Speculators Could Drive Uranium to $55/Pound

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TradeTech LLC Chief Executive Gene Clark talked with StockInterview about the uranium bull market, where his price models show uranium prices heading and when to expect the peak of the current upward cycle of the bull market. When will “hard?times again hit the uranium market, and how long will the trough last? And what does the future hold for the uranium price? An industry insider gives us his insights.

Uranium, nuclear energy, Cogema, bull market, stocks, mining, nuclear reactors, China, India, France,Uranium Participation Corporation, TVA, California

TradeTech LLC Chief Executive Gene Clark talked with StockInterview about the uranium bull market, where his price models show uranium prices heading and when to expect the peak of the current upward cycle of the bull market. When will “hard?times again hit the uranium market, and how long will the trough last? And what does the future hold for the uranium price? An industry insider gives us his insights.

StockInterview: When the uranium bull market began, did you foresee $40/pound uranium, now that the spot price has risen above this level?

Gene Clark:
I don’t think any of us saw $40 per pound coming. We had price projections at the time that indicated probably $25 per pound, which would be a long term equilibrium price in constant dollar terms. But, I think it was a surprise the price went up so high. I think what’s going, the biggest factor right now, is the advent of the so called hedge funds or speculator fund and groups of people. The price started to go up, and they came into the market with the express purpose of buying for holding and then selling into the market later to realize the trading profit. In 2005, the hedge funds were responsible for purchasing about 10 million pounds of the 29 million pounds purchased. I think the market is now finally adjusting to the realities of primary supply and demand. It’s been a depressed market for 20 or 30 years, primarily from the draw down of excess inventories, and what we call secondary supply.

StockInterview: Will the speculators remain active in driving the spot uranium price higher?

Gene Clark:
I think there is still some room for further speculation activity. Uranium Participation Corporation, for example, is rumored to be about to come to the equities market again to raise funds for another purchase. They’re asking for authority to buy UF6, as well as U308, and different forms of uranium than they were locked into before. Whether it be at the 10 million pound level (size of purchase), I think it kind of depends on where the market goes. If it tends to flatten out, then I think there’s going to be obviously less interest on their part. When they were active in the market, they, of course, wanted the price to go up. Therefore, they weren’t too careful about what they paid for uranium. I think that’s a part of it. In the long run, it was due for a readjustment to reflect prices of the cost of new production facilities. But, the hedge funds came in and kind of overdrove the market. Eventually, what it’s going to wind up doing is, if they sell off, it could have the impact of driving prices back down below where they would otherwise have gone.

StockInterview: Did the speculators interfere with the trading efficiency of the uranium market?

Gene Clark:
In theory, speculators come in, tend to take the risk and smooth out market prices. But, it never really works out that way. They always come in and only take the risk, if there’s an opportunity to make money. So some people make a lot of money. It does tend to upset the market. If you get away from the primary users of uranium and primary producers of uranium as your market participants, then you tend to introduce more noise than you would like.

StockInterview: With that in mind, in which direction are your price projections going?

Gene Clark:
We’re actually updating our uranium price forecast right now. We haven’t decided on a reference case yet. The reference cases we’re looking at will peak at about $50 to $55 per pound in about three years, and will then drop off pretty drastically. It has to do with a selling of the speculator reserves, the uranium that’s being held (for speculative purposes). I can see it coming back down to $30, maybe below $30 per pound. Then, in the long run ?out through 2020 ?getting easily back up over $40 per pound.

StockInterview: Are you predicting a down cycle during the course of the uranium bull market?

Gene Clark:
Yes. It’s pretty consistent with everything we’re doing with the changes in requirements, in different cases of high, low, and medium demand. Our modeling system is projecting this. It has to do with the supply and demand balance and the cost on the margin. The way to describe it is that prices have come to a point now of higher than we would have projected them to be, such that the supply is going to evolve. The large low cost projects will reach a point where supply then overshoots demand for a few years, which causes the price to come back down. Then demand growth, in the long run, picks up and puts a lot of pressure on the supply market to be able to meet the demand. So you wind up with pressure toward the end of the period.
StockInterview: But the markets are finicky, filled with variables, and can frequently trick price models.

Gene Clark:
Here’s what it would take to shoot that down: We have a problem with small numbers, and there are some very large projects ?Cigar Lake, for example. The expansion of Olympic Dam in Australia would be going from about 12 million pounds of production to over 30 million pounds, if they finish. If you shift that out by four or five years, or if the owner decides, “No, we’re not going to expand at all,?you have a drastic effect. Then you would wind up with $100 per pound uranium, I think.

StockInterview: What are your estimates on the peak price years and the bottom years?

Gene Clark:
A lot of things could change, but here is what we’re looking at. In one case scenario, the speculators are really going to stay out of the market and holding onto their stuff for a long time. If so, then we’re going to be at the peak by the end of this year. If they stay active in the market and buying, then that stretches it out further. Depending on the scenario, we see the peak possibly at 2008 or so. I would say we’re looking at a trough around the timeframe of 20011 to 2013. Then back up after that.

StockInterview: How do you arrive at your weekly numbers for the spot uranium price?

Gene Clark:
We get our data from all of the key sources: the utility fuel managers, sales staff and management of uranium producers and processors, and uranium traders, brokers and asset managers. Some are, of course, more cooperative than others, and whom we call depends on the type of information we are seeking. Since our price indicators are a judgment call, we often focus on the losers in particular recent transactions, as those will be the next to make offers in the market.

StockInterview: Let’s back up a bit. Why has uranium gone up past the levels of the “cost of production,?which would place the spot price between $25 and $35/pound?

Gene Clark:
The biggest factor, in signaling the market, was when utilities went out for long term bid requests. They found they reached a period in which producers would have to build new facilities. Producers building those facilities felt, “I have to make at least enough profit to cover the construction costs for those facilities.?That was much higher than the market at the time. Basically, you reached a point where the chief stuff has been sold. Now, we have to actually spend some money, some capital, to build new facilities, new mines and new mills. That was, I think, the earliest signal of the price needing to adjust.

