Uranium Short Sellers Make Record Bets Against Cameco, Market | stockbee


Uranium Short Sellers Make Record Bets Against Cameco, Market

This Bloomberg story about CCJ (Cameco Corp ) is a long one. Essentially metals and mining has been on tear for long time and most of these stocks have run up 500% plus during this boom. At some stage the party will end. Going by the junk mail on uranium , palladium, and all kinds of exotic metals which I get, a contrary bet on such stocks may be worth keeping an eye on.

July 16 (Bloomberg) -- An unprecedented number of short sellers are attempting to exploit the uranium mania that prompted more than 12 mining companies to quintuple their share prices during the past four years.

Demand from utilities to fuel nuclear reactors has plunged 72 percent from an April 6 peak, according to TradeTech LLC, which has tracked uranium prices since 1968. In the second week of July, 3.4 million pounds of the metal was available, more than three times the amount purchased by power companies.

Investors in Cameco Corp., the world's largest uranium producer, in June placed a record number of wagers the stock will decline, according to data compiled by Bloomberg. Uranium for immediate delivery had its first drop since May 2003 last month and has fallen to $129 a pound, down 6.5 percent in three weeks.

``It would be unwise to be betting the other way in the short term,'' said Peter Richardson, head of commodity strategy at Craton Capital in Melbourne, which manages $315 million, and the former global head of metals research at Deutsche Bank AG. ``We're looking at a period of excess in the spot market.''

Another interesting article stating option bets show the market is heading for 10% or more correction. In my vacation planning, I had factored a possible correction for this period. Let us see if that planning works out.

Stocks in U.S. Poised for 10 Percent Drop, Options Bets Show
Bets in the options market against the Standard & Poor's 500 Index have exceeded wagers it will rise by a 2-to-1 margin for a month, the longest since Bloomberg began compiling the data in 1995.

That's seen as a warning sign the market is due for a decline of 5 to 10 percent after the S&P 500 rose to two records last week, say managers of almost $1 trillion at Morgan Stanley Global Wealth Management, National City Private Client Group and Russell Investment Group. The Leuthold Group, whose flagship fund has beaten 99 percent of similar funds over the last five years, expects the S&P 500 to slide as much as 19 percent by the end of the year.

The options market is ``a bell ringer,'' said David Darst, who oversees $728 billion as chief investment strategist at New York-based Morgan Stanley's private banking unit. ``On a short- term basis, the market's ahead of itself and could have a pullback.'' Darst, who cashed in some stocks in the past 12 months, said the market could drop as much as 10 percent.

The increase in so-called put options coincides with analysts' outlook for the worst corporate earnings since 2002. Retail sales slid in June by the most in almost two years, a signal that near-record gasoline prices and falling home values are taking a bigger toll on consumers than economists had forecast.


AJ said...


Thanks for the nice post.. I would like to agree but then I seem to not.. The liquidity is still out there and the olympics in china is definitely not slowing the market there until late next year.. the M&A mania is on-going and shows no slowing down.. What'll be the catalyst for this big correction? .. Any thoughts?

Pradeep Bonde said...

A technical correction may not require a immediate catalyst. It is more driven by buyer exhaustion at a certain level.
The earning season might be the excuse to book profits and wait for next earnings season.

Jack said...

Should we take the contrarian view and let the bulls continue their upward move?...or... do we heed the advice and go short?

F. said...

If there is a record short interest, then the contrarian play would be to buy!