The Aftermath

Last week, hurricane Katrina transformed New Orleans into a
modern-day Atlantis. The day after this massive storm blew
into what used to be the most beautiful city in the south
of the United States, two levees broke, leading to the near
complete immersion of New Orleans.

And the situation remains horrible. Dead bodies are
floating through the city, hospitals are filled to maximum
capacity, food, medicine and clean drinking water are still
in short supply. Experts even fear the outbreak of typhoid
and cholera in the coming days. Our thoughts are with all
the people affected by this ghastly tragedy.

‘Katrina’ is one of the most devastating natural
catastrophes of all time. The material damage alone could
be up to US$ 100 billion. And yet despite the huge economic
damage to the US, stock markets were relatively unaffected
by ‘Katrina’. The Dow Jones, the FTSE and the DAX have all
moved higher since August 29. But the insurance company
stocks came under pressure as the damage-claim estimates
soared higher and higher. Perhaps this selloff presents a
buying opportunity.

Insurers only suffer short-term

The most interesting thing about the insurers is the after-
effect of satisfying a large claim. Paying claims certainly
hurts the insurers over the short-run, but large disasters
can actually BENEFIT many insurance companies over the long
run. That’s because they will raise their premiums in
response to their loss histories. For example, if a
hurricane, an earthquake or a flood forces the insurer to
pay large claims, the companies will hike their premiums
forever after. After September 11, insurance premiums rose
by up to 90 percent. Europe also saw significant increased
insurance premiums.

So we are inclined to take advantage of the current
weakness among insurance stocks by picking up one
particular stock that’s been on our radar screen for quite
some time. Our next Profit Hunter recommendation, which our
subscribers will receive in the next few days, is a company
we believe will benefit increasingly from higher insurance
premiums. We think you’ll like what we have discovered for
you.

Meanwhile, the only stock in our portfolio that really made
the news last week was our most recent pick – our play on
uranium.

Mystery buying sees Cameco surge 13% in a week

Over the past week, CAMECO CORPORATION (CCO.TSX) has gone
up by a cracking 13%. And nobody – not even the company –
seems to know exactly why the shares have suddenly started
moving up. But the reasons for holding a uranium company
are getting stronger by the day.

Mark Skousen of Investment U Newsletter consider these few
points about energy sources:

"Oil and gas are non-renewable resources and subject to
supply interruptions – as we’ve just witnessed with the
Katrina catastrophe. Coal is dirty, hard to extract – and
dangerous to miners. Fuel cells don’t seem to be getting
anywhere near finding the right technology.

So what are we left with to power the world? Clearly,
nuclear power is one of the viable solutions. It is better
and cheaper than coal, water, wind and fuel cells. And
investors are already taking note of this. Japan is
stockpiling five years’ worth of uranium. China is building
two 1000-megawatt plants every year for the next 20 years.
And Pakistan and India are going nuclear at a rapid pace.

Soaring global demand for uranium is causing its price to
rise, EVEN THOUGH PRODUCTION IS INCREASING. The consequence
is that far more uranium is consumed than can be produced!
While worldwide uranium production rose from 93 million
pounds in 2003 to 104 million pounds in 2004, this was
matched by a global consumption of 180 million pounds! Not
surprisingly, therefore, the uranium price has tripled
since the end of 2002 – from $10 a pound to $30."

So how high could the uranium price fly in the years ahead,
as oil starts heading seriously towards the once-
unimaginable $100-abarrel mark? $50 a pound is not out of
the question.

Just put it like this, by owning Cameco, you own the
world’s biggest uranium producer – and we expect the share
price to continue climbing as investors around the world
spot the immense opportunity it presents.

And the Markets…