The speculator crowd at wallstreetbets has begun to pick up on the uranium story. I’ve now seen two different articles about the uranium thesis and how wallstreetbets is jumping on board. The latest is from Oilprice.com. Wallstreetbets (WSB) is the same folks who ran Gamestop up to dizzying heights.
These folks are the herd and remember, when the herd starts to stampede, you need to watch out. You could get straight run over. The difference between the uranium story and Gamestop is big. Gamestop was heavily shorted and once the buying frenzy started, those that had shorted the stock had to buy it back or face margin calls. Uranium is not the same. In uranium, we have a market that has had a long run of under development and shuttering of marginal mines. It is also a much larger market than GME.
This is exciting but scary news. I’m glad more buyers are starting to pay attention to what’s happening in the uranium sector, but I’m nervous they’ll dump it once it doesn’t produce instant gratification.
One of the best ways to keep tabs on WSB is through swaggy stocks. They track the posts and the comments. They also layout the positive or negative sentiment. Here’s what Cameco (CCJ) has looked like for the past month.
WSB is chock full of idiots trying to gamble their way to millions but there are a few people that are actually interested in solid investments and know what they are talking about. Prior to GME, it was fairly easy to tell which was which. Since WSB’s rise to popularity, the waters are very murky.
Boom!
Liftoff has begun in the reverse repo market. After the NY Fed’s announcement, we have a new record of cash being exchanged for collateral. My belief is the vast majority of this trading is happening with money market funds. These guys are starved for yield and don’t have the same access that banks do to the Fed’s excess reserve fund (which pays more than RRP). Money market funds would be considered “cash on the sidelines”. Once traders start putting their money to work, some of these funds could get swapped back.
Stagflation Indicators on the rise
The IHS Markit group posted preliminary estimates on their reports for September. Both services and manufacturing PMI are lower than last month. Services posted 54.4 while Manufacturing posted a 60.5, for a composite score of 54.5. These reports are considered “soft data”. This means that they survey those in the industry and create a score based on their responses. Anything above 50 indicates expansion. The pace of the growth has slowed tremendously from earlier in the year.
From the report:
“On the price front, input costs rose at a sharper pace during September. The rate of cost inflation was the quickest for four months, and the secondhighest on record, as supply chain disruptions and material shortages pushed prices and transportation costs up. Meanwhile, output charges continued to increase markedly, continuing to rise at a pace far outstripping anything seen in the survey’s history prior to May, as firms sought to pass on higher costs to clients where possible.”
Price inflation is becoming a big story. Blaming shortages and supply chain disruption is getting old. The transitory story is becoming stale, so the Fed better act. I don’t believe they see it yet. They see a small wave of inflation that they think they can control by beginning the taper and maybe raising interest rates a quarter point or two. They do not see that it is going to take a lot more to get this under control. The other factor that is going to play into this is Jerome Powell’s renomination as Fed Chair. If Powell gets pushed out for someone who has a weaker stance on fighting inflation, watch out. This is a story that needs to be watched closely. I don’t believe Powell has the wherewithal to combat inflation but he has more motivation to do so than some others on the FOMC (looking at you Kashkari!).
As more begin to realize that this inflation is the perpetual kind, a rush to real assets will commence. It will be important to watch gold, silver, and oil closely. Other commodities have been running up, it is only a matter of time before these three do as well.