Invest Wisely

Full Position in U.TO

Gipster — Wed, 01 Oct 2008 18:43:18 +0000

I am now at a full position in U.TO with an average cost per share = $6.96. There is an obvious selloff in shares occurring which appears is being driven by a combination of equity/resource/fund liquidation selling, a broad based flight to safety in the market, and the weekly spot for U308 published yesterday at $53 USD and UF6 at $148. At these spot prices the NAV for U.TO in CDN$ is at $7.49 by my calculation:

Inventory    Price                       Value
U308           5425000   $53.00          $287,525,000.00
UF6              1492230   $148.00           $220,850,040.00

Shares Outstanding 72323091

Total Value $508,375,040.00

$1 USD = 1.0659 CDN
NAV USD $7.03 NAV CDN $7.49

One of the challenges in investing in Uranium is that it is not traded like other commodities so there can be a significant disconnect between supply, demand, and current pricing as detailed in a spring commentary at Commodity News and Mining Stocks. In my opinion market has oversold U.TO which is currently trading intra-day at $5.63, but with my full position north of that I will simply hold and wait for the market sentiment to reverse.

Investing in Uranium - Part Deux

Gipster — Sun, 28 Sep 2008 14:01:30 +0000

It didn’t take long for an opportunity to emerge since my recent post re: capitalizing on discounted NAV’s in U.TO . For the record I am putting my money where my mouth is and have acquired what I call a “half position” of U.TO at $7.76 per share. I have decided to leave the other half of my capital I would allocate to this stock long on the sidelines in hopes of being able to add to the position if the market it beats it down to the $6.60 - $7.00 range. If I can average down in this situation and end up with a “full position” in the low $7’s I would be happy to wait this out until we see the low 8’s before selling.

Investing in Uranium - Trading Uranium Participation Units (U.TO)

Gipster — Sat, 20 Sep 2008 22:06:05 +0000

One way to participate in the potential for significant returns in the upcoming alternative energy investment boom is investing in shares of U.TO on the TSX. Much like the Central Equity Fund of Canada (CEF.A) which tracks gold and silver by physically holding gold and silver bullion U.TO holds uranium (U308 and UF6). The August 31st NAV per share was $8.72. The opportunity to trade this stock is presented when we look at the short term volatility. Be patient for an entry point in the $7.80 range and wait for money to flow back into the stock until it is at or near its NAV. Probably the most imporant rules of trading is not based on the entry price but rather the exit price and how long the trader is prepared to have their capital tied up until the exit price is reached. If we look at the 5 year chart it clearly is trending downward as the price of uranium seems to have plateaued in the $60 USD range off its highs of last year. It seems previous entry points of low $8’s have now been replaced by entry points of high $7’s but the correction period back up to the NAV after these lows has historically been quite short. For example on August 12th U closed at $7.65 with an intra day low of $7.43 and high of $7.80 . On August 13th it closed at $8.50 with intraday lows and highs of $8.00 and $8.98 respectively. The max potential for return on this rebound by making perfect trades was 20.86% but more realistic would be buying the trend and entering in the $7.70 range and exiting in the $8.70 range, still a healthy 12.99% return over 2 days. Most recently another trading opportunity presented itself when shares dropped down to close at $7.60 on Sept. 11th and just came back up to NAV range closing at $8.75 on Sept. 19th, thats in the 15% ROI range over 7 trading days. If I see sub $8 pricing in U.TO without a dramatic drop in the price of Uranium or any extraneous events that could change the pricing for the long term I am a buyer and will patiently wait for the shares to correct back to their NAV and hope it happens sooner than later.

Investing in Oil - Hurricane Gustav

Gipster — Mon, 01 Sep 2008 01:00:01 +0000

Hurricane Gustav has already shut down oil and gas production in the Gulf as employees have now been safely evacuated from the region. Recent oil supply numbers and the markets action (or inaction) heading into the labour day weekend seem to indicate that a few days of lost production would not affect pricing. As Gustav rips through the Gulf and hits the Louisiana shores it might be wise to monitor damage reports to offshore wells and refineries. If these get hit there will be more than just a few days of production lost which will could put upward pressure on pricing. After factoring in the huge speculative component involved in commodities these days I would expect a price spike to overshoot on the upside if this is the case. Due to Gustav peaking right in the middle of a holiday weekend Nymex futures opened a special Sunday trading session which saw crude rise 1.9%, not a huge spike, yet. If this Hurricane is destructive to oil output and refining infastructure I believe there will be a short term momentum play to ride a quick wave up on Tuesday through the week on oil and Natural Gas. Keep an eye on Encana ECA and/or Nexen NXY.

The Next Investment Bubble - Alternative Energy ?

Gipster — Sat, 03 May 2008 17:10:34 +0000

Eric Janszen’s article “The Next Bubble” published in Harper’s earlier this year does a great job of explaining how bad the US housing bust really is. Graphing the deviation from long term means of the NASDAQ bubble and now the housing bubble shows the stark reality of financial loss. The tech bubble wiped out $7 Trillion while the housing bubble in America stands to wipe out at least $12 Trillion. Although it seems quite logical that alternative energy could in fact become the next bubble to reflate American financial assets I am not so sure the speed and timing will come right on the heels of the housing bust. Furthermore, the magnitude of the housing bust and its soon to be felt effects on the US Economy will be much greater than the tech bust for two main reasons.

1. The average American now has to live within the means of their income in the absence of the home ATM previously enabling ever increasing consumer spending.

2. The losses in the valuation of housing are leveraged losses. Leverage is a very powerful investment tool, magnifying gains but more painfully magnifying losses. There was no real hard invested capital related to the growth in housing. This wealth and purchasing power will not be replaced for years to come and only after incomes rise and people can save money. A very slow process which will not facilitate growth in the US Economy.

Vancouver Condo Market Not A Bubble - Yet

Gipster — Thu, 24 Apr 2008 20:33:10 +0000

A Vancouver Condo Market Report from the Canadian Mortgage and Housing Corporation clearly shows fundamental reasons for extraordinary price appreciation in the Vancouver Market.

Job Growth + Migration + Resource Constraints = Supply Shortage & Increasing Prices

This makes Vancouver a very predictable real estate market. For now.

Vancouver Commercial Mortgage Market - Shortage Of Funds

Gipster — Sun, 20 Apr 2008 18:20:00 +0000

Vancouver Commercial Mortgage Broker: “There’s 25%-30% less funds available in the market than 6 mos - 1 year ago. Loans which were previously A class loans are being pushed downward to B and C class treatment.”

My comment: Canadian Banks have stopped lending to each other as a direct result of the US credit crisis. Obtaining financing to acquire non-residential property is suddenly more difficult and more expensive as the swapping of funds between lenders has now come to a standstill. Typically most fixed commercial mortgages are priced relative to the 5 year bond (the competing vehicle for the same investment $). Class A borrowers were previously able to achieve 5 year bond +150 bps (1.5%) but are now facing 225 bps and greater. Class B and C product and borrowers are looking at 300 bps and greater. As spreads increase and underwriting continues on a stringent path there will be a slowdown in new project starts counteracting any liquidity and growth measures initiated by the Bank of Canada.

Subprime Fiasco Explained

Gipster — Tue, 19 Feb 2008 19:20:19 +0000

Finally, an explanation of the subprime mortgage fiasco. Linked slideshow: