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Amateurs hammer part 1

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A couple of weeks ago I had the honor of being a guest on my current favorite investment podcast, The Mike Alkin Show.

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On it we discuss why the contrarian approach can be a profitable one and why so few investors are comfortable with it, how my year poker career has affected my view on investing and we also touch briefly on a few mistakes I have made in my investing career so far. I will dig "Amateurs hammer part 1" into this last part in a future post because I think there are some lessons to be learned — especially on what not to do!

And I am quite vocal on my findings on individual uranium companies on Twitter, on YouTube and on my blog. So that is how we connected on Twitter. Amateurs hammer part Mike has played a role in my uranium education and since many people have asked me how I generate investment ideas I thought this would be a great segue into how uranium initially caught my interest and perhaps an example of how one can go about turning a fuzzy idea into a possible investment.

Note that this post is only meant to be an example of the initial stages. Those are held every five years and they have all been fabulous at predicting what was to come.

The method described below is...

When Chinese leaders decide on a long-term idea, unlike in a typical western democracy, they follow through. Probably due to a different electoral system read: So who are these speeches aimed at? Probably first and foremost the leaders out in the municipalities throughout China. So it gets done.

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What was interesting about this particular speech is that whereas previous five-year plans have focused on GDP growth at all costs! The Health Amateurs hammer part Institute estimates that more than 1.

So I started thinking about how an investor can approach this shift. How can China make the transition from dirty coal to cleaner energy sources? Initially I thought liquefied natural gas, LNG, was the play. On top of that, Japan, the largest importer of LNG in the world, had held the course while most analysts had expected Japan to decrease their imports. "Amateurs hammer part 1" as I started looking deeper into it both of those factors turned out to be warning signs, at least that is how I viewed it.

It turned out that China was experiencing bottle necks due to the sudden increase. So that was one risk. But since it seemed to be a question of time the whole LNG idea started to seem more risky to me and it warmed me up to the idea of nuclear power.

On an index where coal is atnatural gas is at On that same scale nuclear energy is somewhere between 0 and 1!

Investing with a hammer

Time for the left to wake up to this fact…. Kenny worked in the nuclear industry so his words obviously carried extra weight due to that fact alone. But he also said it was probably too early to enter the uranium space as production cuts and consolidation had been minimal at that time and for that reason I simply made a mental note of it but never took a closer look. I started doing just that in January after having discarded LNG.

The climate was increasingly on the agenda and the price chart for CO 2 European emission allowances were making some big moves, which had increased the price Amateurs hammer part 1 electricity in Sweden, and which in turn had renewed my interest for Swedish wind energy companies.

Swedish nuclear power had been on the retreat since when the owners decided to close down four of their ten remaining nuclear power plants due to the low price of electricity. I had been following the electricity space and the political discussions quite closely since then and my impression was that the owners unsuccessfully had tried asserting pressure on the Swedish politicians to give compensation for delivering baseload energy.

Amateurs hammer part 1 things have been changing lately and the idea of building new power plants further out in the future has started entering the discussions, so while I knew nuclear was struggling I also knew that it was far from dead in the west. And so after LNG was dropped as an investment idea I started looking closer at uranium. Being a deep value guy a price chart like the above is interesting.

The first thing I Amateurs hammer part 1 do when a sector peeks my interest is to read the annual reports of the biggest companies in the industry, initially at least those parts give a sector overview. That meant I started with Cameco and what struck me immediately was their mentioning of the fact that the price of uranium was way below the marginal cost of production, as could perhaps be expected by looking at the graph.

Obviously that cannot continue indefinitely so the next step is to look into what has been the cause of it and what may trigger a change to a normal pricing environment where the price returns to equilibrium, ie slightly above the cost of production.

Historically uranium has had these extremely long bear markets that makes your stomach churn. The bear market that proceeded the current one was mainly due to Amateurs hammer part 1 of atom bombs from the former USSR and the US creating the equivalence of a gigantic mine that simply destroyed the market. Then in about China started Amateurs hammer part 1 interested in nuclear power and due to flooding in some large mines that were supposed to come online this created a squeeze on both the supply and the demand side.

When financial players started liquidating their holdings, partly due to needing funds in the wake of the financial crisis, the price came back down do equilibrium like levels, which is to say slightly above the cost of production. Then in the Fukushima accident happened which made Japan decide to close down their reactors for review. In more normal liquid markets the price would be hurt by such a squeeze but it would also Amateurs hammer part 1 correct after the marginal players had been knocked out.

