The Future of Cold Fusion Investing

Cold Fusion, that pariah of established science, made a comeback in March as the US Navy’s Space and Naval Warfare Center went public with results which they believed confirmed that low energy nuclear reactions were present, repeatable and decisively demonstrable in their specialized palladium/heavy water experiments.

I won’t bother you with the science of their research (more details here); suffice to say that the debate is again polarized on both sides with supporters calling it an important step in the long road to commercial products while the detractors continue to call it bad science.

However, the assets leveraged towards this kind of announcement hardly reacted at all in price when the press release was made. One gets the feeling the reaction was “We have seen this before” and they would be right to some extent.

Exactly twenty years before, the infamous Pons and Fleischman press conference offered to the world a potential new source of energy which was abundant and free from the waste problems associated with conventional nuclear power. Any bull market in Cold Fusion components was quickly snuffed out though as the scientific establishment turned against the two scientists. And that was that for twenty years.

So, will this announcement amount to anything bigger than a hill of radioactive beans? Research institutions across the world that saw some potential in the phenomenon poured millions of dollars since 1989 to no seeming avail. The process was observed successfully in many instances but the scientific mantra of repeatability collided against a volatile and unruly excess heat effect that didn’t quite play to the scientific gallery.

Perhaps this time finally the Space and Naval Warfare Center have tamed and caged the Cold Fusion tiger. You can take your side in the debate but if this becomes the real deal will you be positioned to take advantage? As a result of that announcement, I undertook an investigation of the investment potential for Cold Fusion and the best candidates to invest in at this point in time.

Those familiar with this investment paradigm will probably say three things - palladium, SWC, PAL and that’s all you need to know. In our report we take a look at these three assets (amongst others) and look further afield to where the future of cold fusion investing may lie. We ask some questions such as:

1. Is palladium the only metal that can bring about the Cold Fusion effect?
2. What is the better mining company: SWC or PAL?
3. What about the other palladium mining companies?
4. Why do some forms of palladium not produce Cold Fusion and does that affect some refined palladium products?
5. What is a realistic price projection for palladium if Cold Fusion is commercialized and would such a price make it uneconomical to use?
6. What would be the reaction of governments to such a new and strategic resource?

The world of Cold Fusion investing is not black and white as it may appear and the failed attempt of one promising but now defunct Cold Fusion company (see the report) testifies to the fact that one should not jump on the first bandwagon that takes to that road.

Take for example the question of government. What has government got to do with this anyway? Well for a start they funded the research mentioned at the top of the article but more importantly any resource that attains strategic importance begins to get more and more State attention.

Back in 1933, gold ownership was banned as US government policy morphed into a socialist scenario that saw “public necessity” trump individual wealth preservation. The same held true of silver in 1934 but for larger bullion amounts.

If palladium becomes a saviour of alternate energy policy, does government stand back and let the free market take the price of palladium to the stratosphere or will they act to seize all palladium holdings, freeze the various palladium ETFs and license the output of palladium mines in their domain? It is a likely scenario but when and how is as yet unknown. The remit of the investor is to see the telltale signs of government rumblings and exit quickly (for example, Roosevelt banned all silver exports just days before the executive order confiscating large private holdings of silver bars).

Another example is the supposed leverage that palladium mining companies offer over the metal. This is a well known strategy amongst precious metals investors but during the palladium bull of 1999-2001, Stillwater Mining Company miserably underperformed palladium. Why was that and how can one decide the mix of bullion and equities as such a future time? Well, you can’t but investors at least need to be aware of the risks involved ahead of time.

Cold Fusion is real, but the transformation from a scientific experiment to a commercial product is not there yet. If (or when) it happens and commercial companies begin to pour serious money into finally nailing down the process, I believe palladium will begin a bull market that will dwarf the one that spiked to nearly $1100 per ounce on Russian stockpile problems.

Disclosure: I own palladium bullion but have no positions in SWC or PAL.

Comments

[yellowhoard:]

Palladium is going much higher and it does not need cold fusion to propel it. Diminished supply is working just fine.

May 19 08:30 AM

[The Silver ...:]

Yes, I concur that palladium is a good longer term investment from a supply and inflation point of view. Palladium did well compared with gold and silver during the inflationary 70s. Supply, inflation and cold fusion could be a win-win-win for the metal. For me, the more bullish bullet points the better.

However, the supply argument I presume held during palladium's rout last year, it failed to protect palladium. I still have a copy of Jerome Smith's "Silver Profits in the 80s" which predicted a new silver bull based on similar supply arguments - it never happened. The accrued stockpiles of the inflationary 1970s flooded the silver market for years to come.

