Dec 20

Financial Sense Newshour – Best of 2009

Posted by Kristjan Velbri | Posted in Book Reviews, Economy, Energy, Markets | Posted on 20-12-2009

As this year draws to a close, it would be appropriate to take a look at the best of 2009. Since the last months of 2008, I’ve been a follower of Jim Puplava and his excellent weekly financial news talk show. The second hour of each Financial Sense Newshour features an author of a book written about economics or finance. Here’s my top 8 for the year that was. Enjoy!

1. Inflation vs. Deflation debate – 2009 was a year of endless debate for inflationists and deflationists and it seems that neither side has settled down yet. In the previous show Mr. Puplava hinted that there would be another inflation vs. deflation debate in January 2010.

2. Trend of 2009 – interview with Gerald Celente, the trends forecaster.

3. Fallen Giant: The Amazing Story of Hank Greenberg and the History of AIG – this is the story of how AIG grew to be such a large institution and what undid the company.

4. Oil 101 – the best guide to the oil industry: from the well to the pump.

5. Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy - if you like Barry’s style, you should check out his blog at www.ritholtz.com

6. Where Keynes Went Wrong: And Why World Governments Keep Creating Inflation, Bubbles, and Busts

7. “The New Market Wizards: Conversations with America’s Top Traders - an excellent interview based on the best-selling book by Jack Schwager

8. “Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse” – another great book by Thomas Woods. There are more interviews and presentations with Thomas Woods at the Mises Institute.

The full list of 2nd hour interviews is available here.

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May 30

News From the Nuclear Power/Weapons Front

Posted by Kristjan Velbri | Posted in Energy, Politics | Posted on 30-05-2009

Pavel PodvigI’ve been following Pavel Podvig’s blog, titled Russian strategic nuclear forces, for a few weeks now, I and would like to invite you to read it. In addition to covering the Russian nuclear forces, he also covers the issues of Russian nuclear power and proliferation.

Mr. Podvig has been the principal investigator of the Russian Nuclear Forces project from its very beginning and was the editor of the Russian and English editions of the book Russian Strategic Nuclear Forces. Pavel Podvig is the author of a number of publications on Russian strategic forces and various arms control issues. He is also a researcher at the Center for International Security and Cooperation at Stanford University.

Here are some of his latest posts:
Russia will sell enrichment services directly to U.S. utilities
What if North Korea were the only nuclear weapon state?
Consolidation of Russia’s nuclear complex

In addition to that, here are some news from the US-Russia nuclear front:
Russia and US hasten nuclear thaw
U.S.-Russia nuclear talks make positive start

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May 21

Investment Opportunities in the Uranium Mining Sector

Posted by Kristjan Velbri | Posted in Energy | Posted on 21-05-2009

In the previous article, I gave an overview of the current situation in the uranium market and why I think it’s headed for a new, long term, bull run. Now is the time to take a look at some specific stocks. Uranium, like any other energy source, is in a long term bull market and the investment opportunities presented below are for investors, not traders. That is also the reason why I am not going to give any technicals on the stocks.

As my broker has limited my stock transaction to a relatively few countries, of which Australia and Canada are not a part of, I have limited my field of research to companies listed on the US markets.

Cameco

Cameco (CCJ), the world’s largest uranium supplier is engaged in exploration, development, mining, refining, conversion and fabrication of uranium for sale as nuclear fuel in Canada and internationally, accounting for 15% of world production. They are backed by about 500 million pounds of proven and probable reserves and existing resources. They are very active in exploring new mines and are also monitoring developments in Australia, where a new government is more supprotive of uranium mining and nuclear energy.

Its revenue has almost tripled since 2004, the growth of net income has been slower, though. In 2008, Cameco’s revenue increased to $2.4 billion, while its net income slid 11%. It’s no secret that 2008 was a tough year. Cameco has decided to take advantage of that – in Q1 2009, it bought additional reserves to be sold at a later date, for profit.

Down the road, we will realize additional revenue and earnings as we deliver the purchased material to our customers, Cameco Chief Executive Jerry Grandey said.

Speaking at the Reuters Global Mining and Steel Summit in New York, Cameco’s CEO also had some optimistic words about the future, that is, optimistic for investors in the uranium mining segment.

I think the financial crisis is clearly impacting the ability of every supplier to raise capital /…/
When you see project cancellations, you see expansion derail, you see some projects that will just go slower. That is just simply taking away future supply and sowing the seeds of the next spike in the uranium price.

Cameco’s share price has come down a long way from its top but it has also more than doubled from its bottom. Given the long term bull market for uranium, I think Cameco still has a lot of potential.

USEC

USEC (USU) is the U.S. government’s executive agent for the Megatons to Megawatts program, a 20-year, $8 billion, commercially funded nuclear nonproliferation initiative of the U.S. and Russian governments. As of December 12th, 2008, USEC has recycled 352 metric tons of HEU into 10,214 metric tons of LEU, which, according to the agreement, means there is still 148 metric tons of HEU left to recycle, enough to provide USEC with another 4 years of uranium. The company is also working on a ‘next generation’ enrichment plant called the American Centrifuge Plant, the technology of which was developed by the US DOE. To finance the new plant, USEC has ceased paying out dividends in 2005.

On the financial side, USEC is doing pretty well. It’s revenue has been going up steadily for years now, although it comes as no surprise that 2008 was a weak year for them as well with a 17% drop in revenue and a 49% drop in net income. It’s share performance has been very erratic over the last year, which is not really that bad as it offers swing traders a chance to make a fast profit. Investors could also benefit by entering once the share price has dipped (again).

