RE:Avanti - Please listen to your shareholdersEven...... The following is Rick Rules explanation and example of resource cyclicality and how prices respond to the low and high of the cycle. He Explains: (Substitute Moly or copper or any any commodity for uranian in his example...also....the last line is his signature statement regarding price performance in the commodities.............)
"… In any resource, when the industry's median production cost exceeds the commodity's selling price – in other words, when it costs companies more to produce that commodity than the commodity is worth on the market – that industry is in liquidation. This is the situation I just mentioned in uranium.
There are two potential outcomes at that point… either the price has to rise, or that commodity will no longer be for sale on the market. That is a strong sign that you're approaching or have arrived at the bottom of a cycle.
Conversely, when commodity producers as a whole enjoy 50% or better pre-tax margins and returns on capital employed exceed the S&P 500's returns on employed capital by 50% or more, you should be looking for the exits. The stage is set for a serious decline in the price on that commodity.
In other words, markets work. The cure for low prices is low prices, and the cure for high prices is high prices.