Why not, it has more than tripled in the last couple of years. Didn't the Nasdaq do something similar? The Nasdaq was at 1500 on opening day 1998 and it peaked at 5000-ish 27 months later. Seems pretty similar to me.As Lee Corso might say; not so fast my friend. While the price action is similar the all encompassing nature of how many people are participating in this market is not the same as the Nasdaq.
Do you own any pure plays? Do you know anyone who owns any pure plays? I actually own two and my weighting is quite large; 4%. I don't own any for clients. If you have 5% or less you are not recklessly levered to this space. I'm not sure exactly what number would equal reckless; certainly 20% would and I think even 10% would be way too much but these numbers are nothing compared to what people were doing with Internet stocks back in the day.
The worst case scenario with uranium is that it is a mania which is not a bubble. Bubbles simply do not occur a few years apart. Once a generation is probably more like it.
27 comments:
All significant bubbles are DEBT bubbles in reality. Consumer debt provides the liquidity for the bubble to occur. I do not know about uranium, but the consumer debt bubble has continued. It may manifest itself in the future.
I wish I knew where and when. I am very long the markets, but I would caution the belief we are safe from bubbles for X number of years. I do not see a problem tomorrow, but I will not lull myself into a false sense of security because it has only been 7 years since the tech bubble.
i take it you do not consider what happened in housing a bubble?
Sami, how many people do you know who have had their net worth cut in half as a function of whatever has happened thus far with housing?
not many... i am not arguing that it is a bubble, just curious about your opinion since many in the media seem to term it that way.
i live in the Midwest were prices have not plunged but sales are almost non-existent. there are many homes for sale in my subdivision that have been offered for over a year with no activity and with several reductions in asking price.
This is a new subdivision where at least a house a week was being sold prior to that.
i do read about painful stories in areas like southern Florida where there are more contract cancellations than closings for new homes. That's a pretty astounding statistic.
Also let us not forget about what just happened with NEW due to the default levels.
for now it seems that mostly highly
leveraged people are getting hurt -- either due to poor credit/choice of mortgage or due to the speculative nature of their "investments."
any how... not seeking a debate, was more curious of your opinion than anything.
no doubt there are anecdotes of misery from 1998 when all was right with world.
the thing behind the thing with this post was to point out exactly what you said about the media.
anyone who is over leveraged can blow up at anytime to be sure. A bubble takes in the masses and takes years to recover from, IMO.
The only pure play I know of is CCJ and they've had some issues. BHP is sitting on a bunch of U but it's a small part of their overall assets. Who be the others?
I have followed aspects of the housing market for a while. Sometimes I write about the situation. The latest data shows a double digit increase in foreclosures over a three month period year to year in thirty two states. Several states are in triple digits.
Safe to say that the majority are speculators up to their eyes in overleverged debt thanks in part to "friendly" appraisals.
The worst situation is condos in Southeast Florida. The problem there is staggering and will take a few years to create an orderly balance between buyers and sellers.
what "pure plays" do you own, or have you thought about owning?
there are plenty of so called junior miners, most of which have no proven reserves, there is the Uranium Participation Corp(personal holding) and some of the big miners do have exposure, probably not enough to move the needle now but maybe in the future?
One good place to research is to go to Inveslogic.com and to a search for Uranium. I just read a great report on Seeking Alpha too.
If you care about this theme you need to roll up the sleeves.
Housing is not a classic bubble - some condo markets may be an exception.
Overpriced? I think so.
Going to go down in price? I think maybe a little, but housing is more likely to stay flat for a number of years after a modest decline and let inflation bring house prices back to reality.
There is a DEBT bubble still growing out there and while I still remain long in the market I expect it to end one day.
I read somewhere that U isn't traded on exchanges like other commodities, oil, metals, etc., and so its action can't be explained as a bunch of speculators and hedge funds moving the price around. Isn't that a prerequisite to a bubble?
(Usually I think someone resorts to invoking "speculators" when they don't like the price action of something. Like when Kudlow declares that oil would be $30 if not for those darn speculators).
Uranium is not a bubble. The price is going to continue to move up, way past $100. Bubbles do not end until supply meets demand. Supply is running way short here and it will take very high prices for production to be ramped up.
As far as the stocks, there are not many investable ones. Most are speculations. Should be a correction soon but this sector is poised for an extremely strong 07 and 08. Until I hear people talking about it on CNBC or in the WSJ, there is no way this is even close to a bubble. Just a super bullish situation. - Jordan, trendsman.com
thanks Jordan
I would add that if something goes from $1 to $100 and then back to $0.80 and less than 1% of the investment public participates it is not a bubble.
This is just an example, I don;t know how many people are participating in this market but safe bet that it is insignificant compared to how many people rode the internet wave.
I agree. I do think uranium will become a bubble though. Cant happen soon though. We need an ETF and we need most of these juniors to trade on the AMEX or NYSE. Even at that point, it still will have some legs. I have been bullish on uranium since I first heard about it at a conference in 2004. But, as I noted before, there just aren't that many good investment options. CCJ is the best but the stock appears to be dead money right now. I would encourage everyone to look at the fundamentals, history and S/D situation of uranium. It is truly amazing. You are going to see prices move up to several $100/lb in the next few years. -Jordan
Hi,
Been invested in U stocks for around three years and I think for the most part, it is a misunderstood commodity (aren't they all). I first started with CCJ, and then bought FRG (then FTDGF.OB) and actually sold some today. Then, about a year ago, I purchased SXR.TO, UUU.V, IUC.TO, DEN.TO, I was just throwing darts. Then, IUC bought out DEN, and now it is DML.TO and SXR and UUU merged last week. I really wish I could take credit for buying stocks that merged, but I can't; my only reason for buying the four was that they were close to production. The real bombshell was when CCJ reported the flood, that is when the U market went crazy.