StockInterview: Isn’t there a ton of hype across all media channels about the “nuclear renaissance?and the demand for more nuclear energy?

Gene Clark:
First of all, all the hype about nuclear renaissance is really in the United States. The Chinese have had plans to expand for a long time. The Japanese have been steadily adding new capacity. Koreans have been adding new capacity. Indians have been adding new capacity all along, all the way through this, even before we started this discussion on nuclear renaissance. I think that phrase is really focused more in the United States., which really hasn’t ordered a plant since 1976 or something like that. There is a boom. Maybe it’s the uranium renaissance.

StockInterview: Is all of what we’ve been reading just plain hype?

Gene Clark:
There is some hype, but there is also some substance. A part of it is certainly a change in public attitude about nuclear power. If I was riding on an airplane, ten years ago, and someone asked me what I did for a living, I was guaranteed to have a lousy trip, arguing about nuclear power. When I mention it now, I get a positive response. There’s been a market shift in public attitude about nuclear power. From the standpoint of the utilities that would be ordering nuclear plants. To the extent that they need new capacity, looking at nuclear now is not off the drawing boards, partly because of public attitude. The industry has been moving through this trough period, preparing itself for a new era. It remains to be seen when the first order comes. But when the first actual order of a nuclear power plant, along with the license application does come, I think you’ll see several U.S. utilities following, probably five utilities very actively involved.

StockInterview: When will that actually happen?

Gene Clark:
I think it will come within the next five years, the ordering process. Of course it will be probably another eight years before we actually see the first power plant from that process. We’re talking probably about 13 years. That’s how long it takes. You can actually construct one in 48 months, but you have to have been through the licensing. If you don’t believe the anti-nuclear people are going to be psyched up to fight the first plant coming through, then you’d be very naïve. The first one is going to be more difficult and take more time, I think.

StockInterview: One anti-nuclear group told us they do not believe we’ll have more nuclear power plants in the United States.

Gene Clark:
That’s possible, but given the current circumstances, my guess is we will have more nuclear plants. We need the capacities, whether we’re going to build coal plants (or other types of power generating plants). I just came from California, moved here (to North Carolina) six months ago. They were talking about building gas-fired plants for base load generation, which is the most ridiculous thing you can imagine. The plants are cheap to build, but the fuel cost is exorbitant. I did a speech a couple of years ago, having looked at the Energy Information Administration’s projections of gas demand. All the growth and natural gas demand is going to be in the electric utility sector. We are going to be importing 60 percent of our gas supplies by 2020. Does that make any sense? No. We have a lot of coal, but there are lots of complaints about coal burning. In our state of North Carolina, the attorney general is actually suing the Tennessee Valley Authority (TVA) for the damage from coal burning of the TVA’s power plants in the adjacent state, in Tennessee. There’s going to be continued pressure on coal burning. I think nuclear has as good a shot as any in terms of new capacity.

StockInterview: Some critics have argued China and India will not be able to afford the massive nuclear power plant build up they’ve envisioned.

Gene Clark:
If you think the Chinese are going to have any problem financing things, you’d better think twice. Let’s focus on India. India is a clear case where, and it is a good rule of thumb, one percent growth in gross domestic product requires one percent growth in electricity requirement. For India to grow economically, it needs electric power. Where are they going to get it? They have coal plants there, as well. Once you use up all your hydro capacity, you really don’t have much to choose from, except coal, natural gas, and nuclear. To the extent that they can have economic growth and income, coming into their country, they would be able to finance nuclear power plants. My guess is they’re going to get the vendors of the nuclear plant to finance them.

StockInterview: Are you talking about the French?

Gene Clark:
Cogema and Primaton ?the companies that construct the nuclear plants. Financing is generally part of the package. The first plants in China were basically financed by the French government. If the French go into India, you’ll see the same thing. The Russians have financed plants for developing countries. That’s not unusual for them to do. The United States may, or may not, get involved. I think there have been some types of guarantees in the past, but not at the same level as the Russians and French do it. I think those are the big choices. I wouldn’t be surprised to see the South Koreans involved in the reactor export market. They’ve pretty much developed their own technology now. They have the capability of building 100 percent of a nuclear power plant in South Korea: the pressure vessels, all the steel requirements. They can do it all. We really haven’t seen them export yet, because they’ve used up all their manufacturing capacity for their own program. At some stage, I wouldn’t be surprised to see that happen. And I think they would be able to finance reactor export sales.

StockInterview: How are the U.S. utilities going to fare in getting their “share?of uranium to fuel our domestic nuclear power plants in the context of the apparent overwhelming Asian demand?

Gene Clark:
In reality, the U.S. utilities, which tend to wait longer to contract, are going to be the ones on the losing end because the Chinese and the Indians will contract early. The implication is the Chinese and Indians are not going to be able to find enough uranium for their new plants. They are committing for supplies way out into the future. When the U.S. guys come to the market, they’re going to look around say, “Oh blankety- blank, what happened? Where’s the uranium??They’ll be the ones that sat around. I think that is what’s going to happen unless things really change in the way contracting is done in the United States.

Will Lightning Strike A Third Time For Dr. Boen Tan?

