by Kyle Johnson
FOMO: The fear of missing out.
This quirk of human psychology can lead to great experiences… like saying “yes” to a night out with friends.
But FOMO and financial decisions typically don’t play nice.
Remember NFTs?
“Non-fungible token” is the term for certain digital art. NFTs are bought and sold via cryptocurrencies (typically Ethereum). Being digital, they can be replicated without limit. Notwithstanding, some investors believe there’s value in being the owner of record within the NFT community.
I’m not sure something has ever been named more appropriately—NFTs are quite literally not fungible.
Nobody wants them.
Most NFTs exist on a publicly accessible network. Every transaction is recorded and preserved. A team at dappGambl (a crypto gambling and gaming firm) analyzed over 73,000 different NFT collections. In case you are unfamiliar, an NFT “collection” is a single project comprised of many different pieces of art.
They found that over 70,000 (95%) of the NFT collections studied are essentially worth $0.
There’s a lot of FOMO behind that statistic.
I won’t make excuses for anyone. But NFTs would have been difficult to ignore if crypto was part of your social circle and media consumption.
At the height of the frenzy, a piece by “Beeple” sold to an individual investor for $69.3 million.
As far as I’m aware, it’s never been put back up for auction. Maybe some diehard fans are still willing to pay top dollar.
Maybe not.
In 2022, someone sold an NFT from the “CryptoPunks” collection for $3.3 million. This resulted in a $7 million loss for the seller.
Someone spent $2.9 million on an NFT of Jack Dorsey’s first Tweet, believing he could flip it for $48 million. But that never happened. The NFT is currently on sale for 100 Ethereum tokens (currently worth about $160,000). The most recent bid was for about $240.
The dappGambl researchers found that fewer than 1% of the NFT collections they studied have art selling for over $6,000.
Realized and unrealized losses abound.
It’s clear that some in the NFT community are incredibly wealthy. But much of the NFT craze was driven by an army of young retail investors. It’s estimated that over 23 million people own worthless NFTs.
Most young people have relatively little money to invest. Yet the researchers estimate the NFT market once had a monthly trading volume of $2.8 billion. During the mania, the “CryptoPunks” collection had a market cap of $2.2 billion. The “Bored Ape Yacht Club” collection had a market cap of $1.7 billion.
Ready for the punchline?
Just six uranium companies currently have a market cap above $1.7 billion—and uranium prices are soaring.
Imagine for a moment if retail investors rushed into uranium stocks with NFT-like enthusiasm.
To be clear, I’m not suggesting that NFT investors will turn into uranium investors.
I am saying that FOMO spares no one.
People who would laugh at the concept of NFTs are currently getting swept away by the fear of missing out on uranium.
Take a look at the Google search trend for “uranium stocks” over the last 90 days.
Professional investors don’t Google such generic terms. Also, there aren’t enough of them to cause such a spike in search trends worldwide. Retail investors are responsible for this.
Suppose uranium continues to shine. If retail investors pump a few billion into uranium stocks, savvy investors will be handsomely rewarded.
But this is the low end of the potential upside. Retail investors are typically several steps behind institutional investors. And some of the institutional guys control hundreds of billions. A select few control over a trillion.
It’s important to recognize that the NFT bubble did not happen in isolation. It was part of the larger crypto mania. The FTX fiasco proves that many institutional investors will throw eight- and nine-figure sums into speculative plays.
Crypto and NFTs are relatively new.
Uranium has been industrialized for decades.
Many believe crypto (and NFTs in particular) serve little to no purpose.
Uranium’s usefulness is proven and highly desirable.
FTX was run by people in their 20s and early 30s. The key figures didn’t have many (perhaps any) big wins on their CVs.
The uranium market is full of seasoned professionals who have already delivered profits to investors.
What happens when the big players get serious uranium FOMO?
How much might they invest?
Institutional investors understand that energy is the lifeblood of the global economy. Just look at the top companies in the energy sector.
Saudi Aramco has a market cap of $2.2 trillion. Admittedly, state ownership complicates the matter. But this figure is representative of the value in meeting global energy demand.
ExxonMobil has a market cap of $458 billion.
Chevron: $317 billion.
Shell: $214 billion.
This is impossible without the backing of Wall Street, family offices, and sovereign wealth funds.
Yes, some institutional investors will grift for sweetheart government deals. A group of investors recently called for $275 trillion in government subsidies in the name of saving the climate. But others will act knowing that so-called green energy solutions will continue to disappoint. And if they aren’t already, they’ll eventually grow tired of governments regularly frustrating and blocking oil, gas, and coal production.
Is it crazy to believe that institutional investors will pour tens or hundreds of billions into the uranium market in the relatively near future?
Society collapses without energy.
An expiration date has been imposed on fossil fuels. Alternatives can’t meet demand.
Barring a revolutionary scientific breakthrough, it’s either Mad Max or uranium.
Thankfully, nuclear energy has recently been deemed acceptable by a growing number of politicians, bureaucrats, and environmentalists.
- China is leading the way in new reactor construction.
- European nations have fired up old reactors and many have started building new ones. EU bureaucrats finally added nuclear energy to their Net Zero proposals.
- The UK typically produces energy and climate policy insanity. But reason is starting to prevail. Prime Minister Rishi Sunak promoted mini nuclear reactors earlier this year. He recently throttled many standard Net Zero initiatives.
- A record level of Americans now support nuclear energy. There’s at least reason for hope that America will soon join the party.
Globally, there are currently 436 operational nuclear reactors. Another 60 are under construction. An additional 321 have been proposed.
We’ve entered a new era.
But could weaker demand for energy darken the horizon?
Worrisome economic data keep piling in. Yet the economy clings to life. Many investors are increasingly frustrated and anxious. They parse every word from Jay Powell and Janet Yellen. Some even analyze their speaking cadence, tone, and body language.
Let them read tea leaves.
As speculators, our best move typically depends on where the economy is in the boom-bust cycle. At present, this is unclear.
Maybe the economy will take off.
Maybe it stumbles.
Maybe it falls off a cliff.
I recognize that pointing out uncertainty isn’t very helpful. But good, bad, or ugly… society needs baseload power.
Uranium is becoming the only viable and politically acceptable fuel for the job.
Uranium might be the closest thing speculators (and society) have to a silver bullet—it is likely to thrive regardless of where the economy goes from here.
But perhaps this is all too good to be true. Maybe uranium’s recent performance was just a flash in the pan and I’m just getting carried away.
View the “uranium stocks” search trend over a longer time horizon and you might think I’m suffering from recency bias.
You’re free to dismiss everything I’ve said. But I suspect you’d be interested to know that Bannerman Energy (a uranium development company) sold for $0.77 in January 2006. It peaked at $36.30 in December 2007. Other uranium stocks popped during this time period as well.
It’s tempting to compare the recent spike in “uranium stock” searches to the all-time high. But it’s probably wiser to compare it to the uptrend that began in 2005.
Successful speculating requires catching trends early.
KJ
P.S.: If you are new to uranium stocks or just want to bolster your investment thesis, you can skip Google. We’ve published a free report on the uranium market to help newbies and veterans make the most of it.
