Sprott Physical Uranium Trust

And why I’m not buying it.

I was contemplating buying TSX:U.UN for some time already, but couldn’t force myself to buy a single share so far.
Since Kuppy and Doomberg (and many others) are constantly pushing it to the masses, I’ve decided to turn my gut feelings into real reasons and put them in writing.

1. Moral reason.
Sprott is trying to create/increase the scarcity of Uranium on the market (corner the market) by buying it and stacking it in their storage.
If Sprott‘s plan works and the price of Uranium goes up significantly, lots of people will be paying much more for their electricity or/and nuclear plants will have problems producing electricity.
People buying SPUT shares now are hoping to profit from higher Uranium prices in the future, causing misery and suffering to others.
While I don’t live in the world of pink ponies, I can’t put my money into something with this kind of intention.
Sprott Physical Uranium Trust

The picture is from Slavic folklore, but you can think of Scrooge McDuck

2. Financial reason.
Since I’ve learned about Sprott Physical Uranium Trust, I was wondering, if energy scarcity is our future, why should I buy SPUT instead of let’s say a regular O&G stock?
While SPUT produces nothing, O&G companies produce oil and gas (surprise! 😀 ) thus heating people’s homes and powering their cars.
While SPUT charges a 0.35% management fee, regular O&G companies pay dividends.
While SPUT price went up a lot since inception, the price of O&G companies went up a lot too.
Talking about the specific example, I’m holding shares of Vermilion Energy for quite some time, and here is a comparison chart of TSX:VET vs TSX:U.UN since inception:

Source: Barchart

3. Begin with the End in Mind.
Imagine, not so distant future, Uranium prices are going through the roof. I mean, that is the ultimate goal of Uranium “cheerleaders”, right?
Utilities can’t secure enough for their operations or maybe they can, but electricity price is crazy then.
People can’t pay for their electricity, government needs to do something about it.
Government needs someone to blame and something to ban, this is what governments usually do.
SPUT, hoarding Uranium, is a very good target to blame.
What about the ban? How about banning the purchase of Uranium for everyone except energy producers (power plants)?
Suddenly, SPUT can’t buy Uranium anymore, what will they do? Maybe sell? Where will the price of Uranium go in that case?
How many people will rush to sell their shares? Would I be able to sell mine on time?
If it doesn’t happen, and the price of Uranium will not rise dramatically, or maybe even drop in price, because of another major incident with some Nuclear power plant, then what is the point of holding it?
These, of course, are just my assumptions and the future might be completely different.

As always, there are lots of other little details here and there, but in general, these are 3 main reasons for my gut feelings, telling me to not buy shares of Sprott Physical Uranium Trust.

Btw, today is Cosmonautics Day! A celebration to commemorate the first man in space.

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