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DEAR
AUNT MARGARET
John Tyler
CEO trader007.com
April 12, 2006
Dear
Aunt Margaret,
Thanks for your letter outlining several concerns. There seem to be many
others like yourself who have saved and worked hard all their lives only
to find that their "Golden Years" dreams are turning to dust
and ashes.
It is natural to be anxious, but please don't spend your time worrying.
I know that the roses are starting to bloom in your garden and the birds
singing with their spring voices. These pleasures are more valuable than
every bit of US Treasury debt……and they are yours, free for the
taking.
The reality does remain, however, that your gas bills are rising and the
Cadillac's fuel bill could power a small transport company. So even
though you've wondered about these new hybrid cars, it's time to get
serious about changing over. If you still can't bring yourself to be
seen in one of these, consider one of the new diesel cars. Biodiesel
plants are springing up all over the place.
We'll never run out of biodiesel and the price will be less subject to
wars and rumours of wars. Even the farmers growing the grains and
legumes c make their own biodiesel on farm, despite attempts to excise
the product of their labour, the sun and rain that should be free for
all.
As you will realise, I have not started with any fancy financial
strategy using futures and derivatives. Nor have I mentioned the hedge
funds that are the talk of your bridge set. It's so easy to get caught
up trusting such things as hedge funds without understanding them. Let
me tell you with some certainty that many are having trouble even
scratching out their own living in the intensively competitive market.
What appear the best do extremely well for a year or two, and just when
we happen to buy in, they start to plummet (You remember Aunt
Lil's investment in LTCM, and then Enron). It's not that we are cursed
or blessed with bad luck as would many have you believe, but is just
simply the nature of the financial markets.
What I am trying to say, and I'm sure you know already, is that if you
manage well those things that are close to you and needed for daily
life, there is little need to expect miracles from our investments. We
can allow them to work their own form of magic.
Two areas relating to your outside investments need to be
addressed in this letter (and I do promise to write each month) to set
you on the right path so that your last decades are really golden.
The first is on the nature of your own thoughts and feelings. Don't
discuss your investments with anyone other than a trusted professional
adviser. You don't want to be the subject of derisive comment or be
assailed with well intentioned advice. What is popular now is unlikely
to be so in a year or twos time. How you invest and what you invest in
will be unique to yourself.
The second is a specific area of investment. We have previously
considered the long term strategy of 80% of your funds being in a
diversified portfolio of income producing assets. This one, no matter
how convinced that we are on to a big winner, you should look to put no
more than 5% of your funds into. It is speculative, and knowing how I
have championed the cause of ethical investment, may surprise you. These
are uranium companies.
For many years, uranium has been in oversupply as the end of the cold
war allowed us to "beat our swords into plough-shears". In
fact many US homes have been heated with recycled USSR warheads. Ironic
isn't it? Anyway, this supply is fast running out, so new sources of
supply are required.
A massive reallocation of global supply is required away from oil to
U3O8.You've been used to seeing the OPEC meetings dominated by various
Sheiks. Can you imagine in 20 years time, a round table meeting with
Paul Hogan and Aunt Everidge phenotypes? Yes, it's possible. Some 40% of
the world's U3O8 resource is in Australia. They've been slow to realise
it, but if they don't get on and mine it, some one will come and take it
from them. As you always told me, "Use it or Lose it!".
Apparently the Chinese have been down there to make sure that there is
the feed stock for the 36 new reactors they are intending to build. The
Indians are soon to follow.
The problem is that these Aussies are used to booms and busts. You will
remember the Poseidon days in the 1970s when a $2 stock went to $200.
Well now its 30 years later, and I suspect that the same thing will
happen. I can feel you getting worried, so perhaps it's time to have a
cuppa before you read on.
Stay clear of companies that are all "huff and puff." They lay
claims as close as they can get to previous discoveries, and have a name
that immediately conjures images of wealth and greatness. They always
have "highly prospective territory", but no actual drill
results.
Those with worthwhile drill results will take off. It's a question of
when best to invest, so will consider that below. But for now, a bit
more about those companies that have the bona fides for an excellent
long term investment. Where they are different is that they have been
working on their prospects for some years. Often they will have a
partnership with a larger player, and have plenty of cash in the bank.
Even with proven reserves, it will take many years to get to the mine
approval stage and initial development, but these stocks tend to be
accumulated by what we might term " the smart money".
This is money that belongs to people like you who can still smell the
roses, and not be dismayed by the ups and downs of their assets.
It still amazes me how different the mind is of set of smart money. Once
they have made their initial investment, if it turns down (as it will
often do), they are calculating when they should add to their stake. The
dumb money starts looking for someone to blame, and bails out at exactly
the wrong time.
And now that bit about when to buy. Wait for the sizzle to fizzle, and
then start buying in. Take your time and buy in several batches. It's
like the way Uncle Albert BBQs his steaks. He'd always wait for the
flames to die down and the coals glow red. His steaks were to die for.
When all's said and done, you need to put you need to have a fire to
cook, and this uranium market is getting all fired up.
As one who watches the markets closely, I have been surprised at the
rush into this area. Yes, a lot of this money is speculative, but it
appears that some smart money is in there also, supporting many stocks
above previous run-ups as they declined over the years. The major
uranium players are already well ahead, so if we are to make go of this
opportunity, we must cautiously invest in the type of stock I indicated
to you.
I have written enough for the moment, so farewell for now. I promise to
write next month with some more ideas. Give Ruffles a big pat from me.
We shall make sure that Ruffles will still be able to dine on the best
sardines.
Your
loving nephew,
John
Copyright Trader 007.com No liability accepted. Aunt Margaret
will get her own professional advice.
Trader 007 LLC
11 Lower Dorset St
Dublin 1Dublin
Ireland
©
2006 John Tyler
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