Finance2007   Finance for personal business

According to a recent “Retirement Trends” survey by Fidelity Investments, 96 percent of Americans saving for retirement don’t know the current contribution limit for an individual retirement account, with some guessing as low as $1,000. The reality is that for tax year 2005, IRA contribution limits increase to $4,000 — up from $3,000 in 2004.

When it comes to knowing the facts about retirement, misperceptions can lead to missed opportunities. Today’s workers will face rising health care costs when they retire, as well as declining pension benefits and a higher cost of living. That’s why it’s important to save as much as possible, and as early as possible, in tax-advantaged accounts like IRAs.

Knowing the facts can help dispel common myths that may keep some investors from making the smart move of saving in an IRA.

* Myth No. 1: My 401(k) savings should be enough.

Nearly one-third of Americans in their prime savings years who have not yet opened an IRA account think their 401(k) savings will be sufficient for retirement, according to the Retirement Trends survey. However, Fidelity estimates that retirees will need approximately 80 percent to 100 percent of their pre-retirement income to live comfortably. Using an IRA now to supplement workplace programs can help investors make sure their savings will continue to grow and last throughout retirement.

* Myth No. 2: I have to come up with thousands of dollars all at once to open an IRA.

For the one in four non-IRA owners surveyed who say they can’t afford the initial investment required to open an IRA, opportunities to save even more for retirement may be daunting. But getting started without an initial lump sum is as easy as setting up automatic monthly payments through a Fidelity SimpleStart IRA.

* Myth No. 3: IRAs are for older people with lots of money to save.

The truth is that younger investors could benefit the most by starting to save early because they have time on their side. Nearly two-thirds of young adults have started to save for retirement before age 30, according to the Retirement Trends survey. That’s good news; starting to save as early as possible is one of the best ways to prepare for the future.

Sadly, we dont live in a world where one can realistically be expected to save their money. It just doesnt happen anymore! A few decades ago that could have happened but not any more. It used to be that your income was far greater than your expenses and you could put quite a bit away. But now our income is often outstripped by our expenses! Our income has not kept up with rising prices and rising taxes.

So were forced to make due with our current income. Sure we can try to increase that income over time, through pay raises or moonlighting or getting a better job, but the reality for many of us is that we have to figure out a different way. One of those ways is to intelligently use loans to help you with your finances.

Perhaps it means getting a payday loan to bridge us to the next paycheck. Or maybe other times it means using our credit cards to consolidate our monthly expenditures and paying it back once at the end of the month. And still other times it means getting a loan to help us buy the things we need.

There are two types of loans. An unsecured loan is money that a lending agency gives to you based on their assessment of your risk. Your credit rating is one of the ways they make that decision. And since they lose their money if you default on your payment, the risk is higher so the interest rate is higher.

However, if you need to borrow more money or you want a loan at a more attractive interest rate, or you want some flexibility with the repayment terms, then borrowing against your assets is the way to go.

Some examples of assets, or equity, that you just might be able to use include your house your car, your stock certificates, or some other kind of valuable possession. Borrowing against these assets assures the lending institute that they can recoup their losses if you fail to make your payments since there is an alternate form of payment.

Lending agencies like this because it minimizes the risk they take. And youll love it because it increases the amount of money you can potentially borrow, it lowers the interest rate youll have to pay, and it lengthens the amount of time youre expected to pay the loan back! What could be better than that?

Some excellent uses for secured loans include such things as debt consolidation or house improvement loans. In both cases, youll find that a secured loan gives you a good amount of money at an attractive rate so you can reduce your debt payments or increase the value of your house affordably!

We live in a world that expects us to borrow now and then. Dont you think that a secured loan is the way to go the next time you need to borrow?

Even though Americans are feeling some relief at the gas pump from last fall’s record prices, their checkbooks are still likely to take a hit this winter as natural gas and heating oil prices continue to soar.

In fact, the Energy Department predicts that those using natural gas to heat their homes can expect to see their monthly bills rise 48 percent from last year. If it’s an especially cold winter, the cost will be even greater.

This can be a difficult thing for consumers to contemplate – especially when most homeowners already average 4,100 per year for energy.

While it is not always easy to understand the geopolitics and economics of energy, rising prices always indicate that there is too much demand, and for years there has not been enough domestic supply. Consequently, America has had to rely on foreign sources for its natural gas, due in large part to the fact that prices are so much cheaper.

