Here are the latest items and commentary on current economics news, market trends, stocks, investing opportunities, and the precious metals markets. We also cover hedges, derivatives, and obscura. And it bears mention that most of these items are from the “tangibles heavy” contrarian perspective of JWR. (SurvivalBlog’s Founder and Senior Editor.) Today’s focus is on investing in Rare Earths. (See the Tangibles section, near the end of this column.)
Precious Metals:
CPM Group: Precious Metals Outlook for 2017
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Top Four Platinum Stocks for 2017
Stocks:
Thursday’s headline: Dow drops 200 points, led by Cisco. By the time of the closing bell: The DJIA was down 1.2%, the S&P 500 dropped 1.5%, and the NASDAQ Composite Index fell 1.9%. Meanwhile, across the Atlantic, the Euro STOXX 50 declined 0.3%. Oh, and gold was up nearly 1%, to $1,288.50.
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Economy and Finance:
Ted Kavadas at Seeking Alpha: The Probability Of A U.S. Recession – August 2017
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Japanese economy posts longest expansion in more than a decade
Troubling Trends:
Tyler Durden: 2016 Was Just Revised Down To The Worst Year For US Productivity Since 1982
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Stock Market Warning Siren is Blaring
Tangibles Investing (Rare Earths):
One seldom-mentioned tangible investment is rare earths. These are also often called rare earth elements (REEs) or rare earth metals. (Although a few of them are not metallic in the common sense of the word.) And most of these are not actually “rare” in the Earth’s crust. But they are indeed only rarely found in sufficiently high concentrations to justify mining and ore separation. Much of the production is in the form of Rare Earth Oxides (REOs.) The rare earths include:
- Lanthanum (often categorized as a transition metal)
- Cerium
- Praseodymium
- Neodymium
- Promethium (the most scarce of the REEs, and the only one that is radioactive)
- Samarium
- Europium
- Gadolinium
- Terbium
- Dysprosium
- Holmium
- Erbium
- Thulium
- Ytterbium
- Lutetium
- Scandium
- Yttrium
Most of the rare earths in the preceding list are used extensively in the aerospace and defense industries.
Another Boom Ahead?
The prices of rare earths tend to swing dramatically. Therefore, investing in them is not for the faint of heart. China is the main producer of rare earths ores–around 95% in recent year. There are just a few REE and REO producers in North America. The biggest of them is Neo Materials (aka Molycorp.) It has been reported that China now retains most of their mine production of rare earths for domestic use and they are nationalizing their mines. So with a near monopoly, the prices of many REEs and REOs are expected to rise up out of their current doldrums, in the 2020s, or sooner.
As an aside, in the precious metals world, Neodymium magnets are often used to spot fake gold and silver bars.
Rare earths saw a brief well-publicized boom back around 2010 and 2011. But since then, individual investor interest has waned. Institutional investors and some commodities wonks are still fairly heavily involved in speculative investing in REEs and REOs.
I can foresee waves of interest in rare earths over the next few decades, in tandem with global conflicts. The most likely scenario for price volatility would be if China got involved in a regional conflict. (I’m predicting somewhere in Africa.) China would then be sanctioned by the international community. That could tremendously disrupt the world trade in rare earths. There could be some huge price spikes.
To Have and To Hold?
There are few rare earths suitable to actually hold in your personal possession. Some of the rare earths such as Terbium–and several of their oxides and chlorides–are in fact toxic to handle. But they are all apropos for futures contract plays, ETF buys, and mining stock purchases. Well, perhaps some of them might be suitable for warehouse storage if someone wanted a true tangible holding, but very few individual investors do so. There is a vendor called Rare World Metals Mint that sells Erbium and Dysprosium ingots, but with minting costs I wonder if that is a cost-effective way to invest.
As for ETFs, I’ve only heard of one with a reliable track record. It is the VanEck Vectors Rare Earth/Strategic Metals ETF.
In conclusion, I recommend rare earths investing only for someone who is wealthy and who already has a very well-rounded tangibles portfolio.
Here are a few articles on the subject that are worth reading:
- Rare Earth Metals And Opportunity
- Lessons From the Failed Rare Earth Investment Hype
- Three Top Rare Earth Stocks in 2017
- Modern life’s devices under China’s grip?
- How to Buy Rare Earth Bullion
- China is about to tighten its grip on rare earth minerals
And here is a quite useful book:
The Political Economy of Rare Earth Elements: Rising Powers and Technological Change
Provisos:
SurvivalBlog and its Editors are not paid investment counselors or advisers. So please see our Provisos page for our detailed disclaimers.
News Tips:
Please send your economics and investing news tips to JWR. (Either via e-mail of via our Contact form.) These are often especially relevant, because they come from folks who particularly watch individual markets. And due to their diligence and focus, we benefit from fresh “on target” investing news. We often “get the scoop” on economic and investing news that is probably ignored (or reported late) by mainstream American news outlets. Thanks!
Getting out of the stock market now in fear of a major decline could be self-defeating. Many people are invested because they have to be, not because they like it. Reaching their financial goals is extremely important. Missing out on a major stock market runup could be disastrous. How can you know when to get out? What if the bottom drops out while you’re invested. Firstly, major market declines usually take anywhere from 1-3 years. The y go down in a series of shark fins, bouncing back up after each decline. The biggest decline is usually not the first, sometimes not even the second. If you use trailing stop loss orders, you can avoid falling into the abyss. Make a spreadsheet or use a website like tradestops.com (I am not connected with them in any way). It’s entirely possible that we could have a 10-20% correction along the way. That would be painful, but not important. That’s normal market action. We’re not yet in a bubble, no matter what the commentators say. There’s too much money still on the sidelines, people are still scared of the market, and there’s no real mania for stocks. If there are bubbles around, they’re in bonds and cryptocurrencies. In fact, if you want to see the danger coming, watch the bond markets more than the stock market — that’s where the trouble will start.
With all the bubbliscious chaos in our world today, I’m amazed that I can still buy ASEs & silver maples for ~$20/copy, delivered.
Surely I’m not the only one?……
I like investing money in things I can understand, and that includes being pushed to learn about new markets. Rare earth metals are a difficult market to make sense of as the influencing factors include location of deposits, political activity and difficulty understanding future demand in highly specialized products. You are right it’s not for the faint of heart. I prefer to stick with silver, gold and platinum but looking at some of the price histories on REMs it’s clear to see that’s is a lot of volatility (which equals opportunity). Thanks for exposing it.
When you consider investing in an ETF, please make sure to look at how much money is in it and the daily volume of trading. A thinly traded ETF (not many shares trading, even on a good day) will fall more rapidly in a crisis and perhaps become impossible to sell at any reasonable price. I suggest sticking with the more liquid larger ETF’s, regardless of what area they invest in.