HardAssetsInvestor

Mike Norman: Welcome back to HardAssetsInvestor.com. I’m Mike Norman, your host, here with the second part of my interview with Matthew Grossman, chief equity market strategist at Adam Mesh Trading.

So we ended off in the last interview, you started to tell us a little bit about uranium. It’s something I’ve been hearing a lot about as well. I think a new ETF has just been launched on that − trades on the New York Stock Exchange. What can you tell us about uranium?

Matthew Grossman, chief equity market strategist, Adam Mesh Trading Group (Grossman): Well, uranium is a very interesting metal, if you want to think about it this way. Especially because there’s a lot of nuclear energy plants being assembled in China and in Russia. Presently, China has 11 nuclear-generating energy plants. And they have 28 in production. Russia has 18 in production.

When these plants are actually established, they’re going to demand more uranium. That has actually pushed the uranium prices most recently up to two-year highs. So I wound up doing a lot of research into uranium and tried to come up with, for my readers and my followers, what are the best plays?

Well, one of the biggest producers in the world is Rio Tinto. But they mine a variety of different minerals and chemicals and things like that. A pure play is CCJ, or Cameco.

Norman: I’ve heard of them.

Grossman: And they’re a large-cap pure play on uranium.

Norman: That’s all they do is mine uranium?

Grossman: That’s all they do is mine uranium. And it has about a $14 billion market cap. The stock is near 52-week highs; it’s very strong. Now, why I bring those up is that then it leads to that ETF that you were talking about. The symbol is URA. It’s relatively new, a few weeks old, this ETF. And why I really like it is that it’s an ETF that does not track the future prices of uranium, but what it does is it’s made up of 23 different stocks, 23 different holdings of uranium stocks. And they’re global uranium stocks, rather than just domestic.

The largest holding in URA is Cameco, the CCJ, at 20 percent. And then there’s 22 others, globally. And it’s roughly trading about $20.

Norman: What is the price of uranium right now?

Grossman: The spot price is $60, and then they have a monthly price that’s about $53.

Norman: That’s price per ounce?

Grossman: Price per pound. Interestingly in 2007 — and I remember trading the stocks off of, back three years ago, the uranium price — uranium spiked to, I want to say, $130-$137, but in the $130s. Kind of like the super spike that we saw in oil in 2008.

Norman: Does it track oil? It’s competitive with that. We use it in energy generation, etc.

Grossman: Not so much. I do believe — and why people should be interested and why I’m interested in uranium — it’s just a great growth story around the world, feeding that middle class in these emerging countries. If you’re someone like me who thinks that the middle class is only going to grow in China, and in Russia, and in India, and so on and so forth in the course of the next 10 years, they’re going to need to supply more than electricity. And so the more nuclear-generating plants that they build, the more uranium they’re going to need.

How about this: There was a report that came out just last week. And it was saying that China presently has nine gigawatts of energy created by uranium. And their goal is by 2020, they want to have 112 gigawatts. That’s a 1,200 percent increase over the course of the next nine years.

Norman: That’s just a China growth story, or an India growth story. You could buy an index which tracks China or tracks India. Why do you have to do it in such an oblique manner? I mean, basically your story is a China growth story or an India growth story, right?

Grossman: I would agree, but I would think that we’re going to see a lot of ups and downs when it comes to the economy over the course of the next few years.