Investors who bought at the peak of the frothy commodities rally are now panicking or kicking themselves. Neither of these things helps a trader or investor think straight. Here are some suggestions for how to deal with the current market shakeout.
- Shut down your computer and do something fun if you think you bought the right stock(s). Exercise is a great way to deal with stress. The shaking up of the market has already begun. If you weren't stopped out or didn't set stops earlier, your best chance to make money is to buy more shares at a much lower price. Most of the experts we've talked to say that the next rally should begin between the end of July and Labor Day. When we tried to talk to James Dines, an expert on uranium, in late May, we were told to call back in a few months. This was a good sign that the markets weren't very interesting. Mr. Dines is usually happy to do interviews, but not recently.
Do you think the factors that led to the boom in commodities have changed? If they haven't, the optimism is just taking a break. We don't think there will be any big changes in the markets. Russia still wants nuclear power, and it may have reached the peak of its oil production. China hasn't said when its programme to build more nuclear weapons will end. India wants to buy new nuclear reactors for $40 billion. This week, spot uranium went up another dollar, to $45 per pound. If you own uranium stocks, this is good news. Not even close to the end of a bull market.
- If you're worried about your investment in one stock or another, stop watching the ticker and pay attention to the basics of the company. Is the story still true, or has something changed? Look at #7 A, B, and C.
- Since most of you will still be scared, please look over the basics of any uranium company you've read about:
- It's an old saying that you should buy something when you want to get rid of everything you have in that category. If you want to sell all of your uranium stocks at the same time, you might be better off buying more. This is mostly about small investors. Most professionals did sell at the peak, and they are now slowly buying up the shares of those who were too dumb to sell until the crash.
- Has something big and earth-shaking happened? Three Mile Island was the end of the last bull market in uranium (TMI). After it was found out that Bre-X Minerals had lied about finding gold in Indonesia, the last good rally in the precious metals markets fell off a cliff. Always, something important and newsworthy happens, and it has a wide range of effects. That's the cause. As with TMI and Bre-X, these were the first shots that set off a chain of events that ended the bull markets.
- Before you sell, you should ask yourself, "Do I really want to give these shares to a bargain hunter who will make a fortune off of my losses?"
A) How much money does the business have in its bank account? In times of change, cash is king. Companies that were smart enough to finish their financings during the recent strong rally are doing well. They can handle the short-term storm and are ready to move on when this correction reaches its bottom and turns around. When this correction looks the worst, those are the best companies to look into.
B) Have the same people been in charge? In the past few weeks, the story probably hasn't changed much, unless the top financial and/or technical people ran out the door. Companies that have put together a strong technical team are strong and will last. They will keep going.
C) Are the properties no longer worth anything? One reason you put money into a company that mines uranium was because it said it had "pounds in the ground." There are more at some companies than at others. Some people spent money and time to complete a National Instrument 43-101, which confirmed the amount and quality of the uranium resource in an independent way. If that changed and the company said, "Sorry, there wasn't anything there after all," or "Hey, we were just kidding," that would be one thing. If you haven't heard or read that, then the uranium didn't walk away or move onto a competitor's property. It's not gone.
When the markets are going up fast and you feel like you've won the lottery, think about this Bible verse. "When did Noah build his ark?" is an old joke. The obvious answer is: before it started to rain.