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A Renowned Exploration Geologist Is Pursuing Another Major Uranium Deposit in Saskatchewan’s Athabasca Basin

In late January, Cameco Corp’s director of advanced exploration tantalized the audience at Vancouver’s Minerals Exploration Roundup, discussing the geology, and especially the size, of his company’s Millennium uranium deposit. Drill indicated resources are estimated at 449,000 tonnes with a grade of 4.63 percent uranium oxide. Additional tonnage is inferred at the l…

investing, stock market, commodities, energy, utilities, stock tips, stock trading

A Renowned Exploration Geologist Is Pursuing Another Major Uranium Deposit in Saskatchewan’s Athabasca Basin

In late January, Cameco Corp’s director of advanced exploration tantalized the audience at Vancouver’s Minerals Exploration Roundup, discussing the geology, and especially the size, of his company’s Millennium uranium deposit. Drill indicated resources are estimated at 449,000 tonnes with a grade of 4.63 percent uranium oxide. Additional tonnage is inferred at the lesser grade of 1.81 percent, but still a respectable grade by anyone’s calculations (one percent of uranium oxide is reportedly comparable to about 50 grams of gold). Because of soaring spot uranium prices, this deposit’s gross value might someday conceivably exceed $2.4 billion.

“The geological setting of the Key Lake Road shear zone is quite similar to the Millennium deposit,?Dr. Boen Tan told StockInterview. “The Key Lake Road shear zone is located within the same north-northeastern structural trend as the Millennium deposit.?Cameco’s (NYSE: CCJ) director of advanced exploration, Charles Roy, called the Millennium uranium deposit, “the most significant new basement discovery in more than 30 years.?News reports suggest the Millennium discovery could host a resource of 57 million pounds of uranium oxide. The Millennium deposit is located north of the former world-class Key Lake uranium mine and south of two of the world’s highest grade uranium deposits, McArthur River and Cigar Lake.

So why is Dr. Tan evaluating a relatively early stage exploration project against one of the world’s most recent and highly lucrative uranium discoveries? Most junior companies exploring in Canada’s Athabasca Basin, or for that matter any junior natural resource company, are unduly sanguine about measuring their property’s exploration prospects in relation to a major, often recently discovered, world-class deposit. All too frequently such “closeology?(“we’re close to the big deposit so we can find an elephant, too) comparisons are deceptive and misleading. In many investment circles, it has become a clich? However, when the comparison comes from a highly regarded exploration geologist, such as Boen Tan, one should pay attention. Especially when Dr. Tan talks about his geological insights regarding the greater Key Lake area.

Dr. Tan was the Uranerz project geologist for uranium exploration at Key Lake in the early 1970s. His exploration work led to the discovery of the Gaertner deposit (1975) and the Deilmann deposit (1976) in the Key Lake area. According to a recent Northern Miner article, “It was not until the discovery of the Deilmann and Gaertner deposits at Key Lake that the true unconformity type uranium deposit model was first recognized.?
Dr. Tan also supervised the definition drillings of these two deposits until 1978. According to the Uranium Information Centre, Key Lake once produced about 15 percent of the world’s uranium mined. Over Dr. Tan’s long career, he was also fortunate to have evaluated some of the world’s largest uranium deposits in the Athabasca Basin, which had been previously co-owned by Uranerz. These include the Key Lake deposits, the Rabbit Lake deposits (including Eagle Point, A-, B- and C-Zone, and the McArthur River deposits).

Comparisons between the Key Lake Road Project and Cameco Corp’s Millennium Uranium Deposit

Asked about his opinion of Forum Development’s Key Lake Road project, for which Dr. Tan is the chief geologist, “We have the right lithology, the right structure and, on top of that, we have uranium mineralization.?Dr. Tan was impressed with the amount of uranium mineralization scattered with the graphitic metapelites. “It is very seldom you find such a lot of uranium mineralization there,?he explained. Again, he compared that with exploration around the Key Lake deposit where he remarked, “The graphitic metapelites at the hanging wall of the Key Lake deposit had as much as 4,000 parts per million of uranium.?It’s an optimistic sign in preparation for a summer drilling program.

Let’s look at Dr. Tan’s geological comparisons between Cameco’s mammoth Millennium uranium deposit and the exploration he is overseeing for Forum Development’s Key Lake Road project.

1. Athabasca’s eastern basin is comprised of Archean granitoid gneisses and Paleoproterozoic metasedimentary rocks. Dr Tan wrote, “Both the Lower Proterozoic rocks and the Archean granitoid rocks occur within the KLR shear zone in similar geological setting (along the north-south structural trend,) as the Millennium deposit.?
2. The Millennium’s main uranium zone occurs in a pelitic to semi-pelitic stratigraphic assemblage of gneisses and schists. Asked about the drill targets on the Key Lake Road project, Dr. Tan responded, “The targets are in the pelitic stratigraphic assemblage at depth which includes the same graphitic pelitic gneiss and the calc-silicate which host the uranium mineralization in the Millennium Deposit.?
3. Cameco’s geophysical surveys indicated the presence of a significant resistivity low centered over the uranium mineralization. Dr. Tan explained, “Forum did airborne VTEM (electromagnetic survey) and multiple parallel EM conductors of over 40 kilometers long were outlined. Last year’s radiometric prospecting was carried out and several uranium showings (from 0.1 to over 5 percent uranium) were found in the graphitic metapelites, calc-silicate and pegmatites along this 40 km conductive trend.?
4. The Millennium deposit features extensive hydrothermal alteration over the lithology. The uranium mineralization was associated with dark chlorite and illite, and with a distal halo that included sericite. Dr. Tan remarked, “In the Key Lake Road area, we did observe moderate clay alteration in the fractured and brecciated calc-silicates and pelitic gneiss which appear to be chlorite and sericite. In 1980’s five reconnaissance holes were drilled in the area and chlorite alteration in the meta-pelites was reported from the drill cores. In a project Forum has scheduled for drilling this winter, Dr. Tan pointed out, “In the Costigan Lake area clay alteration in the pelitic gneiss were intersected in several holes. One drill hole intersected uranium mineralization of 0.43% U3O8 in 0.36 m of clay altered graphitic pelitic gneiss.?
5. The Millennium deposit’s ore mineralogy is comprised of pitchblende, with lesser amounts of coffinite and uraninite. Dr. Tan discussed the comparative mineralogy, saying, “We found uraninites in the calc-silicates which occur as fine to coarse disseminated grains and as nuggets up to 2 centimeters in diameter (over 5 percent uranium). Fine grained uranium mineralization (up to 0.6 percent U) found in the fractured graphitic meta-pelite appear to be secondary uranium mineral.?In the Key Lake Road’s “Molly Zone,?Dr. Tan indicated, “Uranium mineralization was found within the calc-silicates and pegmatites along the shear zone. The calc-silicates contained up to 5 percent uranium with visible pitchblende?He also pointed out that at Forum’s Maurice Point project, which the company may drill in 2007, “the prospector discovered a zone of mineralization of 100 by 10 meters wide with uranium mineralization from 1 percent up to 7 percent uranium in an outcrop.?
6. Finally, Dr. Tan explained, “Because all the unconformity uranium deposits in the Athabasca Basin, such as the Millennium, Key Lake and McArthur, always have lots of boron. That is indication of the hydrothermal diagenetic ore-forming process. Do any of Forum’s properties show boron? Dr. Tan said, “The Beach Zone in the Maurice Point project has high boron elements. On top of the good uranium grades, yes, that is the extra special thing. Because it is characteristic for a hydrothermal uranium deposit in Athabasca, like Key Lake. It’s a good indication like pathfinder elements.?
Evaluation of Forum Development’s Exploration Prospects

