I’m not a nuclear energy expert, but I do understand human psychology. Therefore, I sold my entire position in Cameco Corp (CCJ) this week. I entered the position in CCJ as a medium risk bet on the increasing demands for energy, particularly nuclear energy. Over the weekend I saw that this medium risk investment was growing into something much more risky. People are already freaked out about nuclear power, the problems in Japan just reinforce these pre-existing fears.
The fears of people do impact the value of a commodity, such as uranium. Fewer nuclear power plants mean less demand for uranium. More fear = less nuclear. A year or so ago I went through a similar situation with Diamond Offshore (DO). What was once a smart play in deep-water drilling became a constant back-slide as the Gulf oil spill became worse by the day. What I saw this weekend was possibly the beginning of such a problem.
Yes, I understand that the media hypes stories and this might be the case in Japan. If so, that’s fine, I can always come back to uranium mining companies. If that is not the case, my money parts from me and I’m out of luck.
I’ve learned not to bet against a freaked-out public. I see this being the case with the use of nuclear technology. Therefore, I am out of uranium.
To close, I often speak of long-term investing and not becoming a ‘trader’ while you’re a long-term investor. In a case such as the Japanese quake and tsunami where a very dangerous situation is taking place with nuclear power, I do think it is wise to take a serious look at how your investments are going to be impacted by such events. If you can make a clear connection (nuclear power blows up = bad for uranium demand), then I believe it’s wise for the long-term investor to trade as necessary.
I’m on the sidelines for now.