From: "Trendsman" <trendsman@trendsman.com>
Subject: TRENDSMAN: Update
Date: Fri, 27 Oct 2006 18:00:04 -0700
Members,
Uranium & Energy...
I mentioned in the webcast that most stocks in the group were at the tail-end of their consolidations. Most of the charts were looking similar. Well on Monday the group got a much needed catalyst for the next bull run. Cameco reported that a rock slide flooded its mine at Cigar Lake . The Cigar Lake project was to begin producing uranium in early 2008 but reports now state that production will be delayed by a year. This means that the large uranium production/supply deficit will be worse than forecasted in 2008 and 2009. Remember that it takes 10 years to develop a uranium mine and these types of mining accidents are very hard to work through.
Cameco's stock price suffered but the rest of the group surged higher (10%+) on powerful volume. If you haven't already, it's time to reload on uranium. We know that the fundamentals are the strongest in the entire commodity group. Now the technicals are saying "buy."
Also, it's important to note the shift taking place in the energy sector. In 2003-2005, oil and gas was at the forefront. While uranium performed strongly, it received scant coverage and attention. Going forward, I expect alternative energy to lead the energy sector. This is not to say that oil and gas will go away. I just expect far stronger returns in uranium. Case in point, Conoco Phillips (COP). The stock is trading at 5.7 times trailing earnings. That means 5.7 x the last 4 quarters of earnings. Currently, the stock is yielding 2.3%. Do you know at market bottoms after crashes, the PE ratio is almost the same as the dividend yield? That tells you that big oil/gas stocks are being given away despite fantastic results and despite the energy sector being in a bull market. This link shows COP's annual revenue and earnings over the past few years...http://finance.yahoo.com/q/is?s=COP&annual. With those #'s I would be paying more than 5.7x trailing earnings....a lot more. This augurs extremely well for uranium.
Elections and Politicans Effect on the Economy
Economics drives politics not the other way around. American history is a great example of this. The American colonists didn't want to pay taxes to the English King without represenation. From that, we had the American Revolution and, a new political system was born out of a desire for economic liberty.
Contrast that with today's system. Without a free market currency, Americans have less economic freedom and from that policy makers control everything. Case in point, the Federal Reserve and the government have the ability to create money. They have the ability to spend when they cant afford it, buy votes and steal the public's money via inflation. Someone once said, "He who makes the money, makes the rules." That person was very right. This rampant inflation (money creation) is what reduces liberty and wealth and its what leads to a multifaceted (economically, financially, morally, socially) national decline.
What's the point? It's the system that is the problem and not the people that operate in it. The politicans that want to change the system are the real leaders. As investors, we just need to know the system and profit from it.
Market Update
I will rehash some of my conclusions from the webcast.
- Worldwide money creation is alive and well. It's not just the US that is inflating
- Everything rose from 2002 to 2006 (bonds, stocks, commodities, gold)...This trend has remerged in the last month
- Gold is starting to decouple from oil....it has already broken out against the CRB (commodity index)
- Record amounts of worldwide money creation has provided a floor and impetus to stock markets around the world. As a result, economic activity continues and supply of base metals is rapidly drying up.
In summary, the action of the past month is telling us that the mega trend of 02-06 is re-emerging. This time, gold and silver are going to lead the commodity market higher, rather than energy and base metals. Looking at a chart of the Dow/Gold, we have seen a counter trend move in which the dow has outperformed recently. This could continue for a few more months, but ultimately will give way to the primary trend of gold outperforming. I'm looking for silver to really outperform gold once it breaks 18.
We could be at the start of a big move in all types of markets (similar to 02-06). While this is fantastic on paper...boo! Beware, because the seeds of hyperinflation are evident. Draw your conclusions from the data- the charts. With gold/silver, in the coming months, poised to take lead ahead of all investments, that is an ominous sign for the future.
Jordan Roy-Byrne
Author, Trendsman Newsletter
"All through time, people have basically acted the same way in the market as a result of greed, fear, ignorance and hope - that is why the numerical formations and patterns recur on a constant basis."- Jesse Livermore |
