Wednesday, November 16, 2011

Uranium Prices

We currently live in a yield starved environment which is man made.  Average citizens are experiencing a painful deflationary portion of the business cycle characterized by poor access to credit, high regulation, a decreasing standard of living and an increasing cost associated with basic life.  Connected citizens have access to risk free capital and special arrangements in an effort to create continuous prosperity at the expense of the nation.

Consider that MF Global blatantly used cash held in client accounts to relieve margin calls placed on the firm.  Razor thin capitalization is the secret to extracting excessive profits.  This is required to keep up with your peers in the New York banking scene.  Trusting clients are left with margin calls of their own and must liquidate positions while waiting for a bankruptcy court to recover their cash balances.  Do not expect to see any senior management from MF Global headed to jail though because being connected in the US is the key to legalized theft.

If you are a regular citizen investing is difficult in a manipulated, centrally controlled system.  Unfortunately you must venture to sectors of the market where the cartel has not yet dispatched its criminals to begin taking what they believe is rightfully theirs.  One market that is ripe for future exploitation is the Uranium mining shares.

Consider this chart of uranium prices.  Notice that the post Fukushima reaction did not reach the prior support established in the late summer of 2010.
This next chart is perhaps easier to focus on as it tracks physical uranium:

If you are not aware of the incredibly bullish fundamentals present in the uranium market please consider this article Uranium Market Fundamentals.

The emotional selling that occurred after the Japanese disaster was a severe overreaction.  The world is approaching 500 active reactors.  If Japan and Germany close 20 over the next decade that will be merely a speed bump on the way to 750.  Saudi Arabia alone will close 80% of that gap.

In this type of misunderstood market you should consider equity positions in firms with quality uranium deposits in economically meaningful grades.  Also, make sure you are buying firms run by competent men who are properly financed.  When you purchase equity in a sector that is massively under supplied while at the same time loathed by a society that refuses to live without power you are setting yourself up for excessive capital gains.

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