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Stock Ideas Investors Daily Edge Identifying Investment Trends in Gold, Silver, Uranium, Oil
Stock Ideas Investors Daily Edge Identifying Investment Trends in Gold, Silver, Uranium, Oil 
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| Well, maybe not. Back to this weekend. The “thing” that’s missing in the reporting of the recent correction is a psychological perspective. You see, the 10-percent correction took the SPX into the red for the year. | |
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| Identifying Investment Trends in Gold, Silver, Uranium, Oil |
| Wednesday, 23 July 2008 | ||||||||
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We are still delving into the fundamentals underlying five essential global commodities (here and here). Those are gold, silver, uranium, oil and natural gas. The goal is to clearly identify investment trends backed by strong fundamentals and invest accordingly. This is especially important when you are speculating. Last week you saw the very strong long-term basics underlying the pricing of uranium. Today you’ll see the fantastic opportunity now present in the uranium exploration and mining shares. The price of uranium took flight in late 2006 and most of 2007. It peaked right at one year ago, near $140. The term “uranimania” was coined by Bob Bishop, if I’m not mistaken. Uranium stocks of all nature went up in meteoric fashion. Fortunes were made by those that came to the party early and were smart enough not to overstay their welcome. Since then the stocks have now hit the other extreme. The spot price of uranium has likely seen its low at a recent $57. The stocks have been decimated. They are presently unloved and overlooked. Here’s an example: Mesa Uranium is a Canadian company that explores in Utah and my home state of Arizona. I have never owned Mesa and I am not recommending it. This chart is for purposes of illustration only. From the 2007 high near $.81 to the present $.12, Mesa is down around 85%. That is commonly called carnage. A lot of pure unmitigated froth had to be removed from this high-flying sector. You’ll also notice that Mesa traded zero shares July 12. It’s been thrown to the scrap pile. Not all uranium stocks are performing this poorly, but the overall sector is pretty pitiful. I believe recent market activities are completely overdone. You saw last week that uranium trades by contract much closer to $90 per pound than the present spot price of $60. I promise you that you are among the very select few that understand this variable.
There are extraordinary strong global fundamentals behind the uranium market, whether or not the US decides to climb aboard. Most Americans have yet to discover that the globe no longer revolves around us and our clownbuck. Decades of fraud, mismanagement and abuse are taking their toll. One of the primary reasons that oil is presently so high is that the US has practically destroyed the dollar. Entities across the globe are unloading their masses of dollars in order to buy tangible assets like oil. The uranium market does not solely depend on the US figuring out that nuclear energy is clean, cheap and safe. China, India and multiple others are already in progress. It is absurd that so many freak out about possible deaths or injuries related to uranium based energy. The track record is actually excellent. Even many of the “green” leaders are coming to this conclusion. Do you think maybe there are untold deaths and injuries across the globe because we remain oil dependent? Do you doubt that multiple wars are fought to secure oil resources? I strongly suspect that the vast majority of IDE readers are not that naïve. If you want to look at the true “safety” factor for oil you need to consider the multiple conflicts fought over it. Have you ever heard of wars being fought over the element uranium? High oil prices have brought all other forms of energy back into focus. I’ve strayed a bit here. We’re supposed to be on the topic of uranium stocks. The point is that nuclear weapons and nuclear energy are quite different entities. “Terrorists” cannot break into nuclear facilities and gain access to bomb quality materials. The uranium exploration and production stocks have been unmercifully pummeled. They are generally at price levels not seen since uranium was $35 per pound. Many are down 40 to 75 percent from 13-month highs. Ouch! The pendulum, as usual, has swung too far. Uranium mining faces an uphill battle. Miners are not poised to bring forth sufficient supply to meet current demand until 2018, at the earliest. In situ miners (those who use an environmentally friendly extraction process) are running into problems finding enough attractively priced sulfur to bring forth the uranium. Exploration, permitting and mining is an exceedingly long process. There remains tremendous resistance to uranium mining in many jurisdictions. Supply will lag demand for an extended period. Only the most talented and well capitalized companies stand to succeed. Explorers and developers with advanced projects in mining friendly districts will be the “go to” companies as this bull market resumes its march. You could actually make a successful resource stock strategy by simply buying quality companies when they are near their 52 week lows. It wouldn’t always work out but resource cyclicality would certainly be your close friend and ally. Many uranium explorers are at or near this nadir. Invest Resourcefully, Rusty
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