Imagine you invented a machine that revolutionized travel. You know your invention could cut local and long distance travel time substantially and vastly improve the ability for business to deliver freight efficiently. The invention would add trillions to global GDP. If released, your invention would no doubt be universally used and admired. However, based on the initial safety assessments, analysts predict that if used widely your invention would cause the deaths of 300,000 Americans per year and countless more around the globe. Would you still release it? 

If not, imagine a world without cars.

It turns out that car accidents are among the leading causes of death in the US, and yet few of us would give up the luxury, convenience, and autonomy of owning an automobile. We’ve decided the benefits are worth the risk.

Now, the bigger question: why isn’t this same measure used when judging nuclear energy?

A partial meltdown at Japan’s Fukushima Dai-ichi plant as a result of the largest recorded earthquake to hit Japan has set off a renewed bout of nuclear hysteria. Uranium stocks are selling off, foreign ports are being closed to Japanese goods, and iodine tablets are selling out along the West Coast. Germany took abrupt action after the first Fukushima leaks were reported, with Chancellor Angela Merkel ordering the immediate shutdown of all nuclear plants built before 1980 and a moratorium on new plant construction.

While it is true many people in the immediate vicinity of Fukushima face radiation sickness or even death, especially those brave workers staying behind to stop the leaks, it is important for investors to rise above this global panic. First off it is important to keep in mind how unusual and horrific the events in Japan actually were. The aging Fukushima plant was exposed to the twin disasters of a 9.0 magnitude earthquake and a once in a century tsunami. Although there are very few places in the world where such a scenario is even possible, alarmists are applying the concern globally, even to plants thousands of miles from an ocean or a seismic fault line.

It is also important to recall that even with the latest disaster there have only been three or four nuclear events worth mentioning in the 60-odd year history of commercial nuclear energy. Although there may very well be deaths associated with the Japanese meltdown in the months and years to come, the only reactor incident to cause civilian deaths to date was Chernobyl, a poorly run facility in the bankrupt late-Soviet Union (amazingly built with no containment vessel). Three Mile Island, the only other major incident before Fukushima, exposed surrounding residents to radiation equivalent to a chest X-ray and wasn’t shown to even increase their risk of cancer.

In comparison, other forms of energy generation have led to significant deaths and environmental risks. The burning of fossil fuels pumps greenhouse gasses into the atmosphere. Coal mines collapse, trapping and killing miners. Oil tankers and offshore derricks spill petroleum into the ocean. But these risks are more tolerated than nuclear concerns.  The difference lies in the fear of radiation.

Perhaps due to its invisibility, or its mysterious and often long-delayed effects, or perhaps as a relic of Cold War propaganda, the threat of radiation exposure provokes an irrational, emotional response. As a result, nuclear power is often held guilty until proven innocent.

But radiation is not nearly as pernicious or outright dangerous as the media leads us to believe. In the US, by EPA regulations, nuclear plants are expected to annually release radiation less than what any passenger receives on one flight from LA to New York (a route I travel quite often). Living in a brick or concrete building for a year will give you twice the dose of that flight. A chest X-ray will give you over 80 times the dose of your brick-walled apartment. A nuclear plant worker is allowed 10 times the dose from a medical X-ray scan per year. Still, the worker would have to receive double his maximum yearly dose to have a measurable increase in cancer risk – and 4 times that dose in a day to show any signs of radiation sickness.

The risk is truly minuscule, especially when we consider the alternatives. As much as President Obama likes to talk about “renewable energy” and “green initiatives,” the reality is that there is no clean source that can provide energy nearly as inexpensively as our current sources. This means that a switch to entirely “green” sources, including wind, solar, and hydro, would cause the average American’s standard of living to drop by an order of magnitude. So, the viable alternatives to nuclear energy are limited to coal, oil, and natural gas. Each of these poses significantly more health and environmental dangers than nuclear.