In Saudi Arabia, for instance, the price of natural gas is 75 cents per million Btu, and in Kuwait, it is 1.25 per million Btu. Compare this with the U.S. price of almost 13 per million Btu and it is easy to see why America opts to import its gas.

But companies like Mammoth Resource Partners Inc., a Kentucky-based oil and gas exploration company, are beginning to put a dent in skyrocketing natural gas prices by tapping into the gas-rich Appalachian Basin.

“The Appalachian Basin, in my opinion, is the largest opportunity in North America to reduce America’s dependence on foreign gas,” said Mammoth President Dr. Roger L. Cory, a frequent guest speaker on the topic of “peak oil.”

Much of the rise in heating oil and natural gas prices can be attributed to last fall’s hurricanes, which disabled refineries and terminals in the Gulf Coast. Until hurricane Katrina, many did not understand that gas from overseas is liquefied and shipped to the Gulf Coast for offloading and re-gasifying, whereas domestic supply, such as that explored by Mammoth Resource Partners, can safely pass through inland pipelines directly to domestic markets for use in America’s homes.

Canadian Research Analyst Forecasts Severe Uranium Supply Crunch For Next 10 Years

Uranium to Head North of 500/pound?

Rising Uranium Price May Consolidate Exploration Sector, Driving Intense Takeover Activity

Legendary stock picker James Dines recently compared uranium stocks to the high-flying net stocks of the halcyon days of the Internet expansion era. While the much-hyped and fleeting Y2K crisis never materialized, the U.S. energy crisis for highly sought uranium has been developing for more than twenty years. Still early in the current bullish uranium cycle, investors are scoring triple-digit returns on what some are calling a renaissance in nuclear energy.

Nearly 2 billion people across the planet have no electricity. The World Nuclear Association (WNA) believes nuclear energy could reduce the fossil fuel burden of generating the new demand for electricity. The WNA forecasts a 40-percent jump in worldwide electricity demand over the next five years. The worlds most populated countries, China and India, are in the process of creating the largest energy-consuming class in the history of earth. Both plan aggressive nuclear energy expansion programs. Dozens of lesser developed countries, from Turkey and Indonesia to Vietnam and Venezuela, have announced their eagerness to pursue a civilian nuclear policy to benefit power needs for their burgeoning middle classes.

In a nutshell, global utilities are going to need uranium to help feed the increasing number of nuclear power plants proposed over the next twenty years. Uranium is now in shorter available supply for civilian energy use than ever before. Over the next decade, as demand continues to outstrip supply, analysts are predicting utilities will snap up known uranium inventories sending spot uranium prices to record highs. During this launch phase, investors have taken notice, chasing up the stock prices of many uranium producers and exploration companies.

Uranium Prices May Reach Unbelievable Highs

Toronto-based Sprott Asset Management research analyst, Kevin Bambrough, told STOCKINTERVIEW.COM, There is a good possibility of a supply crunch that could drive uranium prices to unbelievable highs. Various analysts predict price targets for spot uranium, in the near-term, above 40. Canadian Augen Capital Corps managing director David Mason speculated, 100 (US) a pound is within reason within the next year or two. Sydney-based Resource Capital Research is half as generous, forecasting 50/pound by 2007, explaining another 40 percent jump in spot uranium prices will be driven by end users in the power generation market which is urgently trying to secure supply into the future.

How high could spot uranium prices run? Kevin Bambrough made a hypothetical case for uranium trading north of 500. Its a ridiculous price, Bambrough confided. Its hard to speculate if this is even going to happen. While he admits that price would not be sustainable, Bambrough makes an interesting point about the concerns facing utility companies, charged with providing us with our electricity. In his futuristic scenario, Bambrough speculated, Theres a chance that some facilities will have to choose shutting down their nuclear plants (if they can not obtain uranium to fuel the facility). On that basis, Bambrough calculated the operating costs of a nuclear facility versus the operating cost of a competing fuel. In his conjectural model, Bambrough used natural gas priced at 5.

