Fundamental Trading Diary

Fundamental analysis of the capital markets


USEC Inc. (USEC) is a global energy company that supplies low enriched uranium (LEU) for commercial nuclear power plants. The Company, either directly or through its subsidiaries, United States Enrichment Corporation and NAC International Inc. (NAC), supplies LEU to both domestic and international utilities for use in about 150 nuclear reactors worldwide; is an executive agent for the United States Government for a nuclear non-proliferation program with Russia, known as Megatons to Megawatts; performs contract work for the United States Department of Energy (DOE) and its contractors at the Paducah and Portsmouth gaseous diffusion plants (GDPs), and provides transportation and storage systems for spent nuclear fuel and provide nuclear and energy consulting services, including nuclear materials tracking. The majority of USEC’s customers are domestic and international utilities that operate nuclear power plants.

USEC is trading very cheaply at 6.66 times earnings after falling off the map in 2007.  I’m initiating a small position in USEC.

On a related note, my small positions in Fannie Mae and Freddie Mac have swing from a 30% loss to a modest 6% gain.  The daily breadth in these stocks are incredible – possibly a daytrader’s dream.  The reason for this is that these two institutions represent the focal point for the life and death struggle for global solvency. Will the Fed and US Treasury Dept. allow them to go insolvent? 

The Fed and US treasury will doubtlessly bail out the bond-holders.  The real questions are:

  1. Will the equity-holders get shafted
  2. Will the bond-holders demand compensation at a premium to the USD that they’d be paid in (because the treasury’s ability to pay is simply based on currency inflation)

Most of the power that the Treasury and Fed wield is actually in the secrecy of what they specifically intend to do, while posturing to sway monetary interests to their cause.  They essentially only have two levers of power here:  printing money, and threatening to print money.


August 27, 2008 - Posted by | Uncategorized

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