As with any early exploration project, additional drilling helps define the property’s potential. Many of Dr. Tan’s comparisons, while valid, require drilling the most promising targets. Asked about what questions that drilling the Key Lake Road project might answer, Dr. Tan responded, “If the uranium is deposited under hot water, in a hydrothermal environment around 300 degrees, if you don’t see the uranium during drilling, you want to see the rock alteration, the pathfinder geochemistry, the boron, and elevated uranium.?He also pointed out the most obvious answer you want to see during a drill program, “The thing you want to see in drilling is to see some uranium.?
Some might consider Forum Development Corp’s relatively shallow drilling approach with hesitation. The company plans drill holes between 150 and 200 meters deep, not the 700 meters usually drilled in the Athabasca Basin. Forum’s Chief Executive Rick Mazur, who is also a geoscientist, saw the positive side to that philosophy, calling his exploration model “unique?(which it is). He added, “The Key Lake project was a concept where we were looking for near or at surface mineralization. We acquired ground just outside the erosional context of the Athabasca sandstone, where we believe that basement hosted deposits could be found at or near surface.?
Expensive drilling in the Athabasca Basin can break any junior uranium exploration company’s bank. Financing for these drill programs can run into the millions. Exploration can take years. Investors should note that deep drilling into hundreds of meters of overburden can quickly drain a company’s exploration budget. Mazur explained, “We are fortunate enough to have rock exposed on surface, and not covered with 400 to 800 meters of Athabasca sandstone.?What is Forum’s advantage for shallow drilling? “We can go in there and with a very cost-effective program of geological mapping and prospecting, evaluate areas on our property where uranium mineralization has already been discovered in detail,?Mazur concluded.

David Scott, an eResearch geological analyst, issued a speculative buy recommendation on Forum Development Corporation (TSX: FDC) in October, 2005, and wrote the company “has an excellent management and advisory team with decades of experience in the Basin. They have staked two well-positioned properties and have moved quickly to explore them.?eResearch set a 12-month target price of C$0.60/share on FDC shares, with a potential target price of C$0.90/share “if the company continues to get good results in the Athabasca Basin.?
The analyst re-iterated the speculative buy recommendation on February 13th with the target price of C$0.60/share. The analyst based his investment opinion and price target by comparing Forum Development against “peer group?junior uranium exploration companies. Valuation was arrived at his price target by comparing Forum Development in terms of (a) similar-sized uranium exploration companies and (b) uranium exploration companies with properties next to Forum Development. FDC shares traded between C$0.40 and C$0.50/share during February.

Snapshot: Dr. Boen Tan

Dr. Boen Tan is a member of the Association of Professional Engineers and Geoscientists of Saskatchewan, and possesses over twenty-five years of uranium exploration experience. Dr. Tan joined Uranerz, a private German company, in 1969 and after a number of years as a field geologist in Germany and Australia, moved to Canada in 1973 as a senior geologist and Project Manager for Uranerz Exploration & Mining Ltd. (UEM), conducting uranium exploration in the Athabasca Basin.

Dr. Tan was instrumental in the discovery of the Key Lake uranium deposit and the development of the Key Lake Mine which produced 195 million pounds of U3O8 at a grade of 2.5% over a fifteen year mine life from 1983 to 1997. After the development of the Key Lake Mine, Dr. Tan continued to supervise UEM’s uranium exploration and drilling programs in the Athabasca Basin, including regional exploration in the greater Key Lake area. Dr. Tan monitored the exploration and diamond drilling of UEM’s joint ventures with Cameco Corporation at the McArthur River, Maurice Bay, Millennium and Rabbit Lake deposits until all uranium property and project interests were sold to Cameco in 1998.

The Golden Pendulum Formula

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The pendulum formula is a belief that, in any investment area, the herd instincts of greed and fear are prevalent, that virtually all extremes return to a natural equilibrium point or gravity center, and trends and cycles of these tendencies can be identified and measured.

The pendulum formula is a belief that, in any investment area, the herd instincts of greed and fear are prevalent, that virtually all extremes return to a natural equilibrium point or gravity center.

“In 1581, Galileo, while attending services at the Cathedral of Pisa, observed a chandelier swinging back and forth. Energized by shifting air currents, the chandelier moved in a variety of arcs and amplitudes. Thus was born the concept of the pendulum which Galileo used as a time measurement device in his later experiments?

