I’ve been watching my BAS position, along with the entire energy services sector, being thrown off a highrise all morning.

I don’t know why, but all of a sudden, economic contraction matters again. Let’s gloss over that the entire planet has been in an industrial contraction since mid-2010, uninterrupted, and that this is not news in the least.

Let’s ignore that demand for basic materials ranging from oil to metals has been channeling downward only sporadically delayed from momentary noise – for two straight years.

Let’s pretend we didn’t already know this was happening.

Because about a month ago, everything was fine. And now, right now, it matters. We just cannot go on.

“Did you know Italy’s economy contracted last quarter?”

Well gee, I could have guessed. Something about it also contracting every other quarter for the prior 8…

At any rate, BAS is being unfairly hit here. I’ve been through their books, and they’re trading reasonable. Even with broad slowdown, they’re basically in a position to absorb the shock. And they’re a survivor – I welcome industry consolidation because BAS will emerge the winner.

So I added to BAS for $11.31.

Cash stands at 10%

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I’ve been holding CCJ basically since that reactor went critical in Japan. In fact, the only reason I bothered to purchase CCJ was BECAUSE of the reactor.

As an observation, in the face of natural disasters, people are horrible at honestly judging a situation. They ALWAYS skew to the pessimistic, end-of-the-world viewpoint. And especially with radiation, where the radiation level does not even determine health risks so much as radiation-time, people get goofy.

Case in point: I say to you, “you’ve been exposed to ‘high’ levels of radiation for a few hours.” Let’s suppose that “high” is around the range where death becomes 50/50 according to statistical observation. Rank the following outcomes in terms of likelihood: Death, cancer, sickness – no cancer, and no impact.

Most people, upon freaking out at this statement, would immediately order these outcomes in terms of the fear they have to them – death is most likely, followed by them developing a cancer, followed by them only getting sick, and finally leading off with them scraping by unscathed.

In reality, this is completely wrong.

When exposed to high levels of radiation, the most likely outcome is cell death; since we’ve already specified 50/50 chance of mortality, this is the highest outcome (as all others must fit inside 100% probability), followed by sickness without cancer (survivable cell death), and finally followed by no impact occurring.

The likelihood of developing cancer from 1 hour of exposure at any magnitude of radiation remains effectively the same – zero (this is not to be confused with the implications of absorbing radiating materials into your body, which is why unprotected exposure to radioactive materials is frequently associated with cancers).

This is a good example of panic creating opportunities. The fact that none of the Japanese workers have died from radiation is indication that they will be alright and a reminder that nuclear energy, while complex and potentially dangerous, can be managed safely.

Other examples include the Macondo well in the Gulf of Mexico, the threat of an Iranian blockade of the Hormuz Straight, the impact of peak oil on net global oil supplies, the relevance of the Y2K bug to global finance, etcetera.

Now, I will demonstrate first hand again the kinds of profits that can be made by keeping a level head when “freaking out” is the cool thing to do.

You see, CCJ’s price has been lackluster of late, to say the least. Yet, I continue to hold it after purchasing logarithmic intervals from the entire spread of $29 all the way down to $17. It comprises an enormous portion of my allocations (just under 20%).

But that is about to change.

In a matter of months, Russian recycled nuclear warheads will stop entering the marketplace as fuel. At such point, current uranium production is insufficient to maintain current fuel demands of all global reactors.

And the number of those reactors is increasing – not decreasing.

Germany’s promise to switch from nuclear fuel to alternative energy sources is weak. They have no chance of accomplishing this…nadda, zilch, zero. The technology does not even exist is terms that could make this possible, at this time.

And Japan will not be decommissioning any of their own reactors, despite public mood on the subject.

The reason they cannot do this is China.

Japan is an island nation with few natural resources. The majority of their consumption comes from abroad. The whole reason they went nuclear to begin with was to create a quasi-self-sufficient power grid for the country. The major catalyst for that choice was fear of China’s naval capacity.

Your standard nuclear plant can run for upwards of 500 full power days before needing to reshuffle the fuel rods. That’s a year and a half of power, without fear of supply disruption.

If Japan were to start converting away from nuclear, it would expose itself to two risks it currently doesn’t have: the first is daily fluctuations in the price of fuel (all of which it must import), and second, the risk that China tries to blockade their supply routes.

If Japan made the switch, and China ever decided to interfere with them, then they would have literally a few months to respond before watching their entire grid fault out. Nuclear gives them options to respond to military provocations – as the Chinese have so kindly reminded them of.

Uranium is set to soar, and CCJ is the biggest beneficiary. By this time next year, I will be insufferably gloating.

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Despite the looming $600 billion plus pump from Uncle Benjamin, that does not imply that all things are necessarily a “thought free” buy. Very specifically, I would still avoid natural gas here, and by extension coal.

I was thinking about this the other day, wondering if some of my about-to-be-deployed 25% cash position should be flung into old Jake Gint favorite NRP. It’s a coal royalty partnership that dishes out 10% annually. Pretty sweet…

But the answer I came to is, “no”.

Natural gas is experiencing pricing issues because of storage space problems. If you don’t have space for extra gas, you don’t have space to fill by bidding gas up in price. If you can’t bid gas up in price, then the only bid for higher prices is coming from things like UNG that have limited ability to impact final sold prices.

Which in my eyes means that natural gas could still crater into Christmas on the backs of a very mild winter and overproduction.

If natural gas should lose the bid, energy companies are going to have a field day – we’re talking the-greatest-fucking-Christmas-season-ever, kind of time, as they meet their quotients on ever cheaper fuel.

And by extension, coal would continue to be mutilated without exception as plants continue to convert to natural gas generators.

