This Train is Pulling out of the Station...

Oilsands Quest (BQI) has been a stock we have constantly bragged about. Many of you probably realize that it is about flat or down from many of our recent buys (however we did buy most of our shares in the $2 range, so we were averaging up) and wonder why we would push a dog. Well we always knew that it was a great story, and probably less understood on Wall Street than the current uranium boom. Yes that's right, less people on Wall Street understand this phenomenon than the Uranium Boom! We said it first, and will stand by our word. This drilling season is when many will realize how unique this oil sands play is (we have also said this in previous posts, but feel that it should be reiterated).

Last drilling season was when we discovered that the company was correct on its hypothesis regarding where the bitumen was and how it would be situated. The company was highly successful as they returned significant grades and depths of bitumen from roughly 80% of their drill holes. We believe that as they "fill-in" their drill grid from last season as well as do more exploratory drilling that they will significantly add to reserves as well as receive a heft payday from a major oil company (or even national oil company...think India or China) purchasing a JV agreement for this first project. My take is that many are weary of what they do not understand, this is why uranium is still shunned as an investment even in today's environment, and also the reason people shy away from investing in the only Saskatchwan oil sands play. Provincial (and for that matter national) borders have never indicated where a resource area begins or ends, but I guess that it is so engrained in Wall Street's mind that oil sands are supposed to be in Alberta everyone ignores the writing on the wall regarding Saskatchewan.

Finally though one of Wall Street's greatest minds is speaking up for Oilsands Quest! Dennis Gartman (of the highly respected "The Gartman Letter", Just One Thing, and his many appearances on CNBC) recently recommended Oilsands Quest for his "All Things Athabasca" investing approach. We have often quoted and borrowed this approach, as well as expanded it to uraniums (they are in Athabasa as well, so we are taking this approach one step further). Suncor Energy has been his only pick and last year he recommended Birch Mountain Resources as an infrastructure play, but sold out before the collapse. Gartman had this to say in his Friday December 15 2006 issue:

"Finally regarding "all things Athabasca," and particularly an interesting speculation, Oil Sands Quest Inc (AMEX: BQI) [Ed. Note: In order to be perfectly transparent, we have gotten ourselves involved in this company buy owning a few thousand shares in our trading account just to make certain that we focus our attention upon it... at prices modestly above where it stands as of the close of trading last evening), we are always looking for for ancillary trades in that region, for we are convinced that it is, has been and shall be in the future, the big story of N. American energy independence. Our primary interest is of course Suncor Energy. It has been our primary interest and it shall remain so, for it has the liquidity and it has the history we need to be involved "in size." However, we've speculated on other stocks involved in the Tar Sands, including a time earlier this year when we became involved (for a very short, but very profitable time) in Birch Mountain. We bought the shares near $6/share and were stopped out several months later at $7 1/2. We've stood aside since, as BMD has fallen steadily toward $2 1/2. We've no interest still.

However, Oil Sands Quest was brought to our attention by our old friend, Dr. Mike Berry. Simply put it is a subsidiary of CanWest Petroleum, and it has acreage in Saskatchewan (not Alberta) on land contiguous to the Albertan Athabasca Tar Sands that it is actively pursuing. The stock has broken its downtrend that is contiguous with the weakness in crude oil prices made earlier this year. Further, since the lows made in late-September (when Rod Stewart tells us "We really should be back in school."), each low has been higher and so too each high. This is our new "punt" on Athabasca. As a balance sheet investment , nothing could be worse. The company has negative earnings; it has negative cash flow; it sells at a price hugely above book value, so be very much forewarned: this is a highly, highly speculative "punt" on "All Things Athabasca." However, we own it... at a small loss at present, and we intend to add to it when it crosses above $5/share."

-Dennis Gartman
"The Gartman Letter" Friday 12-15-2006

We highly recommend this letter to all serious investors as it covers everything from the Forex markets to grains to equities. To find out more, please visit http://www.thegartmanletter.com/.

This tells us that we have been correct in our assumption that BQI is poised to rocket past $10 (we had thought that this would happen by the end of this year, but it seems destined that we shall continue to lay the ground for larger gains in the beginning of next year) and that the lows have been seen and shall be forgotten. We love the gains and money the stock market can bring us, however we prize being correct above all, especially when we are one of only a few who are initially right. It's great to have an investor far far far wiser than us aboard and investing in one of our oldest and first picks, and it appears more than ever now we are poised for further gains. Surely this was the reason BQI had such strength on Friday when most oils were down.