The pendulum formula is a belief that, in any investment area, the herd instincts of greed and fear are prevalent, that virtually all extremes return to a natural equilibrium point or gravity center, and trends and cycles of these tendencies can be identified and measured.

Uncovering the full spectrum of trends, cycles, equilibrium points and fundamental values of the market is vital. The results should be in harmony with natural growth, maturity and regression.

An investor’s primary mission is to determine extremes of values, either long or short, that will result in a return to the current “gravity center” or an equilibrium point and thus a profitable trade. To this end, all decision lines, formulas and concepts must be fully integrated and calibrated to result in accuracy, precision and profit.

Fundamental Formula:
Many invest in gold and silver and resource stocks due to our huge trade deficits, unsustainable consumer debt, housing and stock market bubbles, etc. In 2003, John Embrey outlined 15 fundamental reasons to own gold at http://goldmoney.com/en/commentary/2003-09-26.html. Those reasons are still valid today and provide a type of insurance policy against potential financial disasters.

Evaluating gold, silver and resource stocks is not easy. Some are producers. Others may have a defined resource while others are explorers or prospect generators. In general, there are 10 areas in the gold and silver area in particular, that must be considered, evaluated and positively answered.

1. Management, their vision, experience and partners
2. Location of property
3. Infrastructure
4. Number of holes drilled
5. Number of potentially mineable ounces from measured, indicated
and inferred resources.
6. Open pit vs. underground
7. Metallurgy issues
8. Political considerations
9. Finances, net present value & potential share dilution
10. Feasibility study planned or in progress

A more detailed analysis of these guidelines and other issues by Kenneth Gerbino can be found at http://www.321gold.com/editorials/gerbino/gerbino060804.html

Technical Formula:
Outside of the fundamental criteria for owning gold and silver stocks, there are measurable trends, cycles and behavior that allow investors to participate and profit from the pendulum swings into and out of this area.

Studies have shown that 60% of a typical stock price change can be directly attributed to the movement of the overall market. Therefore, it just makes common sense to be on the right side of a market trend. To that end, it is wise to first focus on an index trend before considering individual gold, silver and resource issues.

Also, if we are planning to invest in any market arena, then it goes without saying that we need to reduce the risk, improve the probabilities and employ a more disciplined and original approach. My market direction indicators and advanced market behavior formulas are designed to assist me for just such a purpose, and I simply call it Pendulum. It is a personal tool box, as it were, to guide me in technical decisions.

The concept of trend is basic and using or developing an indicator that demonstrates a trend is essential. I recommend the MACD (moving average convergence divergence) found in most popular programs. In my work, I use my own modified form of the MACD which I called TSL (Trend Signal Line). Like the MACD it assists in determining trends but without as many whipsaws. For obvious reasons, it is very important to develop one’s own indicators so as to avoid getting the same results as everyone else.

Let’s look at an example. One of the more interesting concepts is to display a trend and cycle in one integrated view. One can therefore see the longer primary trend and the short term cycle within that trend. The red TSL is the trend signal line noted above and the SRA, my own speed and acceleration cycle indicator. Here is an example from the May 2005 low in the XAU index. Please see? www.marketpendulum.com/pendulumconcepts.html for a chart description.

As you can see, it did quite well and allowed an early entrance into a profitable trend. So I would encourage all to develop their own indicators and formulas.

Today, my Pendulum tool box measures the swings in the market, their amplitude, force and energy while recording the motion of emotion across an equilibrium point or gravity center. The concept of gravity center is a central feature of Pendulum and is found throughout nature….that force of nature that compels both human behavior and physical objects to find their equilibrium point.

Results:
Using the concepts and criteria above, I employ two model portfolios, one gold/silver and the other resource stocks. The gold/silver portfolio is up an average 265% since 2002 and the resource portfolio 74% since its 2004 inception, a very satisfactory result for my purposes.

Conclusion:
We have discussed using key fundamental data and original technical trend criteria as the basis for stock selections in the gold/silver and resource investment areas. It is not easy, takes time and effort, but for the serious investor, it can be the golden pendulum formula for potential success.

Stock “Bot” Revealed!!!

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Is “Marl” the real deal? Read to find out!

stock bot revealed review

Buying penny stocks can also really risky. But you can lower that risk by researching the stocks. Although this takes a long, long time and is very difficult to do.. Wouldn’t it be nice if you could find out what stocks were going to be hot? If some magical genie could tell you when to buy and when to sell? Well there is no perfect formula to stocks. But there are definitely ways to improve your chances of picking a winner. I have always wanted to get in the stock Market but Have always been way to fearful of the losses. I was looking for some kind of “genie” and guess what I found one! Now I’m not going to tell you to buy this thing because I want you to go and but all the books out there on stocks first… then when your head is about to explode from all the info you just crammed in your head you can come back and look at what I’m saying.

This “genie” I found was call “Marl” and he is a stock bot.
He has no emotions, so he can pick stocks on cold hard statistics. He can also analyze 100s of stocks in the time it would take a stock analyst to do one! Like I said there is always risks with stocks but “Marl” almost eliminates the chance for failure. For the full story on “Marl” check out his site at Stock “Bot”

Winning Traders – What They Have In Common

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We often hear that 95% of people who try trading for a living fail within the first year. These are not very good odds and it is natural for new traders to wonder if they have what it takes. In this issue, I give you a list of 20 characteristics I believe could be found in most winners.

trading, investing, stock market, day trading

We often hear that 95% of people who try trading for a living fail within the first year. These are not very good odds and it is natural for new traders to wonder if they have what it takes. In this issue, I give you a list of 20 characteristics I believe could be found in most winners. I also included some Truths about trading.

The methods employed by winning traders are extraordinarily diverse. Despite the broad spectrum of traders, certain characteristics are found in most winning traders (in no specific order):

– Winners have a trading plan with a strategy that incorporates effective money management. They have the discipline to execute their plan relatively flawlessly and the self esteem to accept the money the market gives them.

