Read this closely:

On an adjusted basis, our earnings this quarter were $61 million ($0.15 per share diluted) compared to $31 million ($0.08 per share diluted) (see non-IFRS measure) in the second quarter of 2012, mainly due to:

•higher earnings from our uranium business based on higher realized prices and increased sales volumes

…(other reasons listed)

This may be all I needed to see. The uranium market, being a low volume, old school brokerage operation, is an insane place. Opague as concrete, and getting quotes isn’t much different than trying to swim through said material.

I have been a little concerned, since uranium prices in the main broker-dealer I follow have just been collapsing.

But URA seems to have bottomed, and indicated prices as increasing. So what’s real?

Well, I can assure you, I don’t care what “uranium prices” are “really” doing. Because Cameco is living in CCJ land, where prices are higher. Lower uranium bids seem to be predominantly an phenomenon effecting small, POS miners.

Sure, you can buy long term uranium contracts really cheap from a URRE, a UEC, or a USU. You can also take on the very real counterparty risk that they won’t be around in another two years to make good on those contracts.

But if you don’t feel like taking long gambles on companies scrambling into deadend, horrible supply deals to stave off bankruptcy, you’re going to pay real rates to CCJ.

I still need to look through their filing closely – there were a few things that stuck out to me briefly as mild concerns, when I did a once over. They still have a ton of currency hedges in place, that probably expose them to all sorts of potential losses, and I’m curious about how the NUKEM deal is working out.

Also, the company has promised to cut expenses by 10%. This is just one of many elements that bares scrutiny and inspection.

But the fact that Cameco could sell uranium for higher prices in this market is astounding.

The uranium space ripped to the upside today. It was led by URA as the specter of a uranium price bottom led speculators into the miners. Several of the smaller names doubled, and even Cameco experienced a 3% upside day.

The actual story is decidedly more complicated.

Uranium prices at a few of the brokers I keep tabs on have actually begun to crack lower. The reports are that 8 separate utilities arranged deals at low prices last week and threats of funding and fears of even lower offers led the small names to cave into demands and sign contracts.

This is why I have avoided small cap uranium miners, like foreigners in France around 1349.

What comes next depends. Fears surrounding Japanese policy could be taking root. If those are grounded, then we may have quite a bit of trouble on our hands. Any such trouble would be viewed, from my perspective, as a buying opportunity. However, a rehash into the $10-20’s would not be out of the question. At current demand and sales, I put CCJ at $13, roughly.

However, if Cameco and the other miners can band together, they may be able to strike back against the weak hands that are presently caving. Cameco is in the distinct advantage of controlling more than 20% of the global market. If they can leverage themselves, banding together some of the smaller survivors, they could create a strong floor, devouring the weak in the process at rock bottom prices.

Longer term, the uranium market remains ripe for picking. There are several trends I am seeing that could lead grid demand to pick up 10-20% just here at home, at minimum, over the next one to two decades, and no real positive supply growth to see yet. Couple that with continued demands from environmentally conscious politics to trend away carbon emitting fuels and the necessity of alternative energies like wind or solar to be supplemented with constant energy sources and a build out in nuclear power is an obvious go to.

Thus far, there is no word on Russia extending the HEU agreement. The moment will be dominated by Japan. The decade won’t care about Japan at all.

It’s been long enough that I’d say I actually need to give an introduction and background here.

I’ve owned Cameco since Fukushima; literally, I bought my first round of shares at $29 while the reactor was melting down. Since then, I’ve built a position, by averaging in and trading rips, that has a cost average around $21.

My belief was that, at the time, commitments to roll back nuclear power facilities were vastly overconfident (if not totally unrealistic) and would ultimately end in retraction. So far, I haven’t seen anything to make me change my views on this. I also felt that the dangers of nuclear power and the consequences of the Japan problem were being overblown. Nuclear accidents have traditionally been forecast to be, literally, millions of times worse than they actually are.

Recent developments in the space include:

1) Japan is prepping 4 more reactors to reopen, while creating the review process to speed things up a bit
2) Tokyo Electric is getting impatient, using a subsidiary of itself to start pushing back against government agency claims that any of its reactors lie on fault lines
3) China is ramping up construction of power plants
4) They’ve also discovered Fukushima is leaking radioactive water – could stiffen the process back up
5) The forced shut down is starting to do its damage to nuclear power companies – Japan Atomic Power, for instance, will be forced into a hard bankruptcy shortly if they can’t get operations up and running or, worse, are forced to decommission any of their three reactors. This would flood the market with fire sale priced uranium fuel
6) Russia has not expressed any desire so far to extend the HEU (Megatons for Megawatts) agreement; it currently stands at over 95% completed. Although interestingly enough, Executive Order 13617 (which floods Russia with money for decommissioning nuclear weapons for fuel) has been extended by the Obama Administration under emergency decree. I’d be more inclined to think that’s an indication a new agreement is being drafted, if I didn’t know how much politicians like to fling slush fund money around to friends and enemies alike. For the moment, I’m predisposed to believing Putin will not be crafting a new agreement

Altogether, the ability of the uranium market to shore itself up depends on Japan for now. There is a visible push to get the reactors up and running, and elements of the government seem at least partially favorable to it. For the last two years, the uranium market has been frozen, as the fuel miners and electricity producers sat in a stalemate, waiting to see what would happen next.

