Betting on the Debt

After my column on stocks that are leading the market lower, I got the usual round of "but what about?" queries from readers and associates. The biggest one was: "What about coal stocks?" Cola stocks have been what can only be called a disaster so far this year and indeed, they have been a month the biggest losers in the past month. Depending on your current position the declines have either been impressive or depressing. Alpha Natural Resources (ANR) shares have slipped by 28% so in the past month. Arch Coal (ACI) has declined by 24%. Cliffs Natural Resources (CLF) has dropped 28%. Patriot Coal (PCX) has seen a gut-wrenching drop of 40% while James River Coal (JRCC) is down a mere 30% in the last month of trading. It has been brutal, and trying to pick a bottom has been a disaster for some contrarian investors.

Coal's problems are pretty well known. New regulations have cast a dark shadow over the industry's future prospects. The Environmental Protection Agency (EPA) hasn't exactly outlawed coal, but they have done the next best thing. You simply cannot build new power generation plants that burn coal and be EPA compliant. To make matters worse, natural gas prices have declined to the point that gas-fired generation plants are as cheap to run as coal-fired plants. Fellow Real Money contributor Glenn Williams has discussed this in greater detail and I will be talking to him about coal's future usage in the U.S. sometime in the next few days. Coal stocks have been declining and, given the earnings shortfalls and possible asset write-downs, they will probably continue to go lower this year....444 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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