James Dines on Uranium: The Buy of a Lifetime

Jim Puplava and Mr. Dines discuss uranium, rare earths, precious metals and the stock market

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Jim Puplava is pleased to welcome back to Financial Sense Newshour, James Dines, Founder of The Dines Letter, to discuss uranium as well as rare earths, precious metals and the stock market.

James Dines has become legendary for having made correct forecasts that were in complete contradiction to the rest of the financial community. For example, he recommended gold at $35/oz and silver at 92.5 cents/oz before they rose astronomically higher; he predicted that "China would dominate the 21st Century" after Mao died; he was the first to prominently recognize the bull market in Internet stocks; he predicted a "Uranium boom" when the metal was at $8/lb before it rose as high as $138/lb; and a proponent of rare earth metals at their proverbial rock bottom before they skyrocketed. Mr. Dines has recently completed his latest book on gold, Goldbug!, which is his third and final gold book based on his earlier classic, The Invisible Crash, in which he predicted a great inflation, followed by a deflation echoing the 1930s.


Jim Puplava: Joining me on the program is Mr. James Dines and Mr. Dines you and I go way back to the, gosh, 90s. Over that time span I've seen you make some very early calls and I've always been amazed, you were early on the internet, of course, you were early on the gold and silver market. Then also some markets that a lot of investors really weren't attuned to—for example, uranium and rare earths; and that's what I'd like to start with today especially after the tragic events in Japan. On the day you and I are speaking Germany's talking about pulling out of its nuclear program which would leave it a bit of a conundrum in the face that they're trying to be the green leader of Europe. So let's pick up with uranium. Is that market dead? Is nuclear power dead especially after the tragedy of Japan. So let's begin with nuclear power if we may.

James Dines: Sure. I think it's one of the great profit opportunities available right now and I'll explain why. The announcement that Germany's going to close down all 17 of their nuclear facilities in the next 11 years made the biggest headlines that you could imagine. It was almost semi-hysterical. It ignited the greens to a glorious glee and, to be honest, seven of those 17 facilities are old and they should have been closed down long ago but in terms of them getting out of nuclear power the headlines almost mentioned Switzerland and Italy getting away from nuclear power and Japan of course. But the press didn't even seem to mention or even notice that at the same time the Saudi's announced that they're going to build 16 nuclear plants. Also, there’s no mention of India’s plans. They've got over 20 percent of its population that has no electricity at all and has just announced an eight fold—that's eight times the expansion of their nuclear in the next ten years. That's not to mention more atomic power announcements from Taiwan and Brazil and the Ukraine, even Slovenia and Poland. So there is a massive worldwide movement toward nuclear power but the prejudice by the world against nuclear is profound. That's when you can make money when you get in touch with reality and you have a chance to buy some of these stocks that are beaten down.

When the anti-nuclear—cheering the end of nuclear dies down somebody's going to ask what might replace it—nuclear power—dirty coal, natural gas dependent on Russia's good will and vulnerable to cyclically higher gas prices, oil possibly cut back by the current revolutionary unrest by oil producers, and do those who answer that wind power could replace nuclear—do they know what rare earths are? That you need 700 pounds for each turbine and around 95 percent of the rare earths come from China. They just this week announced—China—that the Mi Ti just announced that they're building their own strategic stockpile of rare earths so even a trickle of the five percent might get cut off. You know the choice is not uranium, is not nuclear or wind turbines, its uranium plus shivering in the dark. The uranium stocks are dirt cheap. I can't go into which ones are going to buy now out of respect to my own paying subscribers for the Dines Letter but the mass psychology is peculiar when it comes to stocks declining because in a retail outlet if they cut the price by 50 percent everybody runs to buy. But in stocks if it comes down 50 percent they run to sell. This is part of my book Mass Psychology and the psychology of crowns. It's based on the secret desire of gamblers to lose and you're out there saying that that's not possible. It is possible and that's why there are no windows or clocks in casinos. That book is revolutionary.

Jim Puplava: When I saw the announcement in the journal by Germany I'm thinking wait a minute. Germany relies on Russia which we've seen over the last couple of years politically can cut natural gas flowing to your country and they did it several times. They also rely on imports of oil from the Middle East and they're talking about global warming. Well, what are you going to do—replace nuclear with coal? Its seems to me that this is just—its like nobody has their thinking cap on because, you're right, what are you going to replace nuclear power with. The only ones I haven't heard chiming in on that are the French which get almost 80 percent of their power from nuclear.