– They use their head and stay calm ?they don’t get excited or depressed because of their trades. They don’t act on emotions. They can handle success and failure without self-destructing.

– They don’t trade to feel good or to get high.

– They handle trading as a serious intellectual pursuit.

– They always protect their capital because they know they cannot trade without it. This means that they don’t get caught up in the thrill of the moment, the excitement of a running stock ?they don’t jump into careless trades.

– They love trading, trading is a passion and they spend a large portion of their time trading and learning about trading.

– They know that sometimes the best thing to do is to do nothing (sit on their hands). They do nothing unless there is something to do.

– They don’t pay attention to other people’s opinions, they make their own.

– They don’t try to guess the future – they know it is a game of probabilities. They understand that they will always have a percentage of losing trades but they keep the losses for those trades small. They don’t hesitate to get rid of a position when the loss is still small.

– They have a great respect for the markets and they never think taking money from it is easy.

– They behave like professionals. They take full responsibility for their actions and don’t look for something or someone to blame. Instead they use their losses as an opportunity to improve their plan.

– They trade to trade well, not for the money.

– While they are in a play, they don’t count how much money they have made or lost because they know this would influence their judgment. They focus on trading well.

– Amateurs keep thinking what trades to get into, while professionals spend just as much time figuring out their exits.

– When they have a winning position, they don’t let their emotions dictate when to close the position, which would result in small gains. They know emotions cannot be part of the decisions.

– When they enter a play, they don’t have any expectation. They understand it can go either way and that nobody can know the future.

– They have confidence in their plan, patience, and discipline.

– They are not afraid because they have developed attitudes that prevent them from getting reckless.

– They have self-monitoring skills and can continuously monitor their performance in order to improve it.

Some Truths about Trading

– The market is a huge crowd of people. Each member of the crowd tries to take money away from other members by outsmarting them. Everyone, including some of the brightest minds in the world, is against me and I am against everyone. It’s every man for himself. The money I want to make belongs to other people who have no intention of giving it to me.

– The market is like an ocean, it moves up and down regardless of what I want. The market does not know I exist and I cannot influence it. I cannot control the market any more than a sailor can control the ocean, but I can control my own behavior.

– Trading is all about management ?managing myself, my money, my attitude, and my positions. It is not about predictions, forecasts or opinions.

– There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. No man can always have adequate reasons for buying or selling stocks daily or sufficient knowledge to make his play an intelligent play (Jesse Livermore).

– Trading without imagination is like painting by numbers ?and is about as rewarding(William R. Gallacher).

– The market is not going to reward anyone for observing the obvious.

– A mistake made by many traders is that they become so involved in trying to catch the minor market swings (generating lots of commissions in the process) that they miss the major price moves.

– Advisors are only wrong when you get too many of them start thinking the same thing.

– A strategy to enter and exit trades will not help you unless you are both disciplined and organized.

Not Taking Profits

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It’s an emotion every trader is familiar with: greed. Who doesn’t want to get rich, and who doesn’t want to do it in one trade? But thinking that way is one of the main reasons most traders lose money. There’s a much better method to making your fortune.

The Complete Guide to Daytrading, day trading coach

If you know the pitfalls of trad¬ing, you can easily avoid them. Small mistakes are inevitable, such as entering the wrong stock symbol or incorrectly setting a buy level. But these are forgivable, and, with luck, even profitable. What you have to avoid, however, are the mistakes due to bad judgment rather than simple errors. These are the “deadly?mistakes which ruin entire trading careers instead of just one or two trades. To avoid these pitfalls, you have to watch yourself closely and stay diligent.

Think of trading mistakes like driving a car on icy roads: if you know that driving on ice is dangerous, you can avoid traveling in a sleet storm. But if you don’t know about the dangers of ice, you might drive as if there were no threat, only realizing your mistake once you’re already off the road.

Greed is an obvious but dangerous mistake. By their very nature, of course, traders are greedy, since they start trading in order to make more money. Wanting more money isn’t dangerous; wanting it too quickly is. Every trader wants to get rich, and they want to do it in one trade. And that’s when they lose.

Trading success comes from consistency, not from a trading “grand slam.?There are a lot of newbie traders out there who believe that their fortune will be made in just one amazing trade, and then they’ll never have to work again for their entire life. This is a dream, a dangerous one. Successful traders will realize that right away. The best, and usually only, way to make a fortune in trading is consis¬tency. And this fortune will probably be made in small amounts. Unfor¬tunately, most traders go for the big wins, which result in big losses.

It makes sense that traders are more interested in larger profits per trade. What would you rather have ?a fifty dollar bill or a five dollar bill? The answer is obvious. But when it comes to trading, it’s not that simple. If you don’t take the five dollar bill, you may lose fifty dollars of your own money, or more. The main thing to keep in mind is this: even though you can’t take the fifty dollar bill right away, you can take ten five dollar bills over a longer period of time. And the end result is the same ?fifty dollars.

And that’s the main point here: small, steady profits add up. This is not to say you’ll never have a big winner. In options trading for example, it’s pretty common to have profits of 100%, 200%, or even 1,000% in just one trade. So, it’s not impossible to snag the big profits ?it’s just not something you should count on. If you expect numbers like this all the time and accept nothing less, you’re setting yourself up for guaranteed disappointment.

The key to trading success: small but consistent profits. Consistency is the key, because if your profits are consistent and predictable, then you can simply use leverage to trade size. Therefore, you must know when to exit with a profit. Resist the temp¬tation to stay in “just a little longer, for just a little more.?

