JAKE MERL: Welcome to Trade Ideas. I'm Jake Merl, sitting down with Lobo Tiggre, CEO of Louis James and editor of The Independent Speculator. Lobo, it's great to have you on the show for your very first Real Vision interview.
LOBO TIGGRE: First Real Vision. Happy to be here.
JAKE MERL: Today, we're going to be talking about uranium. Uranium stocks have had a lot of volatility over the past few months. Back in July, President Trump rejected the notion of quotas, which is what domestic producers wanted and that's when we saw a lot of volatility, a lot of these stocks pretty much fell off a cliff. Can you please break down the current situation for uranium stocks? What's going on with President Trump and how you see things unfolding in the weeks and months to come?
LOBO TIGGRE: Well, just to set the stage here properly, I would say the most important thing to have clear in your head about this is that uranium overall is in a bull market. We've seen a series of higher highs and higher lows since 2016. It is beginning recovery, I won't get into all that but it's important to keep that in mind, because what we're about to talk about is a potential tailwind. This isn't a make or break for uranium plays. It is an interesting thing that's happening in this space right now. There's an opportunity in it but it's something that could add a boost on top of this underlying trend, which I think is quite solid.
That's what makes it interesting, asymmetrical risk here. What happened, I wouldn't say it started last July, last July was an inflection point, perhaps. There was a lot of expectation that led a lot of these stocks, it could have been impacted up because what happened was that some of the US uranium producers petition the United States government under something called Section 232. They go to the Department of Commerce, they asked the Department of Commerce to investigate if there's maybe a national security issue with the US importing so much of its uranium. More than 90% of the US's uranium comes from abroad and 20% of electricity comes from nuclear power. This is a serious question.
Personally, as a free market guy, I don't really like tariffs and quotas and this response but it's a legitimate question. If a large part of your power grid relies on something that's important and can't be replaced or substituted, it's fair to ask. They put this petition in and they were hoping to get some support for the uranium price for US producers, the Department of Commerce actually recommended that the President do something and support the US producers. That report was submitted April 14, the President had 90 days to answer. Just before the 90 days was up, it leaked that he wasn't going to put these tariffs in or import duties or anything to support the US industry at that time. Boy, the affected share places just fell off a cliff.
When the actual press release came out from the White House, what happened was he didn't just say, "Nah, it's not important, bugger off." What he said was we need to study this more. On the one hand, we don't want to mess with the utilities but there is an issue here. We are importing so much of this, we need to look at this whole situation. He created a study group that has another 90 days, which by the way, are up in almost a month from when we're speaking, you and I, right now, October 14, so it's under study.
Now, there's a lot of things that we can discuss about this, but again, I want to stress that if the United States government does something to support uranium prices, it's a tailwind. It's on top of an underlying bullish trend. If it doesn't, that trend is still there and that's why I think investors should be thinking about this right now.
JAKE MERL: What could the government do? What could President Trump do, besides the quota that could boost shares for these companies?
LOBO TIGGRE: Well, they still could do the quotas. He didn't say, "No, never, forget it." He said, "Well, I'm not ready. I don't quite agree." He said he didn't think it was a national security emergency, but he did say it was an issue, it was a concern so he could still do that. He could still impose some duties or tariffs or quotas or require that the US power generators domestically source an x percentage. That could still happen. I don't think that's likely because it puts a burden on those people and they have employees and voters and all that, too.
You want to try not to upset one apple cart or the other here. I think more likely is something that he actually tweeted about and that would be you could order your agencies, US agencies to source solely from the United States. I think the military already has to do that but that could be ramped up. That could be done without getting Congress involved and a law would have to be passed. You just issue an executive order, or as the Chief Executive of the country, could order the agencies to act accordingly.
He could actually deliver in any of a number of ways. Now, the one thing I would caution people about because originally, people were very excited about April 14, or the deadline when the Department of Commerce was going to deliver this report, but the odds were not that on that day, anything crazy was going to happen. I remember writing about this, look, don't expect anything to go to the sky or fall off a cliff on that day. That's when the report gets issued, he has 90 days to respond after that. It's not likely that they're going to publish a press release within that report and they didn't. It took months before we had an idea what was in there.
Then here comes the next 90 days, and I warned people, "Be careful, there's no guarantee of what will happen here and even if he does do something, he may decide not to do it for a while and he may not. We'll see." Again, now we have this new deadline, but that doesn't mean that on the 14th of October, some new regulation will be promulgated.
On the other hand, if Trump makes up his mind with a tweet, he could change the uranium market overnight before that, and there's no reason for him to wait. This is, if anything else we can say about Trump is he's pretty unpredictable. That said, it's clear that this group has its duty, and they are supposed to report by this day. I think the biggest question about that may be the departure of John Bolton. He was on that group. He's out now and maybe they need to take time to replace him. I don't know.
I want to cautious investors not to get too excited about that deadline but whether it's October 14, or later or earlier, something's going to happen. They didn't study this just to spend more time and money because we have so much fun around the Beltway there. I think the President does want something done and so I think hard to put a number on this P's and Q's to give odds but if anything happens, anything at all that supports the US uranium producers, that should be very bullish for their share prices.
JAKE MERL: With all this in mind, do you think now is an attractive entry point to get involved in the space?
LOBO TIGGRE: Well, it's better. Right after they all fell off a cliff, it was really amazing how that happened. If you were watching this space, before the President could issue-- the White House could issue the press release saying what they were going to do, somebody leaked it. Some newspaper down in Australia got worried that they weren't going to be any tariffs or quotas and the stocks just fell off a cliff, like literally 40% in a day and based on a rumor.