Coal is the worst offender. Ironically, the average coal plant releases 100 times more annual radiation than a comparable nuclear plant. This comes from the airborne release of fly ash, the byproduct of coal combustion. Fly ash contains radioactive uranium, thorium, radium, and other elements – along with toxic heavy metals like mercury, lead, and arsenic. These substances tend not to burn, so they are highly concentrated in the ash that is released into the atmosphere and groundwater. Coal plants are the leading cause of mercury contamination in US fish, of which a quarter are now believed to be unsafe for consumption. Even the non-toxic particulates coming out of coal plants cause lung disease far from their source.

Oil and natural gas are lesser offenders, but still far dirtier than nuclear. Both release nitrogen oxides and sulfur dioxide which can come down to the Earth as acid rain. Oil combustion releases heavy metals, particulates, and leaves a toxic sludge that must be disposed. Natural gas is the cleanest of the three, but still produces carbon monoxide and several greenhouse gases.

These conventional fuels have proven to be more harmful to human health and environmental well-being than nuclear, but they are not held to the same safety standard at any level of production – from mining of ore to power generation to disposal of wastes.

Meanwhile, generating nuclear power is currently half as expensive as burning fossil fuels. Uranium is abundantly available and known deposits could sustain current production levels for the next century.

It seems the greatest risk in nuclear power is a massive PR problem. Most people I see on the beach near my home in Los Angeles don’t seem to mind soaking up solar radiation, AKA sunlight, day after day – even though tanning causes 1.5 million skin cancers in the US every year. Like with their cars, people get that you can’t do anything worthwhile without taking a risk. Apply sunscreen, fasten your seatbelt, and move on with your life, right? Only with nuclear power does it seem any risk is too much.

As the costs mount for ‘strategic’ wars to secure Middle Eastern oil and the world seeks cleaner fuels to power homes, businesses, and perhaps even fleets of electric cars, politicians and the public are going to be forced to face their fear of nuclear power. As the French are known to say about their nuclear program: “no oil, no gas, no coal, no choice.” Eventually, reason prevails, and the truth is that nuclear power is hands down the best option available for powering the 21st century.

The Fukushima meltdown may mark a high point in anti-nuclear hysteria. As a result, investors should not treat nuclear-related stocks as if they were… radioactive.

John Downs is an Investment Advisor Representative in the Los Angeles office of Euro Pacific Capital.

If you’ve been following my work closely, then you know the markets have arrived at critical turning points.
We now have …

Two consecutive daily closing prices in gold (basis New York spot on the NYMEX) above $1,453. That indicates an important upside breakout for gold on my cyclical and technical models.

Gold also penetrating up through an important technical resistance level at $1,463.

In addition, we have …

The Dollar Index continuing to weaken and now very close to taking out its March 22 low of 75.505. This is a potentially very bearish sign for the dollar and further supportive of a rally in virtually all commodities.

We also have an initial buy signal in the Dow Industrials, as it has now closed above 12,391 on two consecutive days.

How has the increase in government in the last 150 years driven precious metal prices? In this exclusive interview with The Gold Report, Leonard Melman, editor of The Melman Report newsletter and the author of Reverse the Way In, discusses why he recommends precious metal stocks, but advocates changes in monetary policy that could diminish the price of gold.

Michael Campbell: I’m looking at  the oil price hitting $113 and talking to many analysts they feel that that’s strictly an anticipatory move, whether it’s speculation or not, about supply disruptions. There’s been a huge premium built into that price now because there is certainly enough oil running around the world in stock piles. A great example of there’s monster money to be made if you get on the right side of those kind of shorter term moves. Of course you can play the market in both directions, the Canadian dollar would be another one that jumps right out at me.

Tyler Bollhorn: You know one of the problems with oil is I think people perceive that it’s a temporary bit of strength because of the political unrest in the Middle East and Libya, and there’s a real lack of commitment to positions. So what happens is people do hit and run trades you know buy it sell it two days later. There isn’t a real commitment in those trades, and I think sometimes traders make a mistake in trying to make sense of what’s going on and say I’m scared to trade those oil stocks because it makes no fundamental sense why oil should be at this price, and so. What everyone should remember however is that the market is not always driven by fundamentals. We don’t know if there is a big hedge fund that was, really short the oil market, is getting squeezed and having to buy back their position. That drove oil to its highs a few years ago, a hedge fund that got squeezed. Ultimately I just look to do what the market tells me to do, and the market is telling me to be in these commodity stocks and stick with them. They are doing well but you got to be pretty short term oriented right now.  

