Making Hay Monday - January 13th, 2025
A bond market flashback
It wasn’t long ago when Asia’s share of the global nuclear energy mix was next to nothing. Primarily thanks to China’s aggressive buildout of new atomic power plants, it has now surpassed Europe and may soon exceed North America where new large-scale nuclear power installations have ground to a halt. In Europe, Germany has shuttered its entire nuclear power fleet. The West’s best hope likely lies with small reactors, particularly those considered to be fourth generation (Gen IV). Among the most promising of those are molten-salt reactors (MSRs). However, none of these are close to commercialization, with the possible exception of one based in Idaho. Even in its case, it is likely at least two years away from “first fission”, despite increasing support from one of America’s leading atomic energy labs.
Energy costs have long been much higher in Europe than the U.S. But thanks to a combination of Russia’s invasion of Ukraine, the aforementioned closure of Germany’s atomic energy base, America’s fracking revolution that produced a torrent of domestic oil and gas, and Europe’s growing reliance on intermittent renewables (which often require the redundant expense of fossil-fuel backup), Europe is now spending four times as much as the U.S. on energy. This is double what it was seven years ago.
Flashback: 1984
“There can be few fields of human endeavor in which history counts for so little as in the world of finance. Past experience, to the extent it part of memory at all, is dismissed as the primitive refuge of those who do not have the insight to appreciate the incredible wonders of the present. Only after the speculative collapse does the truth emerge.” -John Kenneth Galbraith, from A Short History of Financial Euphoria (1990) as relayed in John Hussman’s December 2024 Market Comment
For old codgers like me, you likely remember your high school and college days when that ominous Orwellian date of 1984 seemed way out in the distant future. For us, it’s hard to believe that it is now over 40 years in the rearview mirror. (Today’s Making Hay Monday, MHM, is a personal reflection on my incredibly fortuitous career tailwind: riding the biggest bond bull market in history. As you will soon read, there is an opportunity to replay this, but in another country.)