We’re about to find out, I think.

If Japan can successfully navigate back to nuclear power, it would thaw the uranium space, encouraging power companies that have been so far waiting to see if nuclear opposition would gain more traction, or if Japan’s unspent fuel would be up for sale, back to the markets to bring their fuel cycles up to speed.

If not, Japan power companies will likely start to arrest, plunging the entire sector back into violent fluctuations. For this reason I am exclusively a holder of CCJ, and no others, because they are too small and will have trouble surviving if everything doesn’t pan out just right. This does worry me, as Japanese culture is notoriously slow and patient, almost to a fault. It is not completely out of the question that they let their power companies crash. I simply have to hope that they don’t.

Long term, the sector is ripe, with lots of new demand, and supply concerns at current production targets. However, any disruptions could easily drag out the recovery another few years.

CCJ is greater than 20% of my account.

Welcome, and I hope I find you well.

I’m coming into the afternoon with strong rallying across my portfolio. AEC and CLP are both up over 100 points. CCJ, RGR, and BAS are all pushing 200. The euro cracked this morning, and EUO is now up 150. Silver is enjoying a relief rally, but it’s down so much inside of this year, it seems stupid to talk about.

The only place I’m losing money today are the TSLA puts. And since they’re puts at 2-3% of the account, I really don’t care.

I’m actually looking to add to the Tesla put position, this time targeting the 2015 expiries. A $70 strike price should do nice – maybe as low as $50.

I believe TSLA is the new NFLX; sans the recovery.

All in all, I’m still up over a percent so far, with a 30% cash position to boot. But if I were to be honest, I would say I still expect the summer to end dreadfully.

Have a great day.

Every now and again, I like to look back over where I’ve been to see what I should have done. Sometimes I find I was exactly right. Sometimes I see the errors (hopefully not relevant). And sometime, much to my frustration, I see I was exactly where I should have been but then decided to wander off just before the party got started.

Utilities more or less sum up those frustrations.

I called the utility move about 2 years ago. My reasoning was essentially that a utility is equivalent to a publicly insured bond (a company with a legal monopoly and appropriate guarantees), and that since these bonds have (had) a nice yield, they would become the de facto target if bonds held low prices. But even if bonds somehow fell, they were good enough value to warrant the buy at the time.

Then I picked through and found my favorite utility – AWK (water).

I bought AWK in the low $20’s, road it up to $30, and then…I just sort of wandered off.

So much money got left on the table. Did I leave the utility play because I thought the move was done? No, I mostly left because I thought we were going to sell off and wanted to trade both ways. So I raised cash.

I cannot tell you how many times I’ve overplayed my hand like this, trying to nail the inflection like an ace. And what I’ve witnessed, in hindsight, is that I’m a much better stock picker than I am a market timer.

Which brings us to oil.

I just sacrificed some more money on the alter of oil. But this time, instead of shorting more like a beast, obsessed with “being right”, I’m taking my drubbings and walking off. I’ve been almost perfectly hedged the past few months (excluding silver, which I treat as almost an off balance sheet position at times). And I refuse to let the SCO “hedge” (read, loser) sink my year, which has been very profitable. EUO is doing well, I have a healthy cash position, and BAS, CCJ, AEC, CLP, and RGR will all prove winners. Of this I am confident. The only other thing is the TSLA puts, which are low single digits of assets and will cause as much fluctuation in my portfolio as the month of June, should they burn out.

Or they make my year.

The message here is flexibility. Learn to have it – don’t waste away your hard labors on the rash emotions of the moment.

Have a quick look at the graph on this site. I haven’t audited any of the numbers, but if the author has done his homework, it fortells fairly clearly what oil longs have to expect.

For the moment, all of my short exposure is being pesteringly resilient; most probably because I am counting on those positions to even out my account. So of course, oil is holding up here, the euro is trying to push higher, and TSLA recovered a $3 move.

There’s no reason for any of those things other than that they hurt Cain Hammond Thaler. The market is trying to harm me, because that is the only consolation anyone in these positions will ultimately have…if they can shake me out.

But I have the patience of sheet rock. You will not win.

Current positions by size (greatest to least)

Cash – 27%
CCJ – 18%
CLP – 8%
AEC – 8%
SCO – 8%
EUO – 8%
Silver – 8%
BAS – 7%
RGR – 7%
January 2014 TSLA 35 Puts – 1-2%