So we have to be careful here about supply arguments. My report looks at current ETF stockpiles and of course we have the mysterious Russian stockpiles both in Russia and Switzerland. Truth is we don't know how many millions of ounces the Russians have and so far the existing palladium ETFs don't seem to have stressed supply at all and the palladium price rise of 2006-2008 doesn't look significantly different to other commodities price hikes.

So, any new bullish argument is welcomed by me.

May 19 08:47 AM

[Jasper M:]

Oh, this takes me back!
First, it is a reminder of how long our mainstream media has been second rate - I first heard about the First cold fusion reports from ED HART, on FNN. I've had a soft spot for bond reporters ever since.

As a physicist, these stories intrigue me - usually, a new claim is either swiftly proven wrong (no one can reproduce it), or right (everyone can). A phenomenon that can be reproduced, but only spottily, is unusual. Keeps me in suspense.
Even if it turns out to be an artifact, it is an interesting ride.

May 19 11:20 AM

[Mark Anthony:]

Roland:

Cold fusion could bring about an extremely bullish long term outlook for the palladium metal. This potential could bring about immediate investment interest as people starts to hoard for the potential gain. So this investment interest argument provides not just long term bullishness, but short term bullishness as well.

But the current industry supply/demand of palladium is actually way much more bullish than you think it is, due to a few things you failed to discuss:

1. The short fall of palladium recycling from catalytic converters. Recycling palladium from used auto catalytic converter is a very expensive and complicated process. Due to current low palladium price and small amount of palladium that can be recycled (about 2 grams, or 0.064 ounces, per used catalytic converter), the recycling activity has come to a virtual halt as there is no longer any economic incentive to recycle. This is confirmed by SWC. This alone cuts about 1 million ounces of palladium from annual supply.

2. The dramatic drop of palladium production at Norilsk Nickel. Due to low nickel price, they have decided to mine the ores that are nickel-rich and palladium poor to reduce cost, therefore for the same amount of nickel production, they produce way much less palladium. My calculation based on the ore content says Norilsk palladium production could drop to 2M ounces, versus a normal year's 3.1M ounces. Norilsk's Q1,2009 production number is already out, at 557K, extrapolate to full year that's 2.23M ounces.

3. The Russian government stockpile sale virtually halted, as they probably don't have much left, after decades of stockpile sale. There is no point for them to sell off their strategic stockpile, at current low palladium price. The inventory is nearlt depleted anyway. How much that Soviet Era inventory was, was a state secret. But outsider can still guess the number, based on ore content and based on historic nickel production.

4. The drop of palladium demand in the auto sector is NOT as bad as people would assume. New vehicle sales drop. But tighter environmental regulations require higher PGM load per vehicle. Auto makers are also shifting from platinum to palladium, hence increase the palladium usage. I think Johnson Matthey reports that palladium demand in the auto sector in 2008 actually went up a bit over 2007, while that of platinum dropped about 5%. I have to check the number again.

For more detailed analysis, read this:
seekingalpha.com/artic...

May 25 01:48 PM

[31October:]

It is now 2009, and I'm *still* waiting for scientists to reliably recreate cold fusion results. Don't believe Entertainment Tonight (i.e., the news). Tony Stark's palladium battery would be mass-produced before cold fusion becomes reality.

Platinum & palladium have plenty of uses without sci-fi daydreams.

To answer question number 2 "What is the better mining company: SWC or PAL?" without charging anybody $50:

SWC.

May 28 03:58 PM

[Mark Anthony:]

31October:
It's been 65 years since the first successful nuclear fussion experiment (known as atomic bombs) and despite of massive efforts by governments around the world, today we have fewer than half a dozen countries who are capable of replicating it. The big bearded guy living in an Afganistan cavern, even with his billion dollar net worth still could not figure it out. I am just giving you an example.
Fact of matter is the science of cold fusion, despite of its simplicity, is not high school experiments. Replicating it is not trivial. More important this field has been supressed and has been deprived of any public research funding support whatsoever for the past 20 years. Had there been massive support since 20 years ago, we probably would have been driving cold fusion driven cars already today. It is not too late to start public funding supporting for this new science today. The reality of Peak Oil Crisis is upon us. Without cold fusion, the future of the world is pretty dark.

Follow the link in this article to watch the CBS 60 Minutes program aired on April 19, 09:
stockology.blogspot.co...

