President Trump doesn’t just cause stock market meltdowns. He also knows how to trigger a spike.
On Thursday, news dropped that Trump would sign a series of executive orders. They are designed to quadruple nuclear power output in the US by 2050. Over the weekend, that actually happened.
I won’t bore you with the details. But the only thing holding back nuclear power is the government. Without unnecessary burdens, the Nuclear Renaissance can finally recommence after a multi-decade delay. And Trump just reversed many of those constraints.
It’s not just Trump who has turned to nuclear lately. Last week, Germany surrendered to France by allowing nuclear to be designated ‘green energy’ under EU laws. Nuclear can now compete against wind and solar on a level playing field. Belgium and Denmark are busy unwinding nuclear bans too.
You can imagine the reaction in the stock market…
Nuclear stocks go boom
Over at Jim Rickards’ Strategic Intelligence Australia, we’ve been onto the Nuclear Renaissance since November 2021. And we have two recommendations poised to profit.
One is up 468% since April 2024. It surged 33% on Thursday and Friday thanks to Trump’s executive orders. The US market was closed yesterday, so who knows what today’s gains will be now that the news is official?
The other is a home-grown Australian hero. It’s up 52% since November 2021. And 17% since Trump’s announcements on Thursday. That’s largely thanks to its recent expansion into the US market via a joint venture.
So, the nuclear revamp is good news for investors, energy security and more.
But what if it’s just the beginning of a radical shift in energy plans? One that has more to do with taxes than power?
The only thing that can save political promises now
Governments are going broke.
Developed economies’ government bond markets have been wobbling for more than a decade now.
It began in Europe after the 2008 crisis. After the pandemic, a whole host of nations joined the blacklist of countries with a debt to GDP ratio over 90%. That’s the level identified by the academics as problematic.
The UK government was thrown out by the bond market in 2022. A few US banks were blown up by their bond holdings in 2023. And lately, the bond market managed to get President Trump to delay his tariff threats. The Japanese prime minister recently described his own country’s finances as ‘worse than Greece’.
So, the welfare state is under pressure. And the warfare state is ramping up in Europe, Japan and the US.
Something has got to give.
The solution is obvious. Especially if you’re from Australia, Canada or Norway.
We dodged the global borrowing binge thanks to vast resources revenues.
Commodities and fossil fuels pay taxes while solar and wind need subsidies
In Norway, taxes on North Sea oil and gas funded the world’s largest sovereign wealth fund. And kept the debt to GDP figure below 50%…until last year.
Here in Australia, we’re nowhere near the debt danger zone of 90%…yet. That’s largely thanks to the lack of bank failures in 2008. The government didn’t have to bail anyone out.
But even that is tied to our commodity export economy. China’s demand for iron ore saved us from a recession let alone a financial crisis in 2008.
The point is that developed economies which produce resources have a fiscal tailwind that keeps them out of trouble.
While those countries that go environmental lack this boost. And so they get into fiscal trouble.
Actually, it’s worse than that…
For centuries, fossil fuel companies paid a disproportionate amount of tax revenue. For some reason, the government is said to own what’s underground. And so it is entitled to royalties when a company digs or drills up something valuable.
The energy transition reverses this fiscal tailwind. A net zero grid is set to cost a lot of government money instead of paying taxes.
Nuclear power has the potential to make transitioning to net zero a low-cost option. That’s because it negates many of the costs associated with renewables, such as storage and transmission.
But oil and gas offer a potential revenue boost.
In coming years, governments will be forced to choose between their political promises. We can’t afford them all.
Reversing the energy transition and permitting more oil and gas would allow the energy industry to pay our political bills instead of adding to them. That makes it a disproportionately attractive U-turn to make.
The Tax Blacks know their lineouts
I don’t know what New Zealand’s Treasury is known as. The Tax Blacks? Black Budgets? Claw Blacks? But I know they’re a step ahead of today’s Daily Reckoning.
The New Zealand government is busy revoking a ban on drilling for oil and gas. Instead of phasing out oil and gas, the new plan is to…invest government money in it!
And it’s no small amount, either – NZ$200 million over four years for a 10-15% stake in projects. That’s $184 million in real money.
The idea is to avoid a Spain-style blackout by ensuring gas is a part of the energy mix. And to avoid a German style power price spike by ensuring local gas supply.
It’s smart energy policy. One step too smart for Australia’s east-coast politicians.
But you and I know it’s really all about the money on offer from an oil and gas industry.
The question is, which country is next to permit the obvious?
I reckon it’ll be the UK, turning back to North Sea oil. Heck their biggest oil and gas supplier Norway is urging them to join in the fiscal fun to be had up there.
But my partner in editorial Jim Rickards reckons he knows better…
Until next time,
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Nick Hubble,
Editor, Strategic Intelligence Australia
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