Bambrough explained, Assuming that the coal-fired plants operating capacity, before you would basically shut down a nuclear facility, you would be comparing it to what you would have to bring on, which would be natural gas. If there is a shortage there (with natural gas), what price would it take before I am willing to shut down my nuclear facility? If you were to shut off the nuclear capacity, and fire up more gas to replace it, it would send gas prices through the stratosphere. And that doesnt factor in the cost of shutting down a nuclear facility, itself an exorbitant process. The analyst said he reached his calculation of north of 500/pound for spot uranium, under an extraordinary emergency supply crunch, by answering this question: How much would people pay before they shut it (a nuclear plant) down if there is a shortage of uranium?

Historical cycles support spot prices higher than 40/pound, a level above where uranium may hover for several years. The current cycle of rising uranium prices closely parallels the leap which occurred between February 1975 and April 1976. Spot uranium prices soared from 16 to 40/pound during that 15-month period. During the 1970s cycle, uranium steadily rose from 6.75/pound in November 1973, peaking in July 1978 at 43.40/pound. Since late last year, spot uranium prices soared with the same momentum seen thirty years ago. If history repeats itself, spot uranium prices should trade above 40/pound this year, and stay above that level until the end of this decade or perhaps for a longer stretch.

The key yardstick in determining how much higher uranium prices will climb is by keeping track of the number of new nuclear facilities being constructed or proposed. A few years ago, when we first started investing in uranium, Bambrough explained. There were very few plants being proposed. The numbers have doubled for proposed facilities. And for every one you hear about, theres a lot more being planned. That puts uranium miners into an enviable position. Bambrough added that utilities have to secure their fuel supply for up to six years out, once they decide to build a nuclear facility. The fact is the supply is just not there, warned Bambrough.

In short, U.S. utilities may soon be scrambling for uranium inventory to fuel their nuclear reactors, or face the ridiculous price(s) research analyst Kevin Bambrough warned about. An excerpt from The International Atomic Energy Agencys booklet, Analysis of Uranium Supply to 2050, bears out Bambroughs thesis, As we look to the future, presently known resources fall short of demand. The deficit between newly mined uranium and reactor demand has averaged about 40 million pounds annually over the past decade, cannibalizing existing inventories. As we begin 2006, the supply/demand imbalance has reached a critical phase.

Where Will the Uranium Come From?

In his September 2004 presentation to the World Nuclear Association, Thomas L. Neff of MITs Center for International Studies, stated, The net result of nearly twenty years of inventory liquidation is that existing higher-cost suppliers were driven out of business, new mines were discovered from starting, and exploration was neglected. Neff warned in his conclusion, The problem is the one to two decades that will be needed to expand (production) capacity and build the flow of nuclear fuel that meet the expanding requirements horizon.

The 1970s price spike in uranium was limited because existing uranium mines were quickly ramped up to supply utilities with fuel. Neff noted, This is not the case today and a longer period of high prices could prevail. In Neffs analysis, uranium prices would have risen well above 100/pound in the mid 1970s, using constant 2004 US. On that basis, Bambroughs hypothetical forecast above 500/pound may be not too far out of reach. Neff summarized why the problem has reached a critical stage, We are currently facing the consequences of what may be the largest sustained divergence between expectations and reality in the 60 year history of uranium.

For people who want to bring on new (nuclear) facilities and contract for it, its very difficult to do that, said Bambrough. You have to go to mines that are not even there yet in order to try and contract supply. In this light, it appears the greatest opportunity will appear with the junior uranium companies, which obtained known uranium resources during the last down cycle, and whose operators abandoned such properties because of low prices.

How Can Investors Profit?

Bambrough recalled compiling a worldwide list, in 2003, of a mere 25 companies involving in uranium mining and exploration. I cut the list down to around ten that looked to be promising, said Bambrough. Id say that today there are still less than 30 uranium companies that present a good reward-to-risk ratio considering the massive move the sector has made. Depending upon whose list you believe, the number of companies now mining or exploring for uranium stretches to about 200. The majority trade on either the Canadian or Australian stock exchanges.

What sort of companies has Sprott Asset Management invested in? Bambrough responded, We have preferred to invest in companies that have acquired properties that were once owned and were actively being worked by majors at the end of the 70s bull market. He added, The cost of uranium exploration is so large there is great value built into many of these properties. Specifically, millions of dollars worth of drilling work and data have been collected on some properties. In some cases, mining shafts have been built that only require rehabilitation at a fraction of the cost of starting fresh with a green fields project.

