Unstoppable Bull Market

Two rare commodities that quadrupled in 2010 double again in 2011… three reasons they’re just getting started.

This is the fifth consecutive month that commodities have outperformed the stock market — their longest streak since 1997.

The key reason commodities outperformed stocks and bonds is the weak dollar.

In the midst of the longest commodity boom since 1997 (see below), the hottest commodities right now are, alas, without a corresponding ETF.

Nor can sophisticated investors trade it in the futures market. But there is a way you can still make money in what appears to be an aggressive uptrend:

The blue line represents the price of neodymium — used in everything from portable headphones to hybrid cars. The red is samarium — an essential metal for precision-guided missiles.

Both are rare earth elements — under the tidy production grip of our friends in China. You’ll recall China slashed rare earth export quotas 35% at the start of this year… on top of a 40% cut six months earlier. World prices for many of these minerals have doubled in 2011… on top of a fourfold increase last year.

New developments make it look as if this trend is with us to stay.

As we’ve been detailing, one after another, attempts to break the Chinese stranglehold are smacking head-on into obstacle

  • Lynas, an Australian firm, and a former Byron King favorite, attempted to open the world’s largest rare earth refinery in Malaysia but ran headlong into stubborn regulators. An operating permit is being withheld as protesters raise alarms about the rare earth ore’s radioactive contamination — which is naturally occurring, and low level. Approval has been delayed six months
  • Toyota’s running into its own regulatory roadblocks trying to partner up with companies to mine and refine rare earths in Vietnam. The deal was announced last fall, but now production won’t get under way till 2013
  • In Japan, Dowa Holding’s attempts to recycle rare earths from old electronics is proving more difficult than first thought. Its factory is up and running, recycling 19 metals — but no rare earths.

The Chinese have even upped the ante again too. As of April 1, new taxes on rare earth miners were imposed. What used to cost producer 50 cents per kilogram of refined product now costs $8.

So the scramble to bring rare earths into production outside China moves into higher gear. Industry darling Molycorp — which is gearing up to reopen a rare earth mine in California — recently made investors do a double take when it bought a 90% stake in a rare earths producer in Estonia.

“Does this mean,” wonders our Byron King, “that Molycorp is hedging its bets? Things might not go as well as planned with the California schedule? It’s possible.”

Readers of Byron’s premium advisory Energy & Scarcity Investor have already made hay with Molycorp, collecting 178% in a scant four months. They collected 109% in two months on another of the sector’s “usual suspects”… and they have open gains of 93% and 147% on other rare earth developers.

But for the biggest potential gains, Byron remains focused the big question — who will be the first outside China to go into production?

Source: Addison Wiggin – The 5 Min. Forecast

Leave a Reply

Your email address will not be published. Required fields are marked *

Time limit is exhausted. Please reload the CAPTCHA.