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Weekly rollup | Sept 26 - Oct 02 2022

Stocks Mentioned: Yellowcake plc (LON:YCA), Ur-Energy (URG), Silvergate Capital (SI), Vizsla Silver (VZLA), Lennar Corp (LEN), CF Industries (CF), Cheniere Energy (LNG), Lundin Gold (LUG.TO)

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September 26 2022

Sell Yellowcake plc (LON:YCA) at the open

Sometimes, risk comes from unexpected places. The risk with owning the Sprott Physical Uranium Trust (TSX:U.UN) was their policy of issuing shares and then paying top dollar to purchase uranium to add to their inventory. Worse, the added inventory was never to be sold, according to the trust prospectus. Yellowcake offered a better risk/reward than SPUT since it also traded at a discount to NAV and was actively managed.

Now I'm cutting this trade chiefly because YCA trades in London and is priced in the Great British Pound. There's nothing great left about Britain, and definitely nothing great about the pound sterling. The GBP gapped lower today in Asia open and is down a big fat 3% for the day as I type this. I want to have nothing to do with a currency that moves like this. Yes, currency depreciation benefits the FTSE and stocks can go up more than enough to compensate for the loss from currency depreciation. India is a case in point. But here's the thing. I put on this trade as a speculation on the price of a pound of uranium going up, not on the price of the pound sterling going down. I don't want to take a currency position along with my uranium position. Let the dust settle and then I'll re-evaluate.

This is also a good time to point out that if you have currency exposure, beware! The dollar is ripping higher and the pound is likely only the first casualty of the strong dollar.

Sell Ur-Energy (URG) at the open

I recommended URG last December when I thought the tax-loss season sale was ending. I was right about that. My entry at $1.22 on 12/30/2021 was 18 cents off from the bottom, and although URG has given back all its gains, the great entry point will minimize the loss on this trade. Why sell now? With Yellowcake tanking due to the currency, SPUT trading at a discount to NAV, and the URNM ETF gapping below the 100 DMA on Friday, I suspect a washout this week on all things uranium, especially as the US is going ahead with nuclear reactor closures (see PG&E news) and overall market sentiment is at extreme pessimism. URG doesn't make any money, nor will it ever make enough money to live up to its current market cap. This trade was just alpha on uranium moving, and that will apply equally on the downside. There's no waiting for recovery - not unless you believe uranium is going to soar and buck overall market sentiment. Best to take the loss and exit now.

FTSE 100 is up 0.6% vs a fall of 1.3% in the pound. Stocks haven't kept up with the currency loss.

The S&P 500 is close to taking out its June low. A close below 3650 should trigger a fresh wave of selling. The most vulnerable long position is Silvergate Capital (SI), which can get hit from both a crypto sell-off and a stock sell-off. Exit at open.

Silver has round tripped back to its break-out point on 9/9. Vizsla Silver (VZLA) looked like it was breaking out of its base on 9/12 but the pattern failed. Small cap explorers are risky at the best of times, and they are exceptionally risky now considering the ugly price action in gold and silver. Exit at open.

Funniest thing on Twitter today

September 27 2022

Could explain the crypto rally. News driven rallies tend to fizzle so this is a breakout I wouldn't buy.

German utility RWE (ETR:RWE) signed an agreement with ADNOC for the supply of liquefied natural gas, with first cargoes already expected to arrive to Brunsbuettel in late 2022, a novelty for the UAE which has so far never exported LNG into Europe.

Expect more of this as the energy landscape shifts.

That was quick. Bitcoin went from $20.4k to $18.9k, invalidating the entire breakout in one fell swoop.

September 28 2022

It's a pegged currency so the move isn't much in % terms. Just shows that the strong dollar is wreaking havoc everywhere. The PBoC has increased margins on FX from 0% to 20% but it's not going to deter speculation on the peg breaking when the market smells blood.

A BoE Spokesperson says bond buying will be financed with new reserves. The broad market sell-off halted only momentarily on this news, and the pound took an immediate hit. King Dollar wins this round of the bout.

Make use of today's rally to open short positions on homebuilder Lennar Corp (LEN), LNG terminal operator Cheniere Energy (LNG) and fertilizer producer CF Industries (CF). Stop loss at $78.9 for LEN, $170.85 for LNG and $103.25 for CF. The tight stops on LEN and CF are because these are test positions. If we get a blow out rally from here, it'll last a while and so it's better to avoid shorting. If the June low in the SPX breaks soon, then today would have been a great entry for these shorts, in hindsight. I'm bearish CACC (current holding) and LNG for other reasons, as I've written about earlier.

September 29 2022

September 30 2022

BW LPG and Avance Gas Holdings (Oslo:AGAS) are both above their 20 EMA and 100 DMA as of yesterday's close, likely in response to the news of pipelines being targeted in Europe. I like both, but I'm in no hurry to add to long positions based on two days of price action in a very news-driven market. This has been a tough month for me so I am also not emotionally keen on increasing risk.

Sell Lundin Gold (LUG.TO)

I recommended this stock as a takeover candidate at the beginning of this year. While the stock has held up better than most gold miners this year, it has now been 9 months of waiting with no takeover offer materializing. At some point, the trade is wrong - waiting is hoping. Maybe it gets taken over next month or next year or never. I'm fine with missing out. I gave it 9 months already. Time to deploy that capital elsewhere.

October 01 2022

If they bring back the Greenspan - Bernanke - Yellen - Powell put, pause rate hikes, or cave in and do more QE like the Bank of England, it would mean that it's time to cover all short positions and buy the crappiest of stocks to ride the next big bull run. Think Dec 2018 Fed pivot.

Buckle up, next week is going to see massive fireworks.

October 02 2022

"Our capital position at the moment is strong."

- Former Lehman Brothers CFO Ian Lowitt, five days before the firm filed for bankruptcy.

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