James Dines: That's right! The French have never had a major accident; America's nuclear powered fleet has never in 50 years had a nuclear event. You've got to be careful with nuclear. Nuclear is not something you can be casual about. It's like fire. You know we had this huge—the Dines letter is based out here in San Francisco—and we had this historic fire a hundred years ago—actually in 1906 that wiped out the city because it was built with wood from the Redwood forest so it used to magnificently cover this area and only a small area is left now of them. That was a punishment that made this city gets serious about having a fire marshal approve construction. When it's built they've got to have the sprinkler systems in in advance. So the world is getting one lesson after another. Chernobyl—the old talk about Chernobyl and how awful it was—well, the truth is it was done by a Soviet era inferior nuclear plant and there were a bunch of Russians sitting around getting pixilated on slamming on whiskey, on old Turkey whiskey, and they left this thing get out of control but there's a new automaticity now in these plants where the water is held above the uranium rods. In case of an emergency you don't have to have an engine. You just pull the plug and the water drops on them.

So these—the new innovations are crucial and that's what I see as absolutely necessary is taking seriously the dangers of it and it has to be handled. You know we don't have a choice. The world will eventually run out of oil. In fact, there are no large new oil discoveries being made with the exception perhaps of the one in Brazil. Look at Mexico. I mean their oil production peaked ten years ago at 2.1 barrels a day. They're down to one barrel a day. It will never go up again as long as that Canterell is in decline and what are they going to do in ten years? I mean the lack of foresight it just appalls me and the mass psychology of the mass fear and glorification of tragedy is misleading the world badly. The voice of reason will someday be heard.

Jim Puplava: Well, let's move on to rare earth minerals because we see our politicians including those in Europe advocating wind and solar. The two problems I see with both is night time and wind not to mention a few others but let's talk about it. Most people don't realize the amount of rare earth metals that goes into a wind turbine, that goes into solar panels, that goes into hybrid cars, and we have one country in the world now that monopolizes 95 percent of the world's rare earth minerals. So Germany may talk about going green and getting rid of nuclear but they don't have natural gas, they don't have oil, they may have some wind, they may have solar but they're going to have to get rare earths and, once again, like natural gas, oil, they're going to be dependent on a foreign power for that.

James Dines: Yeah. These rare earths—I was the originally uranium bug but also the original rare earth bug. It was very hard for me to explain to people what they were because it sounds like something exotic. They're not. They're just 17 elements on the periodic table and these oxides—well, the oxidation facet of these elements—are vital in all kinds of things that permeate our society right down to the ones you mentioned, right down to your cell phone in your pocket which makes them able to be so small to tanks and night vision goggles and all kinds of green things. These are the elements of the future and led my subscribers into these stocks in order to drink upstream from the herd. I've been on your show from the beginning repeatedly recommending them. I congratulate you for allowing me to discuss that to try to reach the world. It's also true that I've been predicting the coming rare earth buying panic. Well, you know, as I just this week as I mentioned the Chinese have announced that they might just be cutting off their remaining five percent they're exporting. At some point you're going to see—one of my radical predictions—automobile plants closing down.

One of the things I'm not sure is that the closure of some of the automobile plants in Japan after the Fukushima tragedy is the fact that I've wondered whether or not the closing of Japan's automobile factories were entirely due to the tragedy of Fukushima. I think—personally I think that a lot of that is due to the fact that they're running out of rare earths. That prediction I made in my annual forecast issue in January I said that I thought that it would probably happen in Germany first but I'll give you another example. Just this week the glass polishing association in Seattle, Washington announced that they were running out of rare earths. They will no longer be able to polish glass. So you remember the old days if they wanted to etch something on glass they would sandblast it which, of course, leaves it cloudy. The beauty of using cerium, one of the rare earths, is that you can get an actual polish on the glass and that's going to be over. You're not going to be able to get that anymore outside of China or at least not in the near future until we can begin to get production going. So we're just beginning to get to the stage where we're running out of them and we're getting to the buying panic stage. The last Dines Letter on the front page I have a chart of one of the rare earths is neodymium oxide. I've never seen any chart like it. I mean I'm one of the founders of technical analysis. I have never seen a chart this vertical—not only vertical but the gaps between each trade are actually expanding.

That to me is evidence of the coming buying panic we've published on May 22nd, 2009 in the Dines' Letter right on the front page. I think that because of that it's going to be on the front page headlines. At that point people all around the world are going to start asking what are these rare earths and how do I buy one of those stocks and which stocks should I buy? Well, I spent years studying them before I made the announcement and I've picked what I think are the best ones in the group and they are, of course, leaders and one of them had an announcement just this morning that a large expansion in their reserves. Those are the ones—I'm trying to pick the winners. The ones that will be first to production because I think they're be the ones that will have the biggest and soonest rises, they will eventually be more production in about five years but between now and then we're going to have a terrific buying panic on a level commensurate with a hostile OPEC. Just imagine if OPEC were really hostile, if Venezuela and Iran were having their way and really cutting off our oil. That's the kind of buying panic we're having from out of China.