Penny Stocks – Turn Your Pennies Into Dollars

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We’ve all heard about the investor how bragged about his 100% or 1000% return on a stock or about the guy who made it rich by investing in small caps, undiscovered stocks that made it big. Too easy to lose money unless you know what to look for.

penny stocks, trading, investing

Penny Stocks – Turn Your Pennies Into Dollars

We’ve all heard about the investor how bragged about his 100% or 1000% return on a stock or about the guy who made it rich by investing in small caps, undiscovered stocks that made it big. In theory, it seems to be too easy. Invest in a couple of penny stocks, then sell them when they move up. Unfortunately, it is too easy. Too easy to lose money unless you know what to look for.

First, lets have a look at what types of companies trade on the OTC BB or Pink Sheets.

Stocks that no longer trade over $1 on the Nasdaq
These include companies that fell from grace (Enron). While it is possible that they may see better days in the future, the odds are stacked against them. Its usually best to avoid trading these stocks. If you feel that the temptation is too much, wait until the stock begins to rebound. If you try catching a falling knife, you will get hurt.

New Start Ups
Every year there are hundreds if not thousands of companies who decided to go public. Whether they need the money to expand their business, or are looking to cash out their equity, its a natural progression for a company with a compelling story, and a great track record to go public. While many of these companies will file for an IPO, many others will start off trading on the OTC BB as a penny stock

Second, lets look at some tips to help the penny stock trader avoid making costly mistakes.

Due Diligence
Stocks listed on the Pink Sheets don’t have to file annual or quarterly statements. This makes starting your due diligence difficult. Often, the information is sketchy at best, and typically, its biased. You should expect a shareholder to say good things about the company. If the company didn’t have potential, they wouldn’t be holding it. Or, they might be hoping to unload their shares and hope to talk you into buying.

Stocks listed on the OTC BB file annual and quarterly statements. This provides some measure of financial success. You’ll find most penny stocks lose money, whether through managerial incompetence, or research and development. The key is to identify the companies whose management has a record of consistently making money, or at the very least, delivering on their business plan, and decreasing expenses.

Penny Stock Newsletters
Being a writer for The Leading Source (http://www.1source4stocks.com) puts me in a biased position when speaking to penny stock newsletters. Here’s what I can tell you: be careful! Check the disclaimer for the amount the newsletter is being paid to carry the profile. Are they being paid in cash or in shares? You’ll likely find a corelation between the number of shares they are being paid, and the rating on the hype meter. Does that mean that you should avoid any stock where the company is paying IR professionals in shares? No. Just keep in mind that they are selling a story, and if they sell the story to other shareholders, they will gain. This is not a problem if you get in early, but could be a problem if you aren’t able to jump in right away.

Take a look at the track record of the newsletter. Have they profiled winners? Do they state the facts, or state the hype? Do they also offer unpaid stock profiles? If they do, you’ll likely find that they do their own research in all companies, and are looking to ensure that they aren’t passing a weak stock your way just to pay the bills.

If a company is paying an IR professional money to profile a stock to its subscribers, should you avoid it? Of course not. Think of the payment as advertising. They are promoting the company, and trying to get exposure. Like any company, the only way to get exposure is through some method of advertising. So dont dismiss a paid profile as hype. Keep it in the back of your mind while you are reading the profile, but pay attention to the profile. You may find a diamond in the rough that no one has discovered.

Volume
If you want to make money, you have to be able to buy and sell enough shares to lock in your profit, or protect your capital. If ABC company’s daily volume is only 500 shares a day, it may take you several days to accumulate a position worth taking. If there is bad news, who is going to buy your shares? If the volume is low, stay away. Its not worth it. If you feel that strongly about owning the company, consider contacting the company directly and working out a deal.

Buy Results, Not the Story
If you buy the hype, odds are, you will end up being the last one to own the shares, while everyone else has sold off their position. Look at a company, take a look at what their business plan was, and confirm if they have followed through on that plan. Were they successful? Did they bring a product to market on time? Did the company follow through on its acquisition strategy in the manner they set out? The hype might get you a quick pop, however, unless you are watching your trading screen every second of the trading day, you will miss out.

Size matters
There are thousands upon thousands of penny stocks. The size of your position should not be anymore than $2000 – $3000. While this may not seem like much, keep in mind that its not unusual for a $0.10 company to drop to $0.05. That’s a 50% loss. If your position is $10 000, a 50% haircut leaves you with only $5000. Keep your losses to a minimum. If the company has done well, and you are up, either take your profits off the table, or add to your position, and be sure to reset your stop loss so as to protect your previous profits. Capital preservation is the key to successful trading.

Have a plan before you buy. What are your reasons for buying. What is your exit strategy? Where is your stop loss? At what point will you take your profit? Write down these answers before you place that buy order.

Penny stock investing can be profitable. Remember, you are taking larger risks than you would if you were purchasing shares in a bank stock. That risk can be rewarded with returns that you cant get with a bank stock, or, it will be met with a large loss and a bad taste in your mouth for investing in penny stocks.

Do your homework, don’t believe the hype, and protect your capital.

Note: The Leading Source provides its subscribers with both paid and unpaid profiles. Follow those tips and you will watch your pennies grow into dollars.

The Need for Diversification in the Stock Market

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Diversify or Die

stocks, stock market, stock investing, stock quotes, share, new york stock exchange, investing, investing basics, investing stocks, share price, investing stock market, wall street, stock information, buy stock, stock research, stock exchange, buy st

