"David...I would love your advice about when to sell (I'm actually more confident about when to buy vs when to sell).

"Typical example would be CCJ ...in a matter of months I have made 60 %. But the move appears parabolic and CCJ is well extended from the 200 MA (I know this company well...know the uranium story well).

"If it were not for tax considerations I would sell in a heart beat and be thrilled with my profits...but taxes will be 40%.

"QUESTION: should taxes be considered in making these decisions? Or should you run your investments like any other business and max your profits without tax issues clouding your decisions?"

David Fuller's view Congratulations on your successful investment choice and thanks for an email of general interest to many subscribers.

In an ideal world, capital gains tax (CGT) would not be a major issue, whatever the investor's holding period. Unfortunately, it does raise its ugly head in a number of countries.

Some of you may be sufficiently age enhanced to remember the Australian nickel miner, Poseidon - probably the biggest mining bubble of all time. When I moved to the UK on Boxing Day 1969, to take up my new research position, every Brit in the City was talking about their CGT problem (I think the rate was 87%, or thereabouts, during Harold Wilson's Labour government), if they sold within a year of purchase. Presumably, many an Aussie investor had similar concerns. Meanwhile, the share had built the mother of all Type-3 tops (the big ranging formations as taught at The Chart Seminar). The story ended badly as Poseidon fell like a stone and went into receivership.

I think a CGT of 40%, as mentioned in the email above, is a problem for investors. It is also a regressive (revenue negative) tax for the government which imposes it.

On timing, I think most of us are more confident about when to buy versus when to sell, mainly because the purchase criteria are somewhat easier to identify. For instance, we know when valuations are historically cheap and when was a market panic sufficient to make front page headlines not a good time to buy?

Arguably, the reverse should also apply as we can recognise expensive valuations and market euphoria. However there are differences. Market euphoria is seldom as concentrated as market panic, which is why markets usually fall faster in bear trends than they rise in bull markets. Consequently it often takes longer for irrational enthusiasm to run its course.

There is also "the vision thing", as George Walker Bush called it in a different context. For instance, was it easier to perceive that Henry Ford's mass production automobiles would make most buggy whip manufacturers redundant, than to understand the full scope of competing information technologies? I suspect so. But what about competing non fossil fuel energy technologies? And what about Cameco, mentioned in the email above?

Regarding Cameco, I hold it in my personal long-term equity portfolio, as subscribers probably know, although I bought the Canadian listed CCO rather than the US listed CCJ.

I maintain that the 2007 high for uranium was just the dress rehearsal. Nothing was going on then, other than some speculation. When crude is established above $100, I would expect to see uranium climb steadily up through the previous high, possibly within the next 2 to 3 years. I think every viable country on the planet will want a significant nuclear power capability within 20 years.

Technically, CCJ (monthly & weekly) does look temporarily overstretched after almost doubling, albeit from a depressed level in July. The MA is more useful as a trend mean when we have a price trend which has persisted for at least a year and preferably longer. In TCS terminology, I would describe the CCJ base as Type-2 (extreme reaction against the previous trend, as seen in 2Q 2009), followed by extensive right-hand extension. Alternatively, we could describe it as a small base with a very large first step above that base. Whatever one calls it, I think the chart shows plenty of additional upside scope, once a consolidation of recent gains has occurred.

If you sold CCJ today, I think you would have a reasonable chance of buying it back somewhat lower, although possibly not sufficiently lower to reopen the same sized position after setting aside your 40% CGT. The share was hit hard by the mine flood beneath Cigar Lake, not to mention the global stock market crash, so I do not think recent action represents more than temporary overheating. With world-class uranium reserves, I maintain that Cameco is a buy on setbacks and a great long-term hold.


Uranium Report - My thanks to a subscriber for this informative item which is posted in the Subscriber's Area.