Blame it on Subprime Loans!
Friday September 14, 2007

So what do subprime loans have to do with uranium and the near-term producers and junior exploration companies we follow? Everything and nothing. What we mean by that is everything is impacted by the subprime loan controversy and its ripple affects through the mortgage, financial and housing markets, as well as its consequent impact upon the commercial paper market and entire asset-backed financial instrument market. Yet at the same time nothing has changed with uraniums or the outlook any of the companies we follow.

What has changed is perception and the market's appreciation of risk. The quants and “Rocket Scientists” on Wall Street armed with their black boxes have succeeded in unsettling all of the markets worldwide.

When the margin calls hit it is only normal to sell that portion of your portfolio which is not marginable, i.e., our junior uranium stocks , most of which trade under $5 per share. Likewise, if you wanted to reduce the risk and beta within your portfolio it would be reasonable to liquidate the juniors. Others have sold uraniums simply because they had such large gains (which might now need to be realized to offset capital losses elsewhere). We see signs of stabilization in both our sector and the overall market. Our game plan is to stay the course as our investment thesis remains intact.