Just as I was beginning to lose faith, the rally is back and more tender and loving than ever.

Oh, sure the indices are all flat. But if you concur with that metric, that just means you aren’t owning the right stuff.

Below the surface, select stocks are valiantly striding to attain total victory. They are being welcomed home by stock brokers, to the sounds of silver trumpets and streamers playfully riding alongside them in the air’s currents.

BAS is chief among these stocks. The hedge fund guys have stumbled across my little gem, and are now insatiably attempting to claim my honor for their own. Such folly, but a necessary inconvenience to making thirty-percent-plus gains this year.

BAS is screaming higher. And with higher gas and oil prices, the American energy revolution is back in play.

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Sticking with the larger theme over the past two weeks, my portfolio is melting higher into the close. AEC, CLP, CCJ, BAS, and RGR are all rushing up, either for profits or, in the case of Ruger, to close the day flat. Which, given Ruger’s last month, is really not a problem at all.

Physical silver has largely recovered from the Fed scare. The euro has also rebounded after Junker tried to talk it down.

My expectation is for higher prices. We are running, and only confirmation that the recovery is not happening will stop us. If you are betting against the indices, or are out of the market, I have bad news for you – that is months away.

You are stuck exactly where I was last year; having the right answers, but getting whipped anyway. It will come through for you in the end. But unlike 2011 and early 2012, this time I will be mocking you, sipping straight whiskey, and the pain will only end after I’ve locked in profits and position myself against the market.

So I am afraid you will be on the receiving end of jokes until at least March…

Expect treasuries to sell off as short sellers start trying to edge into that trade. The rising yield will only add to confirmation bias, bouying the stock markets higher. Both trades will fail in the Spring with bad prints going into summer.

The treasury bears will be killed at least this one last time. The markets will sell off again. I personally will be interested in building a short euro and short oil position sometime in the next two months.

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There is only one number I’ve come to stare at every week, and that’s the published uranium spot price. It’s up over 7% in the last month.

It’s astounding, really. I know that the number has absolutely no bearing on CCJ’s operations, whatsoever.

But I am convinced that the number has a very meaningful impact on CCJ’s stock price.

For some reason, humans are always on the lookout for “a reason”. The quest for this unattainable cause has destroyed men. It has brought nations to their knees. It has set killers free and thrown the innocent behind bars.

And now, there are potentially millions of dollars waiting for “a reason” to buy CCJ.

I don’t get it. I mean, if CCJ is a good buy, why not just buy it? Why wait for “a catalyst.”

If you suspected that your gas line was faulty, would you wait for the presence of “a catalyst” to fix it? Would you wait until lethal and volatile gas was flooding your home to patch up the issue?

“Mmm, no sir, that is simply preposterous,” you remark while stomping your foot on the ground. “I believe I need a catalyst before I move to fix that gas line.”

“Now please remove yourself from my study, you charlatan salesman. It is almost noon-thirty, a time each and every day when I practice the ritual of smoking my pipe.”

Hell no. If you saw there was a problem with one of your lines, you wouldn’t care what the expected life of a gas pipe was, or the statistics of an explosion in an average home, or presumably would you wait until your house was the ideal location for a life shattering explosion.

You’d step in and fix the damn thing.

But that’s not how the mentality works in markets. When you spy misallocated risk in market, for some reason totally unknown to me, the accept response is, “We wait, good sirs. We wait until the moment when it’s probably too late to act.”

“We wait for the signal.”

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BAS executives gave a press release this morning containing select operational data from November. Here’s the quick recap; drilling projects for natural gas are real weak and demand for their services was kicked in the teeth in November.

BAS is off more than 7% before the open.

They are now forecasting an even deeper slowdown in the first quarter of 2013.

Now let me tell you how December is going to go. Worse than November, leaving expectations for the first quarter of 2013 even lower than they are now.

But at these prices, BAS remains cheap. And as companies go, it’s flush with cash in a sea of dying competitors.

I expect drilling for natural gas to pick up in 2013, provided we continue to witness natural gas prices holding onto recent gains (no double dipping into the $2 spot prices again, if you please).

That will lead to a second half spaz run in BAS shares, assuming all goes roughly according to plan.

The North America energy revolution is underway. It has not stopped. It has merely been delayed in wait for better pricing.

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Well, CCJ reported earnings and the stock is getting the homo hammer, off 6% on the open (7% on completion of this post). Yesterday’s price ramp is all gone, and whichever trolls were pushing that purchase are now a pool of putrefaction.

The problem with CCJ is this: if you believe that $0.21 quarters are the new normal, this stock is ridiculously expensive. We’re talking somewhere between 20-30X earnings expensive. To rectify that, you’d have to bring CCJ’s price down. A lot.

CCJ would need to be a $13 stock to justify this pricing with the earnings they’ve been reporting.

