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Good Morning Readers.
Years ago when I began upon my quest of
learning about the markets I used to think charting was voodoo magic.
However, since I had made a commitment to learn all I could this included
charting. As I learned more and more I began to realize that charts were not
just a bunch of squiggly lines on a piece of graph paper. I noticed that when
charting are seen in a micro view it looks in comprehensible but when I
pulled the chart out to show years of trading I could see trends and
patterns. I don’t know a lot about fractal geometry but it has
something to do with the random order of tiny particles that make up matter,
however, when these fractals are viewed from a distance there is order to be
found and indeed great beauty. I discovered, once I began to study charting
that the same was true. When looked at from a macro view these charts began
to reveal a symmetry, order and indeed great beauty. This is
a picture of a fractal.
Why do I care about fractals and charting? I
care because fractals are a perfect example of charting and charting is a
necessary tool in trading. If you hire a carpenter to fix your house you
expect him to come with the basic tools necessary to do the job. Charting is
one of the necessary tolls required to be a successful investor. Being able
to read a company’s balance sheet is necessary skill to be a successful
investor. However, as Gerald Loeb wrote, “everyone should have
knowledge of reading charts and everyone should be able to read a spreadsheet
but at the end of the day it is the person who can separate the wheat from
that chaff that will be successful.”
You may ask why I am talking about charting.
The reason is that charting takes the emotion out of trading. I have found
through bitter experience that the one thing that will lead to fiscal ruin is
trading on emotion. Emotion in trading is a killer. Being emotional is
being human. We all experience moments of fits of doubt but we must always
remember that emotion is a micro feeling. By studying charts, we can step
back and take a macro view of a situation and make an unemotional decision
about how to react to an event. Jesse Livermore taught us that it is not the
news but how the market reacts to a particular event that is important.
It is at moments like this that we must step
back and take a macro view of the situation. It is at moments like this when
panic reaches extreme levels that incredible buying opportunities and turning
points are created. Let’s remember that as horrific as the events were
in the Fukushima nuclear plant, this was a “perfect storm.”
Everything that could have gone wrong – went wrong. Let’s also
remember that this nuclear plant was forty years old and with all of this
being said the reactor cores are still intact. The radiation released at
Fukushima is one tenth of the radiation that was released in Chernobyl. With
all of these factors let’s also keep in mind that there has been no
direct loss of life in Japan. Many of the radiation levels in Tokyo and in
the surrounding area are lower than some locations where radiation occurs
naturally and is way below the legal limits. The question that we must ask
ourselves is do we throw out the baby with the bathwater or do we build the
newer, safer reactors.
The world is growing exponentially. The
countries with the greatest expanding energy needs are China, India, Russia
and South Korea are moving full speed ahead in their plans to build new high
technology nuclear power plants. This will require a source of clean energy.
This will require lots of uranium. Let’s not forget that the reactors
at Fukushima were forty years old. Imagine, if you will, how much safer the
reactors are now. Imagine how much safer they will be in 10 – 20
– 30 years from now. As I previously stated it is not the news that is
important it is how the events cause the market to react that is important. I
have followed both China and Russia’s reaction to the news that Japan
has categorized this accident on a par with Chernobyl. China, India and
Russia remain firmly committed to controlling their uranium assets and indeed
they are seeing this event as a way of seeking further uranium supplies. The
spot price of uranium indicates that utility companies and institutional buyers
are not as fearful of nuclear energy as the speculative investors. Nuclear
plants are continuing operations as we speak internationally and this
requires uranium, lots and lots of uranium.
Yesterday, my inbox was full of emails from
my readers who were ready to throw in the towel on the uranium stocks I have
recommended. I have found that when I am ready to throw in the towel –
that is a buy signal. I was able to buy some more of my favorite Uranium
stock Denison Mines (DNN) @ $2.22 before it bounced back up to $2.40 only to
close at $2.25 on over 4 million shares traded.
I love to quote the “Oracle of
Omaha”, Warren Buffett who coined the phrase “when others are
fearful be greedy and when others are greedy be fearful.” Yesterday, as
expected uranium stocks sold off again creating another buying opportunity. An
odd thing happened however. This time they held firmly to their previous
levels of support and came back pretty quickly.
I find this story to be very telling. The
only country that has taken a 100% anti nuclear position that I have seen is
Germany. The radical environmentalists in Germany, whom are gaining
popularity, were able to shut down seven perfectly healthy nuclear reactors.
Now they are paying France for imported nuclear generated electricity and
Russia for natural gas. These environmentalists in Germany ironically have
increased millions of tons of carbon being released into the atmosphere due
to their actions and to add insult to injury have hurt Europe’s most
vital economy.
Finally, I have devoted this post to nuclear
energy to emphasize that fact that to be a successful investor events cannot
be looked at in a micro view. Pull back and look at Fukushima in a macro view
lens. Nuclear energy is here to stay because of the simple fact that the
world is growing and we need more energy. Until the next genius is born that
figures out how to create energy in a completely safe, environmentally
friendly way, we will need nuclear energy. The stocks I like are Denison
Mines (DNN) @ $2.50 or below, Uranium Energy (URG) @ $1.50 or below and
Uranerz Energy (URZ) @ $ 3.25 or below. Right now if you agree with me that
we need and will continue to need nuclear power these stocks are in sale.
Stay tuned!
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