TFN eNews 10/01/2009: Long-term gains in this battered Canadian uranium stock?
Published via e-mail broadcast on October 1, 2009
In today’s TFN eNews:
* Government Tylenol
* Volatility ahead!
* The Revenge of Khan
Dear TFN eNews reader,
If you’re home with the flu and feel you’re indispensable at the office, you come up with subtle scams to convince yourself you’re fit to go in.
Like take your temperature a half hour after the Tylenol got to work.
Based on those results, I’m almost good to go.
Almost as good as today’s U.S. consumer spending numbers. Personal consumption expenditures rose by 1.3%, fueled by growing purchases of durable goods.
Unfortunately, that’s mostly “cash-for-clunkers” government money. That program expired in August. And as a local car dealer assures me, the government check for several dozen clunkers still hasn’t arrived.
It will any day now, I’m sure. Maybe the U.S. economy might make a V-shaped recovery. And maybe tomorrow, I’ll try an ice pack on my forehead before I take my temperature.
*** It may not be Tylenol that the Chinese government is using. But the stimulus yuans Beijing has been greasing the economy with have had a measurable effect on the Chinese stock markets. Markets soared and markets corrected. Both movements occurred with unpredicted intensity.
Our colleagues at Chinavestor.com think that “considering the large number of individual investors, extreme volatility shouldn’t have been such a big surprise. Our target for the Shanghai Composite for December 2009 is somewhere between 3,000 to 3,200. (…)
“We know that the Chinese shares tend to be two and a half times more volatile then their American counterparts. This makes investors smile in a bull market, but be careful because China stocks fall more than twice as fast then American ones when the bears return.”
TFN market oracle and options wizard Andrew Snyder agrees: “The major variable going forward is volatility. With the CBOE’s Volatility Index (VIX) printing at the low end of its recent range, a surge in the opposite direction would line our TFN Strategic Trader members up for hefty profits just in time for October 16 expirations. (Find out how to be a TST member right here!)
“Commodity prices surged yesterday as the dollar turned weaker: Good news for our platinum play and our long-dated contracts. As the gambling industry rebuilds and once again moves into an expansionary mode, valuations across the sector will increase.
“Our RealNetworks (NASDAQ:RNWK) covered call position is working out well. Now that the hype and volatility have settled down, the value of the call contracts we sold is on the decline and share price is remaining steady. We made a smart play on this one and it is already paying off with double-digit gains.
“The big news will come later this week when we get the latest glimpse into the nation’s jobs sector. With unemployment figures due on Friday, there’s a very good chance that increased volatility we’re looking for will come just in time for the weekend.”
*** With volatility taking down commodities a notch or two today, our own Laura Cadden did a little prospecting herself: “Canadian Khan Resources Inc. (TSE:KRI) is preparing to develop uranium properties in the Dornod district of Mongolia. After a struggling through miles of red tape, it now looks like things might actually start moving for this company!
“Khan owns a 58% joint venture interest in Central Asian Uranium Company (CAUC) that controls the mining license for the Main Dornod Property. It’s also a joint venture partner with Russian state-owned JSC Priargunsky which has a 21% interest in CAUC and Mongolian state-run MonAtom which holds the remaining 21%. Kahn has a 100% interest in the adjacent area called the Additional Dornod Property.
“This summer, Mongolia’s Parliament passed its Nuclear Energy Law. It gives the Mongolian Government the right to take ownership without payment of not less than 51% of the shares of a project if uranium resources were revealed through exploration with State funding, or not less than 34% if State funding was not used.
“That new legislation hit Kahn hard. Share prices took a hit.
“But recently, other mining outfits, like Rio Tinto and Ivanhoe, have hammered out investment agreements with the Mongolian government — giving the company new hope: Kahn and CAUC are re-registering their exploration and mining licenses. As well they should…
“Estimates are that to meet growing global need, the production of uranium will have to double over the next 20 years. In that period, the amount of nuclear power plants is expected to practically double from the current 435. Leading the way will most likely be China and India.
“Though prices are now just around $43 per pound, many see the commodity rising to $65 per pound long-term. (In 2007, during the commodities hyper bull market, uranium hit a high of $136 per pound.
“Now, things may not work out for Kahn, and exploration companies are always a risky investment.
“Not to mention that we here at TFN don’t particularly like to recommend stocks that trade below $1. (Simply for fear of creating artificial price-volume spikes!)
But I see the potential for massive long-term gains. And thus would be willing to gamble some speculative capital!”
*** Special Offer: Northeastern University’s Master of Science in Finance: fully online, 16 months, AACSB accredited.
Visit http://onlinemsf.neu.edu/finance-online
Quote of the Day:
“Americans should disavow and not fall prey to the racial rope-a-dope being played on us by the nation’s race hustlers.”
– Walter Williams, Creators.com
Recommended Reading:
Better than stocks, safer than gold
Q4 Update: TFN Complete Guide to Stem Cell Stocks under $10
The 3 Best Stocks under $3 to Buy NOW!
Today’s Top 3 Financial News Stories:
telegraph.co.uk – Money figures show there’s trouble ahead “Private credit is contracting on both sides of the Atlantic. The M3 money data is flashing early warning signals of a deflation crisis next year in nearly half the world economy. Emergency schemes that have propped up spending are being withdrawn, gently or otherwise.”
dailymail.co.uk — The internet overtakes television in battle for advertising “Advertising spending on the internet has overtaken that on TV for the first time.
A record £1.75billion was spent online in the first half of this year, compared with £1.64billion for TV, a study found. It is thought Britain is the first major economy where web advertising has overtaken TV.”
Bloomberg.com — U.S. Stocks Decline on Jobless Claims, ISM Manufacturing Data “U.S. stocks tumbled as a gauge of manufacturing unexpectedly dropped and jobless claims increased more than forecast, adding to concern the seven-month rally in equities has outpaced prospects for an economic recovery.”
Cordially yours,
J. Christoph Amberger
Executive Publisher, TodaysFinancialNews.com
Next Article: Play commodities volatility with Khan Resources Inc. (KRI)
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