Bambrough shared a few of his favorite uranium stocks. Of the companies that we own, we own a larger percentage of Strathmore Minerals (TSX: STM; Other OTC: STHJF) than almost any other company, said Bambrough. We think theyve got some great properties. They were guys who got into the game very early, and who have skills as they do with David Miller (president and chief operating officer of Strathmore Minerals) in understanding the uranium business. And they have a very large amount of databases, as does Energy Metals Corporation, which is extremely valuable in understanding the properties. Both Strathmore Minerals and Energy Metals have properties in New Mexico and Wyoming. I think the future for New Mexico is quite good, Bambrough noted, as well as ISLs in Texas and Wyoming. Another Sprott Asset Management favorite is Tournigan Gold Corp (TSX: TVC). You look at a past producing region, Bambrough pointed out. They went and got old mines. Tournigan recently drilled the historic Jahodna uranium resource in Slovakia, once drilled by the Russians.

Where the Action Is

The more adventurous price action may be found in the ongoing consolidation within the uranium sector. Bambrough observed, There appear to be a few aggressive junior uranium companies that seem to be moving forward and working to build a major company. In November, one uranium exploration company, Energy Metals Corporation (TSX: EMC) began takeover procedures to acquire two other uranium juniors, Quincy (TSX: QUI) and Standard Uranium (TSX: URN). Standard Uranium has since traded nearly 70 percent higher. There are people who have neighboring properties, and it makes sense for them to come together, advised Bambrough.

In late December, another of Bambroughs favorite uranium companies, Strathmore Minerals (TSX: STM; Other OTC: STHJF), announced it had engaged National Bank Financial as its exclusive financial adviser to review transaction alternatives to maximize shareholder value from its uranium assets. Questioned about this news release, CEO Dev Randhawa told StockInterview.com, National Bank has the best technical team and will help us reach the right decision to maximize the benefit to our shareholders. In a 2005 research report, the Cohen Independent Research Group set a price target of C4.29/share for Strathmore Minerals, based upon the current spot uranium price.

I think the market could really use more large cap uranium companies, since large fund managers currently can really only look to Cameco (NYSE: CCJ) and Energy Resources of Australia (ASX: ERA) to get exposure to the uranium market, said Bambrough. There are several junior companies that should come together to form large uranium companies to leverage their extremely valuable skilled personnel, lower the exorbitant costs of permitting and exploration, and achieving other economies of scale. How soon would it be before a larger company, combining some of these promising juniors, reaches listed status on the New York exchange? I would guess that a NYSE listing may not come until 2007 or 2008, responded Bambrough.

Bambrough remains enthusiastic about the uranium sector and closed his remarks, saying, I expect that we will see a great out performance by quality uranium companies as they move their projects forward. We still see some incredible values and are still actively investing in the space. We are still in the early days of the uranium bull market.

We are able to base LTV on the true value of a property, as opposed to purchase price; frequently our savvy investors are able to buy under value and thus

this makes a significant difference.

We are able to base LTV on the projected value of a property when rehab or construction is involved.
We will allow a seller carry back in second position when a buyer is able to negotiate this type of arrangement to his/her advantage. (We loan up to 75% LTV,

but allow CLTV to exceed 125% under certain circumstances.) We will allow a borrower to pledge other real estate assets as additional collateral to make up

for a shortfall in down payment money or earned equity. Besides these options, there is one additional and very effective tool for bridging the gap when the

LTV ratio is running too high: My father has often said that the difference between being able to do a loan and not being able to do a loan is generally our

fee. And there was a time when that was too often the case.

Well, we at California Private Money Loan have made a conscious policy decision to not let that happen ever again. Based on the premise that a dollar

tomorrow is better than no dollars today, we have decided to carry some or all of our fee (as a small second) any time that this is necessary to make an

otherwise good loan fit our LTV criteria.

This is no small thing, as our fee generally runs 4% of the gross loan amount, and our originating brokers (when involved in a transaction) charge anywhere

from 1-5% for their part in the loan process; so with combined fees ranging from 5-10% (I never claimed that private money was cheap; I said that it is fast

and flexible), and assuming broker cooperation, we are able to stretch 75% LTV to as high as 85% LTV. That is a big stretch and frequently it has made the

difference between doing a loan and frankly the opposite of that.