Thus, even though QE3 is the greatest announcement ever if you just want to buy shit and check your brain at the door, I could see lots of people taking a stick in the eye by jumping the gun and buying into some select commodities. I’m not short these commodities, mind you; just tastefully ignoring them.

The play on QE3 is most definitely found in the precious metals. Even some of the manufacturing metals could be risky as I do not foresee QE3 doing much to help real demand for goods – look what happened to Europe’s manufacturing sector after the LTRO’s and ESM/EFSF were put into effect. It would suck to be long steel only to see the sector shed 30% more of gross demand from here.

No, no, stick to silver and gold. And be prepared mentally for the day when shorting oil and the other manufacturing commodities is the right move (but not yet).

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I am close…ever so close…to putting on a feeler position in SCO. I’m sitting on Twitter, trying to coax myself into the pool.

It is difficult. Oil prices are too high. But I recognize that they can still be too high much higher from here.

In the past, I’ve been a little early to the game, and held a little too long – or too short. It’s a tough wrap, because oil should be in the $70’s. Maybe, if you are Po Pimp, you can argue for the $80’s.

But $90 oil is just stupid. It makes no sense. We’re seein a global slow down, so the key input cost to all productivity is prohibitively expensive? Sure…

So the question is – will oil get into the $100’s again?

I saw an article today from CNN, saying just that. QE and Iran – the same old argument; never mind its abject failure before now.

If these kinds of people are staking their reputations on higher prices, it makes me feel better. I’ll probably slap on a small position, but I want to see us past the morning first.

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In case you’ve missed it, after the rally, energy stocks have continued to get their ears boxed, pushing lower. Oil, gas, nuclear, coal, … the whole sector is getting the hot blade pressed to their necks.

That statement does not transfer to the commodities themselves. Gasoline is nearing $4 a gallon again here in Michigan. Coal prices are higher. Natural gas prices are higher. Oil prices are higher.

That’s a rough divergence, and one that will probably be reconciled with commodities hanging themselves in suspension. The energy companies are going lower because actual business is slowing. Higher prices for goods will not help that problem.

But we saw all this last year. The summer has been slow; but as soon as prospects for Santa are added to the equation, it’ll be a holiday miracle. Only Europe somehow going endothermic on the planet, dragging in all the energy and freezing out everywhere else, could possibly ruin that.

So continue to have cash, but avoid betting against the world outright. A continent of miscreants will NOT be ruining eggnog – not for me, and not for you. We will ignore them if it is at all possible to do so.

Get ready, because in another two months, it’ll be sweat pants time…as horrible a thing as it is beautiful.

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What a wonderful weekend surprise, I received. Just read for yourself.

TOKYO — Japanese Prime Minister Yoshihiko Noda on Saturday ordered the restart of two nuclear reactors, a move that returns Japan to atomic power but also runs counter to public concern about its dangers.

The central government’s decision clears the way for western Japan’s Kansai Electric Power Co. to refire a pair of units at the Ohi plant, whose four reactors — like others in the country — were idled after last year’s Fukushima Daiichi nuclear accident.

Although engineers will need several weeks to power up Ohi reactors 3 and 4, Noda’s announcement formally breaks the stalemate in a months-long debate about Japan’s short-term energy plan. A majority here argued that the earthquake-prone country should back away from nuclear power because of safety concerns. But Noda and his powerful lieutenants argued that Japan’s economy would wither if the country remained nuclear-free and short on energy.

The restart at Ohi could open the door for reactors to come back online elsewhere in the country, and Noda has said that the government will make judgments “on individual cases,” based on safety.

“We are determined to make further efforts to restore people’s trust in nuclear policy and safety regulations,” he said Saturday, according to the Kyodo news agency.

It would seem the rumors of nuclear energy’s demise were greatly exaggerated. The Japanese, residents of ground zero to one of the worst nuclear disasters of all time, have counted the beans, weighed the risks, and still decided that a life without nuclear is not a life that can be lived.

Much of this is the short term push of the moment. If Japan had not begun to restart at least some of their reactors, their island nation would have been plunged into darkness. The fear stricken populace, the majority of which are against this restart, may say they don’t want nuclear energy. But believe me, they would have hated the rolling blackouts more.

It was a necessary step to ignore the will of the people and get those plants back up and running.

Now, perhaps nuclear energy will still be driven from Japan, in a slower, more manageable and adaptable process; but I doubt it.

Once these plants are up and running, given a few years of disaster free time to clear the air, the majority of Japan will sink back into a comfortable indifference to nuclear power – and by then, it goes without saying that the nuclear power industry will have fully recovered from the shock of the Fukushima disaster.

Unfortunately for those of you who are ardently anti-nuclear, and are pushing Japan to shut down, it isn’t much of an option. As an isolated country, the required logistics to keep other kinds of power plants up and running are inauspicious. Remember it’s not just a coal plant. It’s a coal plant, plus the shipping industry across ocean waters. It’s not just a gas plant. It’s a gas plant with no possibility of constructing pipelines to carry fuel. And if you’re worried about getting that delivery of gas on time, or at a reasonable price, the storage infrastructure required to carry excess reserves to weather price spikes or shortages would be immense – Japan isn’t exactly renowned for its wide open country and blessings of free space.

Nuclear just makes sense for Japan, provided they reassess the risks and take extra precautions. The effects of logistic errors on the delivery of power in a nuclear setting are negligible. None of the other power generation methods provide the kind of stable energy needed to sustain modern technology, without also opening the country up to undo influence from trade of fuel, or risk of supply disruption.

Expect Germany to cave next, probably in the next 3 years, as the debt crisis continues to force them to abandon expensive alternative energy methods, leaving them the false choice of continuing with nuclear, or switching fully over to oil, gas, or coal – which thanks to the euro’s troubles, are all about to get much more expensive in Europe.

My CCJ position is on the cusp of victory.

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