Others

Besides Cameco and USEC, there are many smaller uranium companies listed on the US markets but I see no reason why anyone should invest in them as they are very risky and more often than not, are still in exploration stage. As a long term investor, I would like to see a company that already has a product and a viable business strategy.

For investors who would like to diversify, there is the option of buying nuclear ETFs:

  • PowerShares Global Nuclear Energy (PKN)
  • iShares S&P Global Nuclear Energy Index (NUCL)
  • Market Vectors Nuclear Energy ETF (NLR)

For those who are interested in the uranium mining industry and would like to buy themselves in for the long term, I suggest you make yourself familiar with the basics of how uranium is mined, milled, refined and reprocessed. There are many good places to start, one which is the IAEA website, but you might also want to take a look at the uranium miners’ websites.

As I said above, I am not going to give you any technical advice, but even if you’re buying yourself in for the long term, you might want to take a look at the technical yourself to determine the best entry point.

Disclosure: Long Cameco

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May 20

A New Bull Market for Uranium

Posted by Kristjan Velbri | Posted in Energy, Finance | Posted on 20-05-2009

As of May 15th 2009, the price of uranium (U3O8) was $51 per pound, down 62.5% from an all-time high of $136 in 2007 (see chart, click to enlarge). From a low point in September 2008, however, uranium has managed to rise around 28%. It appears that the price of uranium has bottomed out and is headed into another bull market phase. This, however, has little or nothing to do with Obama’s stimulus plan or Bernanke’s magic dollars. It all comes down to the basics of free market capitalism – supply and demand.

Nuclear Renaissance

Although anti-nuclear organizations gained a large enough momentum to kill the development of nuclear power in several countries around the world (Italy, Sweden, Austria), there is renewed hope for the nuclear industry. In the face of impending electricity shortages, global warming, air pollution, geopolitical problems and fossil fuel price increases, the nuclear industry has once again been given a chance to prove itself. Around the world, countries are taking another look at nuclear power. The more active of them, like China and India, are already constructing new power plants.

As of 2007, the IAEA reported there are 439 nuclear power reactors in operation in the world, operating in 31 countries, providing 15% of the world’s electricity. Although the share of nuclear power in the overall electricity production has been dropping and will very likely continue its decline, the number of nuclear reactors is set to rise in a healthy, not too slow, not too fast, pace.

New reactors

During this century alone, China has connected 8 new nuclear reactors to its power grid, which brings its total to 11 reactors. Additionally, China has ordered 100 new reactors from Westinghouse Electric to be in operation or under construction by 2020. Italy, formerly opposed to nuclear power (they banned it in 1987 by referendum), has now decided to embrace nuclear power. Other European countries, some of which are worried about the flickering natural gas supply from Russia, are also looking into developing their nuclear capacity. The same is happening in the United States. According to the IAEA, a total of 45 new reactors are already under construction worldwide.

The problem with supply

The world demand for uranium has outrun the supply of newly mined
uranium for well over 10 years (see chart, click to enlarge). The difference between supply (of newly mined uranium) and demand has been matched by decommissioning old nuclear war heads under the famous Megatons to Megawatts program, of which the US counterpart is USEC (USU). The agreement between the United States and Russia provides US nuclear power plants with uranium from dismantled Russian nuclear weapons. The current program, which is scheduled to end in 2013, provides 50% of nuclear energy produced in the United States. Although it would be possible to extend the program, the Russians have said that they are not interested in it (part of it has to do with securing the transport of uranium in Russia).

In the recent years, however, the uranium industry has been looking into expanding its production capabilities:

The uranium market has demonstrated recent strength, with major new investments and expenditures for exploration increasing more than 254% over the two-year period from 2004-2006. Over $774 million was spent globally on exploration in 2006.[IAEA]

With new capital investments coming online, the uranium industry is factoring in growing demand from new reactors as well as the possible expiration of the Megatons to Megawatts program. Taking all that into account, the market is still set to remain tight – developing new mines takes time, especially so when one has to overcome political will (more precisely, the lack of it). This makes uranium mining companies one of the best places to put your money for the long term.

Next time I will be writing about specific companies to invest in. Be sure to get the RSS – this way you will receive all the updates to your personal RSS reader.

Disclaimer: No Positions.

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Apr 30

Crash Course – Energy, the Economy & the Environment

Posted by Kristjan Velbri | Posted in Energy, Video | Posted on 30-04-2009

In “The Crash Course”, Chris Martenson presents an in-depth consideration of the Economy, Energy, and the Environment. Not only does he explain the fundamental causes of the current economic crisis, but he also demonstrates how the problems facing the economy are related to concurrent issues regarding our sources of energy and climate change. The information provided is eye-opening and vital to understanding the world in which we live and how that world will change in the near future.

Presented as a concise and easy-to-understand video production in language accessible to all, The Crash Course is completely free, in an attempt to inform as many people as possible about the problems we face, and action we can take in response. As Chris says: “In order to know where we are headed, we have to know where we are, and in order to know where we are, we have to know where we have come from.” That is precisely what “The Crash Course” tells us.

Click here to go to Crash Course playlist on Youtube. If you are really impatient and don’t want to watch each and every one of the chapters, then here’s my selection of the most important ones:
Money Creation (chapter 7)
Inflation (chapter 10)
Fuzzy Numbers (chapter 16)

If you have the time, you should really watch all of them. It’s really that good!

Here’s the first chapter:


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