Michael Campbell: In your courses you’re teaching people entry points and exit points based on how the stock is trading. Also letting the market tell you what to do?

Tyler Bollhorn: That’s right, I don’t care what companies are doing I care about what people think about what companies are doing and that shows up in market action. So my job is to determine if the buyers winning the war or are the sellers winning. I look for very specific set ups that I know are effective and that’s what I teach people to do too.. But you know it’s a set of rules that works regardless of what the market is doing because there’s always opportunity somewhere.

Michael Campbell: It just feels to me that people are wondering about exit points right now because of the moves that you described earlier. You know in March of ’09  I’m proud to say Money Talks on that weekend we featured guests on Money Talks and on moneytalks.net saying we felt the bottom of that downward move from the credit crisis was over. It certainly has been as strong as strong a move as anybody could have dreamt of. But now certain people are saying it’s pretty extended. I see silver over $40, gold over $1,460, oil at $113, so just tell us the kind of things you’d look at to say at least on the short term maybe that move is over? Canadian dollar is another one given its the third time in history trading at this level.  

Tyler Bollhorn: The Canadian dollar has run up a little too fast and I think it’s due for a pullback. But my outlook for the Canadian dollar is that it probably continues higher, I mean it’s in an upward trend and the trend hasn’t been broken. I don’t try to predict when things will pop out I wait for them to come back to a stop loss point.  I’m always laddering up my stop loss point too because as much as I can sit there,  try to be smart and tell you all the reasons why oil doesn’t deserve to be at this height, at the end of the day the stock market is not predictable. And so what I’m trying to do is adjust, I’ll constantly chase the price higher with a trailing stop using a very specific set of rules I teach. When the market pulls back then I get out, and what that allows me to do is stick with strong trends and take the emotion out of it. I would say that the exit decision is probably the most emotional part of it, people are always worried about leaving money on the table, or whether they should take a loss or not. I’ve got some very simple rules so that you take the emotion out of it, and over ten trades it’s very effective. It may not get you out at the high on one trade, but over ten trades it’s going to maximize your profitability.

Michael Campbell: My experience Tyler, is anybody who’s looking to be that smart at the tops or the bottoms and leaving no money on the table, they are just asking to lose in the end. I’m speaking from personal experience when I say that, I did learn the hard way. It’s sort of a fool’s game to try and put in the top or the bottom as opposed to more focusing on making money.  

Tyler Bollhorn: I always remind people that when you’re looking at the stock market you’re looking at the opinions of thousands and thousands of people. I don’t believe no matter how smart I might think I am I’m not smarter than thousands and thousands of people, especially when some of those people are trading with huge amounts of money. Even if they are making silly decisions in the market, the sheer fact that they have millions if not billions of dollars to work with, they are just going to roll over anyone that tries to get in their way. So you can’t second guess the message of the market, you have to listen to what the market tells you, you have to know how to read or how to listen  to it and that’s what I teach people to do. Just don’t try to be smarter than the crowd because you’ll lose.

Michael Campbell: Our Victor Adair is always saying this and I love it that he brings it to our audiences attention. He says he has his opinion and then he’s got the market’s opinion and that’s the one that makes money. He also says the market can go in a direction far longer than it makes sense. We saw that with the internet bubble, we’ve seen it with currencies. You know the credit crisis produced a huge opportunity because the market went down too far. That’s the nature of the beast and you sort of went quickly over it. But the whole point is to get your personal emotions out so you can take advantage of somebody else’s emotional outburst in the market.