I find it quite striking. I could see stocks dropping 5%, 10% percent or something on a rumor, but 40%, boom. It's not even a rumor of like, oh, we're outlining nuclear power, or something that would really kill these companies, it was the absence of a tailwind was the rumor. That was the best time to buy. They absolutely got clobbered.
Now, they've started coming back, I think people have realized, "Well, maybe that was overdone." I'm saying, "Well, it would have been better a few weeks ago, but they're still--" If you look at the charts, you can look at any one of the main US uranium plays, they're all still way down to where they were before. You can search online, it's easy to find US uranium plays and if you look at any other stock charts, you'll see which ones I'm talking about. If they didn't fall off a cliff on July 14, or July 12, before the news came out was when the damage really happened, that's not what I'm talking about.
JAKE MERL: What are some of the knock-on effects we've seen over the past few months after President Trump's decision.
LOBO TIGGRE: As we said, this is a global market. Uranium, a pound here or a pound there, it's just a metal, it's fungible anywhere in the world. It's interesting that part of the reason for the petition was that a very large part of the uranium in the world comes from Kazakhstan and that's not quite as friendly to US interests as our friends in Canada or Australia. This is a concern about the Kazakhis being close to Russia, but really, they're businesspeople. They want to sell uranium. I'm not worried about supply of uranium.
But it was interesting, because this whole kerfuffle put a lot of companies on the defensive, and their share prices got whacked. Even Canada's big producer, Cameco, they saw a knock-on effect on their shares, even though they're not really a US play. There was a rumor at the time that the Kazakhis were going to seize this opportunity to try to knock out their rival and flood the market like OPEC style with cheap uranium and put chemical out of business. That turned out not to be true.
The Kazakhis have already announced that they're, in fact, they're extending their voluntary pretty production cuts, Cameco also is reportedly even considering shutting down another mine to support uranium prices because at the end of the day, the stuff can't be mined at current prices and it has to be mined or the lights won't go on in important parts of the world. This is a trend I feel very strong about and hopefully in the near term, we'll get an extra boost.
One of the things that's happened is that the US buyers, the utilities that might suddenly have new rules to deal with tomorrow, it's understood that those people are basically off the market. Uranium prices have basically been flatlined. I wonder if the guys who put this petition in now wish they hadn't done it because uranium prices were rising and then this question came up. Now, it seems like the buyers are off the market. Everybody's waiting. Things have flatlined.
JAKE MERL: It's interesting you say that, because there's a unique dynamic going on between the actual equities versus the actual commodity price. Can you please walk through that situation?
LOBO TIGGRE: Yes, well, the two are not the same. The good news and the bad news is the same news. That is that the equities are always highly leveraged to the commodity price. They go up and down by multiples of the commodity price. If you're a uranium bull, for whatever reason, for this reason, or over the longer term premise, then the stocks give you high leverage to the trend or if you're short, and you think it's bad, you would do the same thing. You short the stocks, not the metal itself.
They do behave differently and it was interesting to see, because of the reasons we were just discussing, when the White House put out its press release and they said that they were going to do the studying and they weren't going to do any quotas or whatever, the price of uranium popped 5% on that news. Now, this was the same time uranium stocks themselves had fallen off a cliff. Why? Well, because the perception was that, "Oh, at least we have clarity now. Section 232 is dead and so now, it's all back to business."
Well, it turned out that it wasn't dead or rather the petition is done but the issue is ongoing and still to be resolved. Generally, they do go together. That was an unusual circumstance to see uranium pop significantly and the stocks not move at all. That's very uncommon, and it was an opportunity. When price goes one way and value goes the other, whichever way it is, there's always an opportunity there for a speculator.
That was unique. I think, overall, we can count on and have always all along the stocks giving us leverage one way or the other to the prices. Again, the overall trend is upwards. A lot of your guests have discussed that already. We don't need to get into the details of that, but it's important to remember that. On top of that, the tail window, if we get one around October 14, sooner or later, could really light a fire under some of these shares. And because they're oversold, even though they're recovering, the ones that have been whacked, when people say, "Oh, well, that was overdone," there's good reason to believe that those stocks could go back to where they were trading before or even higher, because now they have a positive outcome. That could make for easily 30%, 40%, 50% gains in a couple months.
JAKE MERL: What would you say is the biggest risk to your thesis?
LOBO TIGGRE: Well, the biggest risk is I guess perception, because if the study group were to say, "Well, most of our uranium comes from Canada and Australia. We're not worried about our good friends down under or in the Great White North. It's not a problem, we just let the market handle this." I think investors would see that as a bad thing. Investors in uranium companies would see that as a bad thing.
It would be disappointing and there could be some struggling. It could be a selloff at that event, too, because there has been some recovery, those optimists could get wiped out. I don't see a big crash because there's already a lot of pessimism. People already hate these stocks. They're still in the doghouse. Okay, they might get relegated to the back of the doghouse, but they're still there.
I don't see a whole lot of downside and if something good happens, there's a whole lot of upside. That's what I like about this. This is why I'm here today. I write about copper and gold and silver, lots of metals, lots of mining, kick rocks and mines and hundreds of mines around the world. It's what I do, but this is a unique circumstance where you have an underlying strongly bullish trend. The more plants being built that are being decommissioned, you got to have this stuff, you can't replace it with windmills overnight. That's the bedrock and on top of that, you have this opportunity that could, within weeks, put a real fire under certain select stocks.
JAKE MERL: Well, Lobo, thanks so much for breaking this down. It was great having you on the show.
LOBO TIGGRE: Thank you.