The problem with participating in U with BHP is that it is not a good proxy, rather dull. CCJ is currently priced with a negative biased because of more options. Take for example EMU (which recently started trading on NYSE), or URZ, or URRE. There certainly is value, but be very careful; the price of U has not gone down once in the past three years and prices are updated on a weekly basis, not daily.
On a percentage basis, and I dont like to do this, because it punishes the good stocks and praises the bad in a portfolio, (but to each their own), the U stocks in my portfolio at the beginning was around 7%, but now closer to 35%.
35%? Crikey.
It is easy to glean you know the subject quite well but 35%? Wow.
Top six uranium producers in 2005
Company name Country Production Market Share(%)
Rio Tinto UK 9.61 19.2
Cameco Corp Canada 9.58 19.2
Areva SA France 6.04 12.1
Kazatomprom Kazakhstan 4.36 10.2
BHP Billiton Australia 4.34 8.7
Priargunsk Russia 3.13 7.3
Source: Deutsch Bank Raw Materials Database
I would think that short to intermediate traders will probably find more profit in the junior miners but those who think of this as a long-term thematic play would probably be better served sticking to the majors (acquired at the right price of course) or, at most, second tier miners such as Denison in Canada; financial strength and producing projects (and a lack of outright fraud) have their value. JMO
I bought Fronteer- FRG- last spring and have made 96%, mostly since CCJ flood. People with knowledge say this is short supply-heavy demand from China, Europe, etc. Clean energy. Read Doug Casey and Dines newsletter.
Price is now up to $85! $10 rise! Wowsers..
-Jordan
Jordan,
Uxc.com still lists U3O8 spot @75/lb, where are you getting $85/lb ?
Most historical bubbles have had a strong element of delusion about the economic value of the underlying asset...Dutch tulipmania probably ranks at the forefront as an example. Uranium has run a long way as a result of the fairly sizable shortfall between annual usage/demand and annual production. This gap between supply and demand is likely to exist for the next few years and possibly peak in the 2009-2001 time period. As a result of the underlying supply/demand issues, uranium is the only commodity that has not had a "correction' in the last four years.
A new fund is being launched in Canada, the "Uranium Focused Energy Fund", to enable investors to invest in a basket of uranium producers/explorers. The preliminary portfolio mix is strong with a mix of all the senior producers, the junior producers, the near producers and the senior explorers. The only other fund like it that I know of is based in London...appropriately called the Geiger Fund. It is worth a look and the prospectus can be found at http://www.sedar.com/issuers/issuers_en.htm. It looks like the fund will not have much exposure to the junior explorers, but it should be noted that the number of uranium explorers has jumped in the last few years from 50 to over 200. There is no question that uranium is a hot part of the market and there are no doubt some charlatans selling moose pasture to the unsuspecting. The last time there was this much interest in junior explorers was in the late 70s...Three Mile Island killed this part of the uranium sector for 20 plus years.
A recent and good overview of the uranium sector and its players can be found at http://dashboard.sprott.ca/servlet/displaypdf?repid=jreid@sprott.ca_0ey74uckl&userid=equityresearch@bcimc.com
For the very long holder, Cameco is probably the place to be... richest mines in the world, operates in a safe part of the world, has a good pipeline of rich orebodies waiting for development and one of the largest exploration budgets in the sector. Near term the stock won't do much until the situation at Cigar Lake is clarified. Cigar is a $16 billion orebody that was scheduled to commence production this year. It flooded in 2006 and remediation efforts are underway. Some market observers are speculating that the mine is lost. Big BS. The only issue is how much it will cost to fix the problem. Until the issue is clarified the stock won't do much. The stock is currently trading about C$42...some reputed analysts have the stock at C$60-65 in 12 months. The other knock on Cameco is that it hasn't sold the market on its sales strategy. As a result of Cigar's problems, some junior and near term producers have really jumped in price...in the short term there is probably more money to be made here. Investing in the junior explorers has been very rewarding but it isn't much better than going to the casino!
One of the interesting things with uranium today is that the commodity trades by itself (a plus for U Participation) while the U stocks tend to trade in lock step with oil stocks (and oil) even though there is no rational connection. If oil goes into a downdraft U stocks are likely to follow...good buying opportunity?
Guys where have you been - Paladin Resources (PDN on Aust exchange) which has opened the first new U mine in 15 years in Namibia - has gone from 1 cent to July 2003 to $10.35 today. No I have not owned it the whole time but have done very nicely.
Yes the U price has jumped $10 to $85 this week.
what I don't understand about uranium is the following:
supposedly, nuclear power is more economical than any other form of power.
hence, demand for uranium is increasing as more and more nuclear plants are built (or planned).
but is there a point at which the uranium price makes nuclear power uneconomical? are we anywhere near that point? does anyone know?
Geoff while I do not have anywhere near all the answers I can add a couple of things that I believe are true. The cost of uranium is a very small piece of the cost of delivering nuclear power. The bulls would say that the spot price could go much higher and still be a small piece.
Another element that is a tad darker is that for example China along with a few other places is sort of forced to go nuclear. Search for this on the net but it is sort of a gloomy by-product of the growth.
Actually the cost of Uranium represented a 5% of the total cost of running a nuclear plant in the 50 dollar range. So at 85 dollars, it is taking a bigger slice of the pie. However, some of the new nuclear plant technologies (2nd and 3rd generation) have costs that are smaller slices of the pie.
The price of uranium would have to go up 500x before it would be as expensive as other services. It only makes up a few % of the cost as the other poster noted, so utilities are not really concerned with the price. Uranium/Nuclear is by far the cheapest, and cleanest and safest I would add. -Jordan
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