A new “cold war”?

We have got a very untraditional US president for sure and even before he officially swears in, he has already shown how unusual he will be. For one thing, Trump loves Twitting and he is using Twitting to convey various thoughts in his mind, good or bad. Not sure if you have noticed, he has already saved the US government billions of dollars by simply Twitting his criticisms about the high costs for Air Force One (by Boeing) and F-35 (by Lockheed Martin). Well, both companies feel the heat and have promised to low down the costs.  Same globally, governments are one of the most stupid entities when talking about expending as they are always overpaying for projects. No officials really care about it as it is not their money and wastes by governments are widespread and acceptable. After all, tax payers will have no choice to just pick the tags regardless how much waste a government project involves. As a businessman, Trump may start to change this kind of mindset!!

Well, actually this is not my main topic today. What I recently saw from Trump’s Twitting was an interesting verbal interactions between Trump and Putin:

From Trump in December:  

The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes.

President Putin said on the same day:

We need to strengthen the military potential of strategic nuclear forces.

Then, Trump replied:

Let it be an arms race. We will outmatch them at every pass and outlast them all.

So what do you feel about this exchange? Well, for me, it reminds me of the historical “cold war” between US and Soviet Union. Don’t get me wrong that I wish a new cold war between the two would start. Not at all as it would be a very bad thing for the world. But we have to face the fact that Trump likes to speak his mind and I cannot say he is not serious about strengthening the US nuclear capability and if so, for the balance, Russia may have to do something similar. If that happens, it may mean the decade long policy of reducing nuclear weapons by both countries could come to an end. I don’t believe both Trump and Putin really mean to engage in a direct confrontation as both seem to have some good chemistry for improving the relationship but still they may start to expand their nukes anyway.

So what does this mean from the investment perspective? For sure it will mean more demand for the nuclear material, uranium. In addition to the potential expanding of the nuclear weapons, Trump is also very much in favor of nuclear-energy. He once said:  “I’m in favor of nuclear energy, very strongly in favor of nuclear energy.” Either of the two or both could mean a real turnaround of uranium demand. If you don’t know, uranium has started its relentless downtrend since 10 years ago, with its price dropped by 85% from its peak in 2007. Even just last year, its price plunged over 40%. Believe or not, the uranium spot price at the moment is below the production cost, which cannot last for long economically. Apart from what US and Russia may do militarily and commercially with uranium, many other countries are and have plan to further expand their uranium use by building more nuclear reactors for increasing demand of energy. This includes countries like China, India, Jordan, Iran, and Argentina. Even Japan has changed its policy to reopen its nuclear reactors.

I think the market has sensed about this coming changes and quietly uranium prices have started to move up.  Look at the ETF for uranium companies, Global X Uranium ETF (URA). It seems to have broken out its one year downtrend lately. If it can hold up around $13 and further move up, it may indeed mean a gigantic turnaround for uranium may have started that will likely last for years to come.