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August 23, 2019 | Recession-Proof Industrial Metal Gets a Boost

Lobo Tiggre, aka Louis James, is the founder and CEO of Louis James LLC, and the principal analyst and editor of the Independent Speculator. He researched and recommended speculative opportunities in Casey Research publications from 2004 to 2018, writing under the name “Louis James.” While with Casey Research, he learned the ins and outs of resource speculation from the legendary speculator Doug Casey. Although frequently mistaken for one, Mr. Tiggre is not a professional geologist. However, his long tutelage under world-class geologists, writers, and investors resulted in an exceptional track record. The average of the yearly gains published for the flagship Casey publication, the International Speculator, was 18.5% per year during Tiggre’s time with the publication. A fully transparent, documented, and verifiable track record is a central feature of IndependentSpeculator.com services going forward. Another key feature is that Mr. Tiggre will put his own money into the speculations he writes about, so his readers will always know he has “skin in the game” with them

The drumbeat of bad news for the global economy keeps getting louder and more insistent. China’s industrial growth just hit a 17-year low. Germany, the economic heart of the EU, is also slowing at an alarming rate. And then there’s Italy… and Brexit… and the list goes on. I take no pleasure in other people’s misfortunes, but as a speculator who saw this coming, my portfolio is well-positioned to profit from the downturn. That’s not just because I loaded up on great gold and silver stocks when they were selling cheap. There’s another metal that should do well over the next two years, whatever the global economy does: uranium.

I know some people think I’ve spent too much time kicking rocks at uranium mines. The radiation has gone to my head. Uranium’s latest rally has faded. The Section 232 hype resulted in disappointment. The stocks are in the toilet. Companies are shutting down.

Except for the radiation damage to my brain—I think—that’s all true.

And that’s precisely what makes uranium stocks such a great speculation today.

It’s because uranium is even more hated today than gold and silver stocks were a year ago that it’s such a great opportunity.

Let me ask you: if you had a stock-trading time machine that could go back and buy some of today’s obvious winners when they were on sale last summer, would you use it?

That’s not possible, but when essential commodities are oversold and related stocks are ridiculously cheap, it’s as close as it gets in the real world.

And make no mistake, uranium is essential.

The US relies on nuclear power for about 20% of its electricity. It’s 80% in France. It varies in other countries, but as Germany and South Korea have shown, it’s not easy to find reliable substitutes. And despite its lack of popularity in the West, BRIC countries are building new plants at a rapid pace. It would take decades to replace all this stable, base-load power supply—if it can be done at all.

Plus, the popularity issue may be turning around, as increasingly desperate climate-change warriors are starting to jump on the nuclear bandwagon. For all the fearmongering relating to nuclear power, it remains an uncontested fact that it’s the fastest way to cut carbon emissions. That’s without plunging the world into a new Dark Age, of course.

Better still, demand is largely recession-proof.

People may cut back on vacations and buying new cars during a recession, but they’ll still turn the lights on at night.

But aren’t uranium prices dropping?

Yes, uranium is down this year. However, prices bottomed in 2016 and remain on an upward, if volatile trend.

 

 

My technical-analyst friends tell me that the series of higher lows in this chart is particularly important. As long as that continues, we can say that uranium prices are on a multiyear, upward trend.

But didn’t uranium prices fall during the Great Recession?

Yes. But that was after a 20x price spike that was clearly too much, too fast. Uranium prices had already fallen a good 50% before 2008 got really ugly. If you look farther back, you can see that uranium prices rose after the Dot Com crash.

Uranium demand tends to be baked in the cake years in advance. And since there is no substitution, it tends to be very inelastic. This is why recession is not the key variable here.

The reality is that uranium is vital, irreplaceable, oversold—and its price recovery is just beginning.

You may have heard of the Section 232 drama earlier this year. The petition by some US uranium producers for government intervention in the market seemed like a good idea to them at the time. However, it may have contributed to the current dip, as buyers awaited the outcome before making purchasing decisions. Unfortunately, Donald Trump did not take action to support US producers when expected, and related shares fell off a cliff.

That unfortunate turn of events may actually be the most fortunate thing in this whole story—for those new to uranium. Trump may yet support those US producers when his working group on the subject finishes their study, now expected by mid-October. But even if he doesn’t, the upward trend remains bullish for all the best uranium stocks—and they’re on sale with everything else.

You may also have heard a rumor that Kazakhstan, the world’s largest uranium producer, plans to flood the market with cheap uranium in an OPEC-style move to crush competition. I never believed this. If they were going to try, the time to do it would have been back in 2016 when uranium was selling for $18 per pound. Instead, they announced production cuts, which are a large part of the reason why uranium prices have begun recovering. It would make no sense for Kazakhstan to kill its own price-support program when prices are still so low that they’re depleting their mines for peanuts.

At any rate, it seems I was right. Kazakhstan’s state-owned uranium company just announced that it will extend its 20% production cuts through 2021. This is a huge boost—a very bullish factor going forward.

There’s a lot more I could say, but the bottom line is that it’s easy to talk about being a contrarian investor, but it’s hard to do. If you look at uranium stocks and want to run the other way, you’re not alone. And that’s exactly why you should consider buying them—but only if you have the guts to stay in the trade and see it through.

Note that I’m not promising that uranium stocks are about to leap higher.

That could happen, but it could also take a while. It’s also possible that another Fukushima-type event will stop the uranium bull in its tracks.

I am proposing a speculation, not a safe investment.

But the potential upside here is huge…

That last time uranium made a major breakout, it went from about $7 to $140—and the stocks went to the moon.

Again, I’m not promising that this will happen. But that card is certainly in the deck. And I’ve bought the stocks I think are best positioned to make the most of it.

Which ones? Well, that—and my gold and silver picks—are what subscribers to The Independent Speculator pay for. You’re welcome to join us, but I’ve no hard feelings if you decide to do your own due diligence and go it alone.

If the case I’ve presented results in your taking action that makes you a lot of money, I just hope that you remember in the future that I helped you out.

Caveat emptor,

Lobo Tiggre Signature

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August 23rd, 2019

Posted In: Louis James

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