Copyright 2006 Richard Stoyeck

Why is it that some people only buy one or two stocks? Others may have 15 stocks but have 50 percent of their investment assets in just one of those 15 stocks. In Wall Street we refer to this type of behavior as concentration. Some firms call it over-concentration. When this happens in a brokerage firm it is always considered dangerous. It is so dangerous, in fact, that if the brokerage firm is using a concentrated stock position as capital, then the market value of the security in question is given a haircut. This means that the full market value of the security is chopped by some fixed percentage in any capital computation. In other words, if you are over-concentrated, you don’t get full value. Some of you may have margin accounts. As you know, StocksAtBottom.com advocates cash ownership of stocks. If you own stocks on margin, it is our opinion that you will get sold out on margin. Normally in a margin account you put up 50 percent of the value of the stock you acquire in cash. If equity falls below 35 percent, you get a margin call. Now, brokerage firms love it when clients have 15 or 20 different stocks in a margin account. If there are some bonds in that account, guess what, they love it even more. Why? Because brokerage firms know that stocks represent risky investments. Something can always go wrong in any one situation. Maybe something can go wrong in any two situations. It’s tough to see something go wrong in 15 situations. That is the essence of diversification. SPREAD THE RISK AROUND. It makes a lot of sense. Some investors own 50 to 100 stocks. This is because they think they need that many to achieve the investment goals that they set out for themselves. In business school at a master’s degree level they teach you that to achieve true diversification you need to own something approaching 14 equity positions. It has been the experience of StocksAtBottom.com that 6 to 10 different equity positions is sufficient to achieve diversification. The one thing we know for sure is that it’s not one stock or two stocks. Own one or two and you get killed.

Putting all your eggs in one basket We advise all investors to own several stocks and to own more than one sector. Own more than one type of investment (that means equities, bonds, real estate, cash, you get the picture) or you will have problems. Sectors refer to stocks with broad themes. Examples are: * Energy * Semi-conductors * Housing * Auto * Consumer * Airlines * Personal Computers * Technology in general If you own 10 stocks, but they fall into only 2 sectors then you really have not achieved diversity in your portfolio. You see, when they come to get Ford Motor, usually General Motors is not that far behind. By the way, it’s great on the upside to own everything in one sector when that sector is going your way. There’s probably not a greater high in the world than when everything you own is going up. On the flip side, when you are overly concentrated in a sector that’s heading down, lower and lower every day, there is no worse emotional low. The depression can be almost unbelievable. There’s also the issue of owning more than one type of investment. There are equity investments, which are stocks. There are real estate investments, and bond investments. There are also venture capital investments, precious metals, and others such as oil and gas. To a large extent, you achieve diversity in your investment strategies by owning different types of investments, as well as investing in different sectors. Let’s go into a few real life examples. We at StocksAtBottom.com believe we have already made the equivalent of a lifetime of investing mistakes, so learn from a few of ours.

Arrow Electronics It was Christmas week in the early 1980’s. One of us was sitting at Bear Stearns as a limited partner at the time. We were doing very well as stockbrokers. It was the period of full commissions (no discounting), and clients were doing 10,000 share trades in $50 dollar stocks. Taking home an income of $500,000 to $1,000,000 in a year was no big deal at the time. We were loaded up on Arrow Electronics, a NYSE company in the semi-conductor sector. Business was fantastic, the future was bright, and things could not have been better. Since we were involved on the banking side as well, we had an open line of communication to the company. We knew we had a good thing going. The telephone rang on one of those beautiful days prior to Christmas when New York City is the place to be, Rockefeller Center all lit up with a 50 foot Christmas tree and all. “Hello.” A harried response, “There’s been a fire at the Tarrytown Hilton Executive Center, a lot of people are dead.” “Okay, that’s terrible, how does it affect me and by the way, what’s for lunch today?” “Buddy, you don’t understand,” the dead pan voice says. “What don’t I understand?” “The entire executive leadership of Arrow Electronics was in that fire.” All of them, every one of them had been killed by this monstrous tragedy. It was the worst Christmas imaginable for the wonderful families of this dedicated group of execs. The families never recovered, the company never recovered in terms of the people that were left, and the stock took years to recover. It plummeted from $32 per share to $4 per share in a matter of days. The recovery was slow and hard, it was agony all the way back on this particular stock. Arrow Electronics is an example of putting all your eggs in one basket. It is an example of owning just one stock. SAB does not care how much you know about a company, things can go wrong and do go wrong. You simply cannot own just one company because the risk on the downside is too great. YOU MUST DIVERSIFY IN ORDER TO SPREAD THE RISK.

The Perfect timing to sell your stocks

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I will guide you through the best way and timing for selling your stocks at maximum cost with minimum risk.

stocks, stock market

While quite a bit of time and research goes into selecting stocks, it is often hard to know when to pull out ?especially for first time investors. The good news is that if you have chosen your stocks carefully, you won’t need to pull out for a very long time, such as when you are ready to retire. But there are specific instances when you will need to sell your stocks before you have reached your financial goals.

You may think that the time to sell is when the stock value is about to drop ?and you may even be advised by your broker to do this. But this isn’t necessarily the right course of action.

Stocks go up and down all the time, depending on the economy…and of course the economy depends on the stock market as well. This is why it is so hard to determine whether you should sell your stock or not. Stocks go down, but they also tend to go back up.

You have to do more research, and you have to keep up with the stability of the companies that you invest in. Changes in corporations have a profound impact on the value of the stock. For instance, a new CEO can affect the value of stock. A plummet in the industry can affect a stock. Many things ?all combined ?affect the value of stock. But there are really only three good reasons to sell a stock.

The first reason is having reached your financial goals. Once you’ve reached retirement, you may wish to sell your stocks and put your money in safer financial vehicles, such as a savings account.

This is a common practice for those who have invested for the purpose of financing their retirement. The second reason to sell a stock is if there are major changes in the business you are investing in that cause, or will cause, the value of the stock to drop, with little or no possibility of the value rising again. Ideally, you would sell your stock in this situation before the value starts to drop.

If the value of the stock spikes, this is the third reason you may want to sell. If your stock is valued at $100 per share today, but drastically rises to $200 per share next week, it is a great time to sell ?especially if the outlook is that the value will drop back down to $100 per share soon. You would sell when the stock was worth $200 per share.

As a beginner, you definitely want to consult with a broker or a financial advisor before buying or selling stocks. They will work with you to help you make the right decisions to reach your financial goals.