Uranium Mining and Exploration

[Lone Clone]

Uranium Bull Market Too Overheated?

By Jon A. Nones
12 Apr 2007 at 01:08 PM GMT-04:00

http://www.resourceinvestor.com/pebble.asp?relid=30806

LAS VEGAS (ResourceInvestor.com) -- Doug Casey, chairman of Casey Research, told listeners at the Uranium Stock Summit that there are three stages of a bull market: Stealth mode, worry mode and mania mode. He said the uranium bull market is entering the mania mode.

Although the bull cycle is nearing and end, Casey said a lot of money can still be made. He said that mania stage in the dotcom era lasted about 2 to 3 years, and some of the best profits came out of it.
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Rick Rule of Global Resource Investments today told listeners that we are already in the midst of a uranium mania, “an insane mania.” He recommended selling.

Casey introduced Rule as one who perpetually sells early. Rule agreed.

“I always buy too early, I always sell too early,” he said. “My yearly return is 60%, so I’m going to continue to sell early.”

Rule began his presentation saying “the thrill is gone; the easy money has been made.” He preached minimizing risks as opposed to maximizing reward giving three serious risk factors in the market today:

1.
At 113/lb, the price of uranium does not have to go up for miners to make it worthwhile.
2.
Only 20-40 management teams survived the 20-year bear market in the industry, which leaves about 550 uranium companies searching for expertise.
3.
Most of the companies don’t have any uranium, perhaps only in the company name, and therefore the spot price is irrelevant.

“What’s free in the uranium market today?” Rule asked. “Nothing.”

Rule used an analogy of betting on horse races. He said when a person places a bet on a horse, he or she is betting on the horse to win, show or place. Too many uranium companies today are merely threatening. Only 10% will win, place or show and 50% won’t finish the race at all, he said.

“We have two choices in this market, we can be contrarians or we can be victims,” he added. “Every great party leaves a vicious hangover, so why not stock a little Alka-Seltzer.”

He said every investor should have two exit strategies in mind:

1.
What’s the exit strategy of the company? Are they looking to be bought out or eventually to produce?
2.
What’s your exit strategy? Why do you own the stock?

“Make the money, take the money,” he said.

In a discussion panel, Jim Mustard of Haywood Securities, Kevin Bambrough of Sprott Asset Management and Dave Forest of Casey Energy Confidential all concurred that taking some profits is never a bad idea.

Mustard said investors should keep an eye on the psychology of the market and spot prices for indications of overheating.

“Don’t be afraid to sell,” he told listeners. “I do not see dark clouds on the horizon” in the commodities bull market, he said, but investors should cut back on the “pages of investments” on occasion to concentrate on the quality plays.

Mustard added that the market still has a long way to go, but “I don’t think we’re going to see this kind of growth” in the next five years.

Bambrough said Sprott has already exited Cameco [NYSE:CCJ; TSX:CCO], Paladin [TSX:PDN] and SXR Uranium One [TSX:SXR] because “everyone is looking at these companies.” He said uranium prices will top out in the next 12-18 months.

Forest told investors to take profits on market hype minus fundamentals.

“We are late in the cycle,” he said. “We’ve gone from homeruns of 10-baggers to doubles and triples.”

He recommended closely watching other commodity markets as precious and base metal price fluctuations can affect the uranium market.

“Don’t rely on the rising tide to lift all boats,” he said. “Keep in mind that things turn quickly.”

Although the easy money has been made, analysts all agreed that there are still investment opportunities available in the industry.

Investor’s just need to be “very selective,” Rule concluded.