On a closing note we have now upgraded http://theinvestar.com to include some company profiles (many more will soon be updated) and added some news links for uranium news as it is so hard to come by. Until next time, good luck and happy investing.

Interest Rates, The Dollar, and 2007

The fed left rates unchanged today as many suspected, but once again stated their desire to root out inflation. This appears to be a recurring theme in Federal Reserve speeches and honestly does not surprise us one bit. We find it troubling that they have decided to focus their sights on something that may turn out to be a phantom menace. Keep in mind that in order to have a healthy, growing economy that some inflation is necessary at moderate rates. We believe that at today's inflation rates we are very well within the 'safe range' and are puzzled, if not troubled, by the Fed's infatuation with stopping out very low rates of inflation. Remember it was only a few years ago that many were troubled by the fact that the US could be entering into an era of deflation (this is when we all decided that inflation was in fact A GOOD THING AT MODERATE RATES...and a necessary evil in the eyes of the Fed).

Now I cannot speculate as to why the Fed is so concerned about stomping out inflation, but am willing to bet that Bernanke might be trying something else altogether. This was the man who wanted to target inflation to a range instead of to an exact number, so he is somewhat going against his nature by trying to get us as close to zero as possible. Much more likely he is beginning to realize that that the Asian Financial Crisis supplied the dollar with an unwarranted spike in value instantly creating billions, if not trillions, of overnight buying power which then allowed for extra American spending abroad for unneeded items. This spike in the dollar could also have added flame to the fire for the great bull run of the late '90s. We had an unprecedented inflow of foreign funds into our securities markets which created that extremely high demand for stocks already in a very tight supply/demand market.

The way I remember the end of what we call 'The Bubble', the demand was so high for these technology stocks of any kind that the market was flooded with sub-par issues that were not suited for investment by main street investors. Where there is a supply, there is a demand. Now although I suspect that Bernanke is attempting to force Americans to stop spending while keeping rates high enough to entice foreigners to keep their reserves of US Dollar denominated securities as well as the physical greenback itself, I believe that the past should be used for the future.

I believe that US securities will have a good year in 2007 with two mild downturns. This is of course disregarding any terrorist attacks of major proportions in any Western, or Western aligned country. We state this for two reasons, 1.) Because investors (not truly investors, but those who believe that gambling is investing) are stupid and 2.) Because professionals love to screw the little guy. When the guy at your local coffee shop starts becoming up-to-date on the daily fluctuations on the Euro/US$ trade, something is about to happen. The dollar has been in decline (not a total straight decline, but overall decline over the past 3 years) for quite some time and led many US investors overseas in order to benefit from a falling dollar and rising Euro. That trade seems to have worked out quite well for some, but now may be when that trade starts to reverse, not long-term but for a short-term run. The gains seen here in the US may have been a result of a cheaper dollar, but that could be enough to bring some money home in order to invest in US securities once again. Once the gates open and the trade appears to be breaking down, hedge funds and other big investors should begin to lower their risk if they have not already. As little as a $.02 move could trigger this as these investors must load up on literally thousands of futures in order to make big money. This is why we believe that the market will spike up as this currency trade winds down for a period of time. It appears that the dollar Is valued somewhere around these levels right now, although we think it should be about $.04 higher for the fair trade right now. Just right now we would rather bet on 'The Dollar Family' which consists of the Canadian, Australian, and US dollars as stated in previous posts.

2007 should be the year when the Junior Uraniums become 'investable securities' for wall street and main street alike. After this drill season we should know who has something and who possess frozen tundra. We got duped into buying frozen tundra once, but it was from Lambeau Field from the '96 Super Bowl season, so hopefully it still has some value (but sentimental will suffice in the absence of actual dollar value). We still believe that Canalaska still has one of the most promising drill areas, and so far we have been backed up by the drill results. For those who have not noticed: THIS IS PLAYING OUT JUST LIKE McARTHUR RIVER DID. Pitchstone is also still one of our favorites with very good potential and a big chance of finding something as they are in the historical mining district of Saskatchewan (for uranium).

Our best priced stock at this point which we believe will double from these levels is BQI. We have been a fan all the way down, but our personal portfolio bought in at an average of $2. We have continued to add on the way down and added about 10% to our holdings on Monday. Uraniums took off early this season, and we missed the boat on that, but still available is BQI which has the potential to double and possibly triple. Watch for them to return drill results that prove they were successful on 80% of their drill holes (they did it last year and they will do it again). This might just be the Aurora Energy of the oil sands, because they have a resource now and they will simply go in and add to the resources and venture out to find other bodies of bitumen to develop.

