Much has been written about the future earnings potential of rare earth stocks with a lot of passion from both sides. A careful review shows that the projections from both sides are highly speculative without a solid foundation.
There are several misconceptions in the market: First, for the most part the name "rare earth elements" is a misnomer (most of these elements exist in abundance); second, there is a misconception that these elements are available only in China. Nothing could be further from the truth. Due to cheap labor in China, Western-world mines simply could not compete with the cost and went out of business.
China knows that its leverage is only short lived as it will not be long before the world again starts producing rare earth elements in places other than China. Significant efforts seem to be underway in USA, Australia, Vietnam, Canada, Greenland, South Africa, Brazil, Estonia, and Russia.
To make money on rare earth stocks, due attention must be given to the following facts:
There are several misconceptions in the market: First, for the most part the name "rare earth elements" is a misnomer (most of these elements exist in abundance); second, there is a misconception that these elements are available only in China. Nothing could be further from the truth. Due to cheap labor in China, Western-world mines simply could not compete with the cost and went out of business.
China knows that its leverage is only short lived as it will not be long before the world again starts producing rare earth elements in places other than China. Significant efforts seem to be underway in USA, Australia, Vietnam, Canada, Greenland, South Africa, Brazil, Estonia, and Russia.
To make money on rare earth stocks, due attention must be given to the following facts:
- These stocks have small floats.
- Short interest in these stocks is high.
- These are very high beta socks.
- These stocks are driven by a constant flow of news and rumors.