But here’s the thing. They’ve been reporting these earnings for two years now.

So the real issue is that the stock market is a medium of instant gratification. People want to make money. And they want to make money right now. There is no patience to wait for developments, or to stick out a rough patch. That’s the entire thesis behind buying CCJ is the first place.

Now, I’ve read their release, and I feel the developments were good. CCJ is taking their foot off the pedal on projects. They are forcing the economics to work. And they’re big enough to affect uranium prices.

Now, a reactor only has to refuel once every few years. So CCJ has to be calm and wait. They can get higher prices by one of two means – Wall Street can accommodate them with higher pricing, or they can force higher pricing (they’re something crazy like 20% of global production, on their own). Uranium prices ARE going higher. It’s a matter of when, not if.

That’s what’s happening here, I think. Cameco is intentionally dropping their revenues, with the goal of increasing spot price, which will make the economics of their new mines work which will lead to higher sales volumes and superior pricing. They have the weight to pull it off.

Now, the second point I want to address is their assessment of global demand by 2021. I feel it’s conservative.

For instance, it includes such projections as assuming that net reactors in Europe decrease by 3 over the next 10 years.

Not going to happen.

To assume that, you’d have to take Germany at their word when they say they intend to close down all their nuclear plants. But this same Germany just shuttered any new development of wind energy (throwing in the towel). Solar is next. So what’s taking nuclear’s place? Natural gas? Yeah, Russia would love that – natty is expensive enough in Europe as it is.

Coal? Oil? There’s only so many places the load displacement can come from. Germany’s going to cave, just like Japan is in the process of caving now.

Now, looking at CCJ’s gross profits and sales volumes, it looks like they have a cost of $30 per pound of uranium produced (before expense cuts, which CCJ says they’re looking into). So let’s say that they can push uranium prices back to $50. That would increase their revenues by 43% by itself. Now you’re talking earnings closer to $0.30, putting the company at a more reasonable 15X earnings.

If they can get uranium back to $55, their earnings are going to blow out by 78%.

If uranium hits $60, they’re looking at a 114% increase in earnings. It’s worth noting that $60 is the long term delivery price of uranium right now (Ux LT 308); it’s only the spot price that’s really hemorrhaging – the long term price (which is used for multi-year contracts) has floored at the $60 price.

And it’s here that Cameco looks cheap. This is the situation where I look at CCJ and say, “this company is going back to $27 a share”.

But I don’t think the long term price of $60 is fair. I think the price is going higher.

The long term price of uranium in 2009 was over $90. The spot price was right around $50. If Cameco can force the spot to $60 and start locking in long term contracts for $90, you’re golden. In this situation, you’re talking about Cameco going for $40 to $50 a share.

And I think it’s totally feasible. The supply and demand aren’t matching up here. The expectations for weaning off nuclear energy are just too rosy, and the price is way too low, even if no new reactors come on line. We don’t have enough fuel right now – higher prices are warranted to expand production.

That is the only thesis for owning CCJ right now. But it’s a good one.

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And BAS is down another 5% today, perhaps as a product of follow through weakness in the sector, an announcement that they intend to raise $250 million, or it’s just leading the charge after Ben Bernanke’s…um…what the hell was the point of that speech anyway?

I don’t know; you pick the reason. None of them really makes sense.

After Key Energy’s disappointing guidance, the investing world is scared – scared, mind you – of any (already highly likely and anticipated) forward guidance that is anything less than what was expected at the beginning of 2012.

Of course, the entire energy sector sold off hard between then and now, rendering all the fracking companies dirt cheap. And secretly, we all know that natural gas / oil extraction in this country is going to continue to expand voraciously. And especially so just as soon as we get some more base demand online and some natural gas price stability. Which looking at coal miners crumpling, will be coming shortly.

Hell, we don’t even need demand for natural gas – just somewhere to put the God damned stuff would suffice…

But that’s all unimportant now. If BAS should print numbers that show a lower growth rate, even though we all know it’s probably just a lull, the market is preparing to give the stock a PE ratio that reflects the disappointment in its entirety.

This is a grave mispricing, in my mind. But hey, I’m happy to embrace and buy the plunge. Both Obama and Romney appear to be very accommodating to the drilling taking place in this country. And to me, energy services companies are still the best way to try and play a bottom in natural gas prices without actually getting beneath that falling piano.

Meanwhile, BAS persists in being one of the only energy services companies that actually has any cash on hand. They’re about to have $250 million more. If we get the slowdown everyone is bracing for, I can tell you without hesitation it will kill dozens of the weaker players. They have no cash on hand; no buffer to absorb shock.

With BAS, I’m looking ahead, to a time when natural gas production is expanding again, even slower than it was this past year; to when natural gas demand has grown on the backs of cheap volumes; and to where BAS is one of the only remaining players.

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