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Cold Fusion, that
pariah of established science, made a comeback in March as the US Navy's
Space and Naval Warfare Center went public with results which they believed
confirmed that low energy nuclear reactions were present, repeatable and
decisively demonstrable in their specialized palladium/heavy water
experiments.
I won't bother you
with the science of their research (more details here) suffice to say that the debate is again
polarized on both sides with supporters calling it an important step in the
long road to commercial products while the detractors continue to call it bad
science.
However, the assets
leveraged towards this kind of announcement hardly reacted at all in price
when the press release was made. One gets the feeling the reaction was "We
have seen this before" and they would be right to some extent. Exactly
twenty years before, the infamous Pons and Fleischman press conference
offered to the world a potential new source of energy which was abundant and
free from the waste problems associated with conventional nuclear power. Any
bull market in Cold Fusion components was quickly snuffed out though as the
scientific establishment turned against the two scientists. And that was that
for twenty years.
So, will this
announcement amount to anything bigger than a hill of radioactive beans? Research
institutions across the world that saw some potential in the phenomenon
poured millions of dollars since 1989 to no seeming avail. The process was
observed successfully in many instances but the scientific mantra of
repeatability collided against a volatile and unruly excess heat effect that
didn't quite play to the scientific gallery.
Perhaps this time
finally the Space and Naval Warfare Center have tamed and caged the Cold
Fusion tiger. You can take your side in the debate but if this becomes the
real deal will you be positioned to take advantage? As a result of that
announcement, I undertook an investigation of the investment potential for
Cold Fusion and the best candidates to invest in at this point in time. That
is now published in a Cold Fusion Investment Report of which details below.
Those familiar with
this investment paradigm will probably say three things - palladium, SWC, PAL
and that's all you need to know. In our report we take a look at these three
assets (amongst others) and look further afield to where the future of cold
fusion investing may lie. We ask some questions such as:
- Is palladium the only metal
that can bring about the Cold Fusion effect?
- What is the better mining
company: SWC or PAL?
- What about the other
palladium mining companies?
- Why do some forms of
palladium not produce Cold Fusion and does that affect some refined
palladium products?
- What is a realistic price
projection for palladium if Cold Fusion is commercialized and would such
a price make it uneconomical to use?
- What would be the reaction
of governments to such a new and strategic resource?
The world of Cold
Fusion investing is not black and white as it may appear and the failed
attempt of one promising but now defunct Cold Fusion company (see the report)
testifies to the fact that one should not jump on the first bandwagon that
takes to that road.
Take for example the
question of government. What has government got to do with this anyway? Well
for a start they funded the research mentioned at the top of the article but
more importantly any resource that attains strategic importance begins to get
more and more State attention.
Back in 1933, gold
ownership was banned as US government policy morphed into a socialist
scenario that saw "public necessity" trump individual wealth
preservation. The same held true of silver in 1934 but for larger bullion
amounts.
If palladium becomes
a saviour of alternate energy policy, does government stand back and let the
free market take the price of palladium to the stratosphere or will they act
to seize all palladium holdings, freeze the various palladium ETFs and
license the output of palladium mines in their domain? It is a likely
scenario but when and how is as yet unknown. The remit of the investor is to
see the telltale signs of government rumblings and exit quickly (for example,
Roosevelt banned all silver exports just days before the executive order confiscating
large private holdings of silver bars).
Another example is
the supposed leverage that palladium mining companies offer over the metal. This
is a well known strategy amongst precious metals investors but during the
palladium bull of 1999-2001, Stillwater Mining Company miserably
underperformed palladium. Why was that and how can one decide the mix of
bullion and equities as such a future time? Well, you can't but investors at
least need to be aware of the risks involved ahead of time.
Cold Fusion is real,
but the transformation from a scientific experiment to a commercial product
is not there yet. If (or when) it happens and commercial companies begin to
pour serious money into finally nailing down the process, I believe palladium
will begin a bull market that will dwarf the one that spiked to nearly $1100
per ounce on Russian stockpile problems.
Further details of
this special report are at our silver blog (http://silveranalyst.blogspot.com) where
readers can also obtain a free issue of The Silver Analyst and learn about
subscription details. Comments and questions are also invited via email to silveranalysis@yahoo.co.uk.
Roland Watson
The Silver Analyst
silveranalyst.blogspot.com
Further analysis and
comment on the silver market can be read in the subscriber-only Silver
Analyst newsletter described at http://silveranalyst.blogspot.com where
readers can obtain the first issue free. Comments and questions are also
invited via email to silveranalysis@yahoo.co.uk.
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