Things are Getting Ugly...but Soon the Cooler Heads Will Prevail

Well there really has not been much to write about recently as the market has been crushed as 'Big Ben' (Mr. Bernanke) has gone about squeezing the life out of what appeared a strong market. Gold is down nearly $100 per Troy ounce, silver nearly $3, and crude down only $5 per barrel. With all of this happening, the market has moved strongly to the downside...just the opposite as many had predicted should energy prices begin to fall. One of the most important ideas when it comes to investing is to run for cover when the market is not making sense. And to be blunt, at this point not much is making sense to us or the market. It seems everyone is worried that the Fed will tighten too much and cause some serious troubles at home and abroad.

Well when all logic seems to fail you in these types of markets (seems everything is falling everyday) you must invest in special places. We are invested in energy stocks, be them uranium, oil and gas, or oil sands, and believe that not much is going to change for the better in the next year. In fact, we believe that the probability for things to get worse is much higher than that of world situations getting better. So the recent sell-off in energy stocks has us perplexed. Certainly the stocks are not broken as they trade for six times earnings in some situations, and it seems that earnings are getting better as old contracts expire and deleverage some of these companies. We want to treat this market downturn as a sale of sorts.

Now for those of you who read "The Intelligent Investor" by Mr. Graham (we believe that all should) then you understand that at this time Mr. Market is worried about something beyond his control and at this time is worried about his financial situation, thus he is unwilling to pay as high a price for a stock as he was only a month ago. However situations change, but some variables do not. The one variable that investors can control (think of this as the independent variable of a calculus equation) is the companies and sectors in which they invest their money. If you pick a high quality company in a high quality sector you can insure that your money should be relatively safe. That is unless the market conditions turn downward, in which case you may lose money, but hopefully since you are in a high quality or promising stock your money will not deteriorate at the pace of which the market indices do. In short, find something 'special' to invest in and stick to your guns. This mantra has treated me well over the years and in situations such as this has allowed me to go bargain hunting and add new positions, or better yet add to my favorite positions.

Currently we think that Cameco is a buy as they are the strongest player in the uranium sector, so we will at this moment add to -theinvestar's portfolio the December '06 Call Options with a strike price of $35 currently priced at $5.60. The contract will give us high exposure to CCJ until December (and hopefully experience the December run-up) and is currently only a few cents from even. We will need a run to $41 to break-even, but we feel that this risk is worth it.

We recently spoke to the Buick Group, who now represents CWPC in investor relations and we discovered a few interesting bits that are only now beginning to make some sense. This was last week we spoke to a representative, but we discovered that Pasquia Hills has been renewed by the partnership with Nova Chemicals but still no word has been given as to whether they are drilling up there at this time. Also I was told that there is going to be big news out in June, which yesterday was announced (Canwest taking 100% interest in OilsandsQuest). Now at the time (I must say this because I did not listen to the conference call today at 12) CWPC was still qualified for its listing on a senior US exchange, which if I heard the slip-up correctly, will in fact be the AMEX. Not really a surprise there, but it confirms our belief of where they were heading from a few months ago. Now concerning the Oil sands conference to be held in Houston, I was told I would have to call back in order to see if the company was going to be in attendence. Maybe because they will now that their merger is in order, and Chris Hopkins will now be taking the helm at CWPC. That is also a very positive event in our eyes as he has been the point man for the project as well as during the presentations and the face for the analysts. About the Forbes article that many small resource stocks seem to be plagued by recently, CWPC says it should not be a big worry. They were indeed contacted by the reporter due to their ties to Pinetree Capital (which the story really focuses on...due to their ties to certain characters) which owns roughly 1 million shares in CWPC. The company said they pitched their story the reporter told them everything they could (competent managers and world class project as well as who performed the drill core analysis). They felt that this was sufficient but cannot comment on how the writer will portray them in the story. So, once again we must maintain our holdings of CWPC in our portfolio and we will in fact add another share to -theinvestar's portfolio at $5.80.

Canalaska appeared to escape unscathed by the market due to their intersection of 1 foot of uranium in their drilling at West McArthur, but in recent trading sessions has been pounded. We are forced to keep our shares in hopes that the 1 foot leads to many cubic feet sometime in the future, as well as a bounce after the chaos has cleared off of Wall Street.

SXRuraniumone and Paladin are two positions we have no worries about doubling in theinvestar's portfolio as they will be opening mines next year. This is truly an opportunity to buy the next producers at prices I thought for sure would not be seen again, so we add one share each of SXR at $8.80 USD and PDN at $3.35 USD.

Additions to -theinvestar's portfolio:

SXR @ $8.80
PDN @ $3.35
CWPC @ $5.80
CCJLG.X @ $5.60