Submitted by QTR's Fringe Finance
One of my favorite investors that I love reading and following, Harris Kupperman, has offered up his thoughts on uranium this week.
Harris is the founder of Praetorian Capital, a hedge fund focused on using macro trends to guide stock selection.
Harris is one of my favorite follows and I find his opinions - especially on macro and commodities - to be extremely resourceful. I’m certain my readers will find the same. I was excited when he offered up his latest thoughts, published below. Please be sure to read both my and Harris’ disclaimers, located at the bottom of this post
I’m writing to you from Zurich, after attending the World Nuclear Association (WNA) meeting a few days ago in London. Last year, the meeting took place in the context of a high $50s (per pound) spot uranium price while this year’s meeting took place with a spot price closer to $80. Normally, a positive return like this would leave investors ebullient, and optimistic for the future. Instead, as I scroll social media, and field questions from friends, I notice a genuine sense of frustration, bordering on fatalism.
To me, this seems rather out of place when compared with reality, and the increasingly bullish sentiment from fuel buyers—hence the reason that I’ve chosen to type out this quick missive.
To start with, I find that investors increasingly act like goldfish—fixated on the most recent datapoint, incapable of holding a thought for more than a few seconds. With spot prices having peaked out at over $100 earlier in the year, investors suddenly seem obsessed with the recent soft pullback, while ignoring how we got here. Furthermore, this is all amplified by a general misunderstanding of the uranium market itself.
To start with, the spot price is a price—it isn’t THE PRICE. It’s a derivative of many factors, mainly emanating from the term market. In many ways, it’s a Schrodinger metric—it’s quoted by everyone, but also effectively irrelevant.
So, what is the spot market? Broadly speaking, the spot market is a place where rogue pounds trade. It’s where some miners choose to sell their pounds, or purchase pounds when they cannot meet contractual obligations. It’s a market where enrichers dump excess pounds from underfeeding, or where utilities go to grab excess pounds when the tails assay steps up. It’s where utilities trade pounds amongst each other and do location swaps. It’s a market where...(READ THIS FULL ARTICLE HERE).