As you said you know one country is supplying 95 percent of it and right now I want to also talk—I mentioned I just brushed against mass psychology. One more thing I'd like to mention if I may Jim. The mass psychology of stocks as opposed to the actual product is based on the psychology of each type of buyer. The type of person who buys uranium who owns a nuclear facility is different from the guy who buys or invests in a uranium stock, mining stock. The same is true for rare earths. The people who are buying rare earths and sending them skyward—I just mentioned you know neodymium oxide—are hysterical trying to get a hold of this stuff but the stocks are fluctuating and they're down now. This is the opportunity to grab these things while they're down. If you miss the opportunity to get in at rock bottom this is the time, your last chance, to load up, to back up the truck.

Jim Puplava: I want to move on to another area of opportunity and that's your take on the markets right now. We've seen a nice rise going into February and then we got the lows in March from the Fukushima incident. We rallied back up into early May and then we've been in a downward trend. I've never seen, at least, psychology flip flop so quickly where the sentiment readings are so low. So it'd be interesting to get your years of wisdom and get your take on these markets. What's your view?

James Dines: Sure. We need to step back just a bit further. You've described so far this year but I'd like to go back to last summer when the pessimism was absolutely suffocating, and I wrote that at the time, of the Dines' theory of positive negativism is one of my principles. I didn't invent that. My friend Humphrey Neal's theory of contrary opinion we discussed it at the time. When things get this pessimistic all the people who are going to sell pretty much have sold out and then we're ready to turn around and get them to buy back. So that huge rise we had from last summer to late in the year at that point began a series of ups and downs. This is typical of what chartists call a congestion area. That is—or range bound—where it generally fluctuates—there are ups and downs fluctuating within a general range and we've been getting that. These ups and downs are whipping the crowd who are following the market too closely up and down, back and forth. They usually end in a sell-off. This happened exactly the same way early last year before they got all negative in the summer.

In the latest Dines' Letter I talked—and also in a previous morning bulletin—I talked about how the market looked lower and it should go down for the rest of June if only because June is cyclically lower. We covered that also in the last 60 Junes. It has one of the worst records of any month. So there's the cyclicality facet aside from the mass psychology. So after the negativity of June I've been looking for a rally that could well be a very large one coming out of this kind of pessimism. I believe that it will be spearheaded by the stocks that have been hammered down the most. The rare earths haven't been dropped that much. They're down about—I don't know—ten percent from the highs but the uraniums are certainly down a lot and so are the precious metals.  So I think those are the areas that I've been concentrating on because with all the troubles and turmoil in the world I'm trying to avoid the areas vulnerable to that. I'm trying to lead my subscribers to hard assets, wealth in the ground and that includes gold and silver, of course, rare earths, and uranium. I mean I'm not sure every one of them will go up but I think that's the place where the bulk of the safety is going to be hiding. So I'm looking for a rally to come in here. I think the selling is now heading toward a climax in late June and will be met by a very gratifying rally and I'll be flashing that by interim warning bulletin as soon as we see it.

Jim Puplava: Let's move on finally to the gold and silver market. We saw silver explode out of last September where the price was below 20 dollars all the way to its all time high in April at 48 dollars. It's now come down. Its somewhere in the 34 dollar range, the stocks have come down as well, but you know what's been surprising Mr. Dines is gold has been hanging in there. It's been tough; it's still up seven percent for the year. We haven't—you know they may knock it down. It may drop ten; fifteen dollars one day but you know what? Give it a week its right back up there again.

James Dines: Right. Precious metals, of course, are one of my specialty areas. The Dines' Letter has been pioneering that for a long time because of the crazy over printing of paper money not by America but by the whole world. This is—currency is the biggest economic bubble in history and I've gone back to study previous bubbles like that and come up with a number of things over the years relating to it and the similarity. Some of it is based on the brilliant work of Gustav Le Bon who wrote The Crowd. He was—that was his model of the French revolution which was going on in the late 1700s at that time. We are now in the early stages of a very serious money printing binge by everybody and that includes China and all the new countries. The whole world is on this and they all got duped on it. As my Mass Psychology book—the first chapter on the history of gold pointed out the same mistake has been made historically time and again. That is when governments print too much paper money it goes through a very recognized cycle. First of all, you have more paper chasing the same goods. So by the law of supply and demand prices go up and that's inflation and that's what causes it. They get greedy and begin to print more and more and it goes into a deflation. Sometimes it's an intervening hyperinflation.