Tyler Bollhorn: That’s right and I think to do that you have to have a plan, you have to have a very rational set of rules that you’ve tested and developed  and you just follow that strategy, and as long as that strategy works you keep following the rules. Take the emotion out of it, avoid trying to be smart. Every time I’ve tried to be smart it’s cost me money. I’m happy to just be a follower and because being a follower of the money of is, in my mind, the simplest way to make money in the stock market.

So many times I’ve been right, but if your timing is wrong you can get crushed. I say just listen to the message of the market and it’s not hard. The beauty of it is that it’s such a simple way to do things, you know I can analyze any stock in three seconds. If I want to look into what the company does and their management and all that stuff that takes hours.

Michael Campbell: What is that the biggest emotion based mistake people make?

Tyler Bollhorn: I think that the world of behavioral finance is getting a lot of attention these days because people are recognizing that it’s about people. The thing that makes us people and not computers is the fact that we have emotion, and emotion causes us to make mistakes. You know and one of the things I do for my students is I encourage them to send me their stock picks and tell me the trade that they are making. Let’s say I look at ten of their trades that they’ve done, I can instantly tell what their emotional hang ups are. You know whether they are hanging onto their losers or selling their winners too early or taking too much risk. There’s all these different things that people do, they are very easy to spot and very predictable. And no one’s alike, I mean everyone’s got different things but we all have the same five or six hang ups that you have to get over if you are going to be successful in the market. 

Michael Campbell: It’s always a pleasure to talk with you, Tyler you are going to be in Calgary May 1st and May 2nd and they can go to StockScores.com to look it up. Also Tyler and StockScores.com works with Disnat who is Canada’s top rated online brokerage firm also. You can go to the moneytalks.net page and click on, on the top left hand side for Calgary May 1st and 2nd where Tyler will be teaching his course.

Value investing can be divided into two separate groups. One side focuses upon the sustainability of earnings and the efficiency in which the earnings are reinvested, while the other side focuses upon the value of the assets. Walter Schloss is a proponent of the latter camp.

Mr. Schloss started his own investment partnership after leaving Graham-Newman in 1955. The partnership was started with a modest sum of $100,000 which he raised from a small group of investors, including himself. By the end of 1984, Schloss and his son were managing approximately 45 million in assets. In 28 years, Schloss had earned his investors a compounded annual rate of 16.1% (after taking out 25% fees) vs. a compounded rate of 8.4% for the S&P which included dividends. The intent of this article is to provide an in depth description of the investment philosophy which allowed Schloss to dramatically outperform the major indices over many decades.

Assets are Safer than Earnings

Schloss believed that investors should attempt to limit their downside when investing. He felt the best way to accomplish this was to focus on the assets of a company rather than their earnings. The following quotes are from his letter on Factors Needed to Make Money in the Market: “Earnings can change dramatically. Usually assets change slowly.” “One has to know more about a company if one buys earnings”.

In my experience, the concept that assets outweigh earnings is an extremely contrarian investment viewpoint. Most investors focus on earnings and many are simply unable to purchase shares of a company which is currently losing money. Schloss felt that purchasing discounted assets provided a substantial margin of safety for investors; a notion that he learned from Benjamin Graham. He felt the value of the assets would eventually be recognized if any of the following conditions occurred: the earnings cycle turned, the assets were liquidated and distributed to shareholders, the company was bought out or the management decided to take the company private.

Schloss on the dangers of focusing on earnings for the ordinary investor from the 1985 Barron’s interview: “Most look at earnings and earnings potential, well I can’t get into that game. This is a little outfit here, to try to compete with big brokerage house analysts, with all their connections and all their information”.

If we analyze the 28 year results from 1956 to 1984 provided by the Barron’s interview, it appears than Schloss’s stategy is validated. During that period, the small group of investors which put their faith and bankrolls into Schloss’s fund, not only outperformed the S&P by nearly 8% per year on an annualized basis, they also experienced only six years where the S&P plus dividends outperformed Schloss on a year by year basis. It seems that the Schloss method not only reduces risk, it also provides outstanding returns! View: The Right Stuff – Why Walter Schloss is Such a Great Investor

Passive Investment Style

….read more of The Investing Philosophy Of Walter Schloss HERE