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"Amateurs hammer part 1" So I started looking for other views on the sector and for that Real Vision is often top notch. This is a subscription-based financial media service where people who have dedicated large parts of their lives to Amateurs hammer part 1 a particular field are being interviewed in long-form. I have spent countless hours as a fly on the wall during my daily long walks with my dog listening to world-class experts in different areas.

And here I found two excellent presentations from Mike Alkin of Sachem Cove and from Adam Rodman of Segra Capital that really hit home the point that was right in front of my nose:.

The above graph is the primary reason why uranium is in the state that it is in. And it is also the reason why I pulled the trigger and started investing in uranium now rather than wait. Once one knows that annual demand Amateurs hammer part 1 in the Mlb range then it becomes only too Amateurs hammer part 1 what is going on. And as can be seen below where demand is included in the picture, it is a very constant thing in that business.

I would spend a few minutes Amateurs hammer part 1 the graph below, which is essentially the same as above but with demand added in.

Note that the numbers on the right side, the price, is only applicable for the red line. For all other information, the volume in millions of pounds Mlbs is the reference.

What the graph tells you is that from the contracted volume was way above annual demand so the decline in price from should come as no surprise, especially when factoring in Kazakhstan and Fukushima as well. And by the way, that graph is also the main reason why I, unlike most people who follow the space, am less concerned with a new Fukushima type-accident knocking down the price of uranium.

People have a tendency to equate Fukushima with the bear market and forget the Kazakhstan and the contracting situation. Unless the world decides to dismantle nuclear power once and for all following such an accident. But then what happens with the climate change push that is really taking a hold on the world now? So in the unlikely event an accident happened tomorrow my money is on a scenario that says the price is higher two years from now, after an initial dip.

As an aside, now that I am on the topic of safety: There are some so-called environmentalists out there that need to examine their real motives when speaking out against nuclear energy…. Are you concerned with saving lives in the real word, or are you more concerned with the idea of pressing on a topic that gets you a knee-jerk hug from do gooders who do no good?

Because an anti-nucIear stance will certainly give you that quick gratification of the warmth of the crowd. Electricity from wind and solar tends to hit the grid all at once, or not at all. So is now the time to sell? In my opinion no. Granted, the risk has increased but the upside is also significantly higher now as my calculations further down will show. And by the way these calculations are based on current market conditions and are not dependent on blue sky scenarios, which would only provide further upside not accounted for here.

The reason for the greater downside is that the price has further to fall in Amateurs hammer part 1 the electricity market reverts back to the unprecedented slump that plagued it in the period from A word of caution though: Other analysts have much lower estimates in the MSEK range. Not exactly sure why but I assume this is due to lack of updating to reflect the new reality.

The above number is a "Amateurs hammer part 1" estimate in my view. Note though that in its short year history Arise has not encountered construction problems before and only once, with Kölvallen inhave run into permitting problems. Despite the above mentioned effects starting to kick in from now on my base case for is only MSEK in EBITDA due to low winds in H1 — and as a kite surfer I know this spring to be an unusually disappointing season!

Companies trading near 5 are often takeover candidates. Note that the above is my base case scenario and all of the above numbers are based on current market conditions and prices.

Be aware that the volatility has been quite extreme for all three factors historically and that the risk is significant. For that reason I have erred on the side of caution in my estimates, especially when it comes to project sales.

What killed the case? I believe all we can comment on is our estimate of fair value and not what the markets will do, especially short term like within nine months, and for that reason I will refrain from commenting on that going forward.

I encourage you to do your own reserarch before making an investment decision.

I own shares in Arise. Meanwhile, the owner, Cameco, had repeatedly said they would not bring it back unless uranium prices were meaningfully higher as it would make no sense economically. There are many other reasons that I have already covered in previous posts but the above three Amateurs hammer part linked directly to the news release from last night.

In my opinion the way to handle risk is in how one sizes a position, not wait for all the stars to align because all opportunities will be gone when the skies are completely clear and everybody can see it. One wants to be positioned before the price of uranium moves because now it is pretty much inevitable that it will. I also have smaller positions in Paladin Energy and GoviEx as well as a tiny position in the optionality play Virginia Resources. Note that this may change at any time and while I intend for all of these positions to be longer term I may enter and exit positions without notification of this on my blog.

I do not accept responsibility for any loss that may occur as a result of any recommendation I make and urge readers to perform their own research and due diligence.

My posts are intended to be treated as a starting point only. Electricity prices Amateurs hammer part booming both on the short and on Amateurs hammer part long end of the curve. On the short end due to water reservoir levels being low, and on the longer end, which is perhaps more significant, due to rising demand and carbon emission quotas increasing steeply because of an increasing focus on the environment from governments.