We have also added a new link to the right for Cabin Fever which is a new advertiser for us and allows for us to continue supplying our research and thoughts to you for free. Please support them as they help support us and in turn hopefully your bottom line. Until next time, good luck and good investing.

Finally Some Love

Imagine my surprise when I opened this morning's Wall Street Journal to see on the front page a lead in mentioning uranium (which gave off a bearish chill down my spine) only to find that once I read the article it was absolutely bullish (sometimes you must read between the lines and use the head on your shoulders)!!!!!! Although the only miner mentioned was Cameco with USEC's refining capabilities also mentioned and then PG&E being mentioned as a consumer of this material, the main point was that a true uranium shortage does exist! Not only that, but odds are that it will only get worse before it gets better.

The financial news media writes about intriguing topics which include industries and stocks, however most of the time they wait for their very own readers (in this case the readers of The Wall Street Journal who happen to be investors) to discover the stocks that they then profile. Case-in-point is Cameco, great industry with great assets (although some may be in better condition than others), but the main point is that many people have already discovered this company (market cap is about $15 billion mind you). They are on the right track with uranium, but they focused on the wrong people (the utilities). Anyone who is a true investor would be able to read through this supply/demand problem and know right at that moment that they needed to begin researching those who actually mine the "yellowcake".

As I turned on the television this morning at about 11 AM, in hopes of watching and hearing something from the Wall Street Journal writers on CNBC, I was amazed to find a Citigroup analyst touting nuclear power. WOW! Two in one day, however once again I was disappointed because he recommended, GET THIS, ALL UTILITY STOCKS! Now I have no research to back this up, but I truly cannot think of one industry where they GREW profits as their main input for their business model increased dramatically in value. Yes those companies could lower costs if they build one of the first six new nuclear plants to replace older, polluting coal plants, but the main point is that each year their input will rise in price for the foreseeable future.

This is most certainly the tip of the iceberg in terms of media disclosure. Something exciting will happen where the spotlight will be forced upon this industry and then all will know where at least part of the market's speculative money has been flowing the past couple of years. We stick by our prediction that SXR, URE, and FSY will be the next companies to have their stocks increase dramatically due to fund investing (mutual, index, hedge or other) followed by the general public. We also like those other junior picks where we believe our money has the potential to double within a year. We will continue to watch as the media picks up on this evolving investing idea, and our bet is that the "talking heads" will fall in love and begin to run with it. After all, excitement sells papers and increases ratings.

Answers to Your Questions...

First off we apologize for leaving out Monster Copper (MNS) from our last post. We meant to include it in with Santoy and Silver Spruce as they are also in the Central Mineral Belt located in Labrador. The best thing about this company is that they are not spending money to explore their land, Santoy is footing the bill. This gives them excellent returns on their investment if something should be found on their lands, and keep in mind they have some very promising lands located in very close proximity to Aurora's Michelin Deposit and other nearby deposits/discoveries.

This is one reason why we do not mind Santoy's high number of shares outstanding, because they are reinvesting that money in highly prospective lands...remember if you are not the early bird, you must pay up for the worm. In Santoy's case they were not early, but not late, thus they have 100% owned properties that are quiet promising, as well as 50% JV properties that appear to be just as, if not more, promising. Keep in mind also that Santoy has other properties around Canada they are exploring at the same time. View Santoy as you would a hand in poker or black-jack, the more outs you have the more you are willing to bet the hand. Santoy has many outs in its uranium exploration properties (it could find something on anyone of them, or even JV some of its 100% owned properties out), so I am willing to allow the large number of shares outstanding to fund this company until a later date.

Africa scares many people because of AIDS, tribal warfare, and corrupt governments. However, sometimes you can find a diamond in the rough down there (literally and metaphorically!) which is what we believe is the case with FSY. They will need money to develop the prospect (they know its there, but still must dig the pit and build the mill) but they are one of the safest bets considering that they have already taken care of their toughest tasks (securing water and power for their project). Also remember that Paladin thought they would be paying 10% for taxes and royalties, but instead the Namibian government gave them a 5% fee. I believe that this speaks volumes for the Namibian government's pro-mining/uranium stance because they are backing up their words with actions. Watch for FSY in the future, and keep in mind that investing is all about finding stocks/companies that have been overlooked, are under appreciated, or just flat out undervalued and getting in them before the rest of Main Street flocks in.