Rare earth more valuable than gold?

I recently took a trip to China where I was able to explore and get a better firsthand understanding of what is going on in that country, and not just all the hype one reads about.

You can read about my trip and my conclusions right here.

I also think you’ll find it interesting that the Shanghai index that we discussed in my earlier blog posting is proving to be accurate.

In today’s blog posting we are going to be discussing a resource that China has more of than anywhere else on the planet, rare earth.

So what is rare earth?

According to Wikipedia which is an excellent source of information rare earth is as follows. This is taken directly from Wikipedia:

As defined by IUPAC, rare earth elements or rare earth metals are a collection of seventeen chemical elements in the periodic table, specifically the fifteen lanthanides plus scandium and yttrium.[2] Scandium and yttrium are considered rare earth elements since they tend to occur in the same ore deposits as the lanthanides and exhibit similar chemical properties.

Despite their name, rare earth elements (with the exception of the radioactive promethium) are relatively plentiful in the Earth’s crust, with cerium being the 25th most abundant element at 68 parts per million (similar to copper). However, because of their geochemical properties rare earth elements are typically dispersed and not often found in concentrated and economically exploitable forms known as rare earth minerals.[3] It was the very scarcity of these minerals (previously called “earths”) that led to the term “rare earth”. The first such mineral discovered was gadolinite, a compound of cerium, yttrium, iron, silicon and other elements. This mineral was extracted from a mine in the village of Ytterby, Sweden; many of the rare earth elements bear names derived from this location.

If you’d like to learn more about rare earth, I recommend going straight to Wikipedia.

Today I want to talk about a rare earth stock that you can trade on the NYSE called MolyCorp, symbol MCP. Here’s what MolyCorp has to say about rare earth elements (the following information was taken from the MolyCorp website):

While Rare Earth materials and permanent magnets are utilized in a wide range of products too diverse to list exhaustively (See Appendix A for a partial list), they are critical and enabling for many emerging Green Energy technologies, High Tech applications and Defense Systems, such as Hybrid Cars, Plug-in Hybrid Electric Vehicles (PHEVs), the latest generation of efficient wind power turbines, energy efficient compact florescent lighting, computer disk drives, cell phones, missile guidance systems, “ Smart Bombs,” and many other applications. We refer to these as “ Rare Earth Dependent Technologies.” Without Rare Earth magnets and materials, these technologies would not be commercially viable.
it would appear that with the recovery underway the demand for rare earth elements should remain strong particularly since China has cut back dramatically on exports of this precious commodity that many people think is more valuable than gold.

Now that you have some background into rare earth, let’s take a look at the MolyCorp stock.

We’ll be using MarketClub’s “Trade Triangles” and analyzing this market to see whether it is a buy after its recent pullback. Our “Trade Triangles” have done very well in this market as you will see on the chart below.

I also want to say that I own a position in this stock as I like the overall chart formation and the upside potential which I think will carry it to new highs. If you want to be conservative, you may wish to wait for our a green weekly “Trade Triangles” to kick in on the upside.

As always there are risks involved in any investment and this one is no different. Personally, I am placing my stops below $40 a share. I would use any two-day pullback as an opportunity to purchase this stock.

This blog posting is for educational purposes only and should not be construed as a recommendation to buy this stock.

All the best,

Adam Hewison
President of INO.com
Co-founder of MarketClub