May 28 06:10 PM

[Gaucho:]

Hey didn't you read the article before you opened your mouth? The NAVY was able to duplicate the reactions!!! Not some off the wall organization seeking money.

Another point! IF the reactions happen just 10% of the time it would be very important. Many scientist have reported 30% of the time. Think of it this way I drop a ball in a vacuum and 10% of the time it accelerates faster than predicted. Would you say oh forget about it does not fit the prediction. If so then you are just not getting it. At this point they need to figure out what causes the reaction and how to optimize it.



On May 28 03:58 PM 31October wrote:

> It is now 2009, and I'm *still* waiting for scientists to reliably
> recreate cold fusion results. Don't believe Entertainment Tonight
> (i.e., the news). Tony Stark's palladium battery would be mass-produced
> before cold fusion becomes reality.
>
> Platinum & palladium have plenty of uses without sci-fi daydreams.
>
>
> To answer question number 2 "What is the better mining company: SWC
> or PAL?" without charging anybody $50:
>
> SWC.

May 29 09:59 AM

[31October:]

MA,

There is a massive difference between an H-bomb and "COLD fusion," which occurs millions of degrees below that required for thermonuclear fusion; and is the also title of the article.

The field has been suppressed and deprived of any money? Not only has the field not been suppressed, it has had millions in public money in the form of grant research, some done by post-doctorate friends of mine in Austin and Atlanta -- I believe my post-doc friends more than I do 60 Minutes. Also, as Gaucho points out, the US Navy has been researching it for two decades.

But, after the Navy report, the DOE did a follow-up - it found some heat release, but not fusion. The Navy countered that they found some neutrons... not very definitive, is it? Read the comments on...
web.archive.org/web/20...
Physics Today said "...new reports of... cold fusion effects were still no more convincing than 15 years ago."

There are 20 more links like these:
partners.nytimes.com/l...
www.padrak.com/ine/CFL...
pages.csam.montclair.edu/~kowalski/cf/265denin...

I know that you will point out the many links claiming a vast conspiracy to suppress cold fusion. But follow the money. If a drug company will lose money for a decade seeking the final massive payoff, how hard would GE or CEG or Tata work to dominate world energy? With researchers in India, Germany, and the US Navy attempting to make cold fusion happen, why are they not cornering PGM markets? The Navy or DoE would get the SEC to block the formation of the new PGM funds for national security. Instead, regulators reversed themselves to approve them. You think China wouldn't capitalize on a real opportunity? Why are tech/indust. corps not running ads for your flying fusion cars?

If you get scienctific method from 60 Minutes and predict cold fusion cars, then you might check the trading symbol of Mr. Fusion, based on Robert Zemeckis's flux capacitor from 1985.

PGM metals are excellent catalysts and used in jewelry. Make your investments based on that.

May 29 12:02 PM

[Mike L:]

Cold Fusion is a ridiculous pipe dream. As Bob Park said, 20 years of trying, dozens of experimenters later, and $ Millions $ wasted and they still can't heat a cup of tea.

The 60 Minutes story was exposed as a no credibility fraud, and 60 Minutes had to retract their claim of APS endosrement of a genuine physicist.

There is one set of true fusion experts in the world. Namely, physicists. Not one respected physics organization endorses 'cold fusion' as a potentially viable technology to mass produce future energy.

I mean think about it. We harness huge amounts of heat to mass produce energy. Whether coal, natural gas, solar, wind, nuclear fission. In all cases you are basically directly or indirectly either harnessing the massive heat and power of the sun, locked up in hydrocarbon molecules, or some similar massive force such as the gravity that drives hydropower turbines, or the fission that drives nuclear reactors.

Yet with 'cold fusion' all these hundreds of experiments have yielded...what? Barely detectable 'in the noise' thermal rise. Usually unreplicable. Atomic tracks, highly controversial even at that. Minute and barely detectable traces of helium, and of course helium measurements are notoriously unreliable.

A bunch of chemist (or alchemist), tinkerers, pretending to know something about physics.

This nonsense and controversial, barely detectable if at all phenomena is going to cheaply produce massive amounts of power generation? LOL! The so called 'scientists' making a living off this scam, don't even worry about wearing any protection from nuclear radiation, gamma rays, et all, because..IT JUST ISN'T THERE! (and if there is anything there, it isn't worth even talking about it is so small)

www.skepdic.com/skepti...

www.aps.org/about/pres...

www.librarything.com/w...

tripatlas.com/Cold_fusion

Jul 09 06:37 PM