Unless you’ve been living under a rock for the past six months, you know Detroit’s once unstoppable auto industry is dying a fast, public death.

The American auto industry’s fall from grace coincides with a shift in the public’s perception of personal transportation. Higher gas prices and a new environmentally conscious attitude have pushed gas-electric hybrids and efficient diesels to the top of car buyers’ wish lists — leaving hulking SUVs to rust on the side of the road.

Add in climate change concerns and you have yet another dilemma for automakers. New government standards mandate total fleet averages to meet or exceed 35.5 miles per gallon by 2016. The new measure is part of an attempt by the federal government to limit greenhouse gas emissions.

It won’t be impossible to buy a gas-guzzler after the new fuel-efficiency standards take effect. However, your choices will probably be very limited. It’s doubtful that a struggling automaker will dole out the development costs to bring a nine-seat SUV to market only to have to drag down its required mileage average. So even if you are able to locate the SUV of your dreams seven years from now, it will probably cost much more than you would expect…

While Gas Guzzlers Are Punished, Coal Wins Big

Of course, cars and trucks aren’t the only cause of carbon emissions. Coal, the fuel of choice when it comes to power generation in the U.S., is right near the top of the list. In fact, coal carbon emissions have increased by more than 18% since 1990, while petroleum carbon emissions have increased 10.8% during the same time period.

Despite coal’s impact on the environment, new proposals to curb coal’s carbon footprint appear extremely lenient. So while new mileage laws are set to clamp down on American autos, coal will essentially get a free pass — all thanks to a proposed “cap and trade” system.

Cap and Trade: Government Concessions Guarantee Coal’s Future Success

Proposed legislation addressing carbon emissions isn’t exactly a carbon tax. Instead, the president and his allies in Congress have come up with a cap-and-trade system. Essentially, carbon emitters would have to buy permits that correspond to the amount of carbon dioxide they pump into the atmosphere. If these companies find a way to clean up their act a bit, they could sell some of their permits to more notorious polluters.

The intention of a system like this one is clear. However, there’s no way a proposal with any teeth will ever become law. The Economist reports:

“The system would motivate everyone to reduce emissions in the most cost-effective way. It would raise energy prices, which is the point, but it would also raise hundreds of billions of dollars, most of which Mr. Obama planned to give back to voters. Alas, that plan looks doomed.”

By the time the cap-and-trade proposal was watered down to potentially win enough votes, supporters were left with a bill that offered almost all of the carbon permits for free, with only 15% being auctioned. And the auctioning won’t even kick in for more than two decades.

While stricter mileage requirements will keep automakers in line, coal (and other traditional, dirtier energy sources) will essentially be allowed to thrive unchecked for years to come.

That’s why now is the perfect time to invest in a small-cap coal company. More on that in just a minute…

Coal: America’s Most Plentiful Energy Source

If you live in the United States and your house is on the electrical grid, chances are very high that at least some of the energy used to power your home is courtesy of a coal-fired power plant. In fact, almost half of the energy in the U.S. comes from coal…

It’s undeniable that coal is one of our most precious resources. So why did this seemingly recession-resistant commodity crash and burn last year?

Coal was hit hard by a broader pullback in commodity prices and the recession — which has weakened the demand for steel — whose production relies on higher-grade coal used in fire blast furnaces.

The recent boom in coal prices in 2007–2008 has left the industry nearly crippled today. Because prices were rising so fast, most coal companies kept an open book. They left contracts unsigned, to benefit from what they believed would be continually rising prices.

But when it all came crashing down, coal companies’ stock followed suit. And to make matters worse, most companies did not possess any locked-in contracts to keep business booming during the bad times. Consequently, profits suffered across the industry.

However, one penny stock I’ve been looking at is a small coal miner that possesses some foresight. While every other coal company was leaving contracts open, this miner was closing deals left and right — even during the height of the commodities boom in 2008. It’s a move that appeared foolish at the time. But now this tiny miner is poised to become the “comeback kid” of its sector this year…

If you’re a Penny Stock Fortunes subscriber, you already know the name of this prescient coal play – you got my recommendation to buy its shares early this week.

If not, visit the Penny Stock Fortunes website to learn how my CXS Money-Multiplier System has raked in profitable penny plays in 2009…

Best,
Greg Guenthner

June 17, 2009

Greg Guenthner

Greg Guenthner heads up Agora Financial’s small-cap division and is the founder of one of the only independent OTC research advisories in the industry. A graduate of George Mason University, Guenthner joined Agora in 2005 after several years as a journalist. He is managing editor of Penny Stock Fortunes and Bulletin Board Elite.

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