We're at the stage now we're in a deflation. Prices are pretty much going down in many areas—real estate, labor, all kinds of areas, but not in some things like a bridge toll—prices are not going down in something like a bridge toll which are a monopoly. I know here in San Francisco the Golden Gate Bridge had a toll of a dollar ten years ago and now its six dollars. The figures on inflation are muddled. We are at risk now of running into a hyperinflation by this QE2 which they call it that to hide it from the public. They're running the printing presses, but all this printing is going somewhere. Something is happening with it and we are at higher, an increasing risk of a hyperinflation in this country. Believe me; I really don’t want to see that because that would involve the collapse of institutions. Anyway, a lot of it is winding up in China and they're running around taking this funny money and buying up the world's hard assets with it—all kinds of mines that Europe has spent centuries locating and figuring out how to extract and they're buying up huge tracks of farmland so they can feed China for the next few centuries. They're very farsighted in terms of looking beyond the immediate future.

So to me the answer for the average person is number one to speak out against this and, two, if you can't protect yourself by buying gold and silver. Now the last gold and silver buy signal we flashed was ten years ago. Gold was 280 dollars an ounce and silver was four dollars and fifty cents and we've patiently held it for ten years. I’m advising people in my Gold Bug book I tell them how to buy gold including coins and what have you because of ways to protect yourself and survive what's going to happen. The tea party, which I mentioned in one of my previous interviews with you, are the beginning of forcing the balanced budget and getting America out of wars and out of the Eastern hemisphere and to focus more on Latin America. All these things are trends that must be interwoven with the future. So I'm very bullish on gold and silver. The silver got a little ahead of itself because the hedge funds got a hold of it and ran it up too fast from 30 dollars to 50 dollars or near 50 and its having a little bit of a hangover and it might come down a bit further. I don't know but I think it's going to go up and catch up with gold. Gold is holding like a rock there at its all time high as you noticed.

Jim Puplava: Yeah, it's been surprising no matter what happens. Like I said, it can drop ten bucks one day and then a day later its right back up there again. It's up there like a rock. Mr. Dines as we close tell our listeners about your latest book which you wrote— Gold Bug—because there's a lot of significant things. I've had you on the program before where we've discussed a lot of its content but I really recommend for those that are investing in the gold market you have a lot of insights and they're going back to the early 20th century on events that occurred that not too many people have paid much attention to.

James Dines: Sure. I'll tell you something. That book I wrote it—it took me a business lifetime to write it. It’s the only—it's my third and final gold book. Somebody else is going to have to pick up the cudgels after me but the book is divided in three parts. The first one—part one—is the history of gold and a really deep explanation of what the history of gold is as you said, it goes back into the 19th century and how gold got interwoven with our currency and how there were different crashes. In the 1800s that were blamed unfairly on gold. I go into it in very, very excruciating detail and it leads up to the final part of the part one on whether or not this market is part of a conspiracy. I normally don't believe in them but not many people know what the Banks of International Settlements is in Switzerland with armed guards outside and special privileges.

Jim Puplava: We used to own the stock at one time.

James Dines: The second part—conservatism of the long term charts of gold, of the gold related aspect and the third and final part are actually excerpts from the Dines' Letter. Also going back much further than before we published in the 1900s actually showing a case study of how it actually works. I think it's my best book.

Jim Puplava: All right! Well, we've been speaking with Mr. Dines. Mr. Dines as always it’s a pleasure having you on the program and the first book that you wrote The Invisible Crash, I still have the original copy.

James Dines: Oh you should save it. It's selling for a lot of money now.

Jim Puplava: Yeah, I know it's worth a lot of money. I still have it. I'm building a library and its going to be in my collector's case. So I know it's out of print right now. Have you ever thought of re-releasing that?

James Dines: No, I want the people who bought it and invested their money in it when I needed money, which I don't now, to get the benefit of the higher prices. What I have done is incorporated some of the parts of it into the Gold Bug book. So they'll get the benefit of it but the actual—what I wrote at the time early in the gold move that's going to stand forever. It's like asking Picasso to repaint one of his blue boy paintings.

Jim Puplava: Well, I'll definitely hold on to mine. Mr. Dines as always it’s a pleasure having you on the program.

James Dines: Thank you.

Jim Puplava: Good health and come back and talk to us again.

James Dines: Same to you! My pleasure also—I had a great time! I always enjoy being interviewed by you.

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About James J Puplava CFP