Oh for the days when investing was about understanding stocks, balance sheets, catalysts and business models.
Along came the credit crunch and to make sense of the stock market you needed to be able to parse the old and new economics of the economies that wrap the markets you wished to invest and trade in.
So now its even worse, now we have to decipher the politics of the governments of the economies that wrap around the stock markets.
Whether it’s the madness of Brexit, the comedy politicians and governments of Europe or the US/China trade war, it seems there is no going back to a time when stock picking is enough.
The Trump war on Trade has as yet been hand waved away by the markets that perhaps have been reassured by years of boom and the recent acquiescence of the Federal Reserve about its tightening that even if the US/China trade war is here to stay, then things will be OK.
They will not be OK. That at least is my call. I also see the ‘trade war’ as great electioneering, at least not a re-election strategy worth giving away without a compensation big win for the administration.
An 18 month to 2 year US/China trade was is not going to be pretty.
The idea is that China has had a one way relationship on trade and that ending that will simply hurt China and help the USA. The US trade deficit has been draining the US for decades and it is clear that it couldn’t go on at half a trillion dollars forever, so rebalancing trade is not a bad thing either. However the process is not going to be a walk in the park for the US nor for any other part of the global economy.
Rebalancing trade is with China is not going to be easy nor is China going to sign up to it without a ‘fight,’ at least not without an economic and diplomatic fight.
One of its tool is ‘Rare Earth,’ a group of metals, usually produced as oxide compounds, that get turned into the exotic micro widgets that the ‘Giz’ into gizmos. China produces most of these magic materials. Happily ‘Rare Earth minerals’ are not so ‘rare’ but the creation of them is expensive because it is messy. China is not famous for caring to much about making an industrial mess so it has fallen to them to be the major producer. They have a bit of a lock on ‘rare earth’ at the moment and wielded it as a economic weapon against the Japanese in 2010 , much to the shock and awe of the commodity and equity markets that sent prices spinning moonward.
That moment passed and ‘rare earths’ fell back to earth.
Yet here we will go again, if China has, needs or wants to up the ante. China no longer represents nearly 100% of production but even so if it was to cut these supplies it would certain cause great consternation and a big spike in Rare Earth prices.
You could buy a Rare Earth stock like Lynas but that has already doubled. What however is still to go into orbit is the Rare Earth ETFcalled: VanEck Vectors Rare Earth/Strategic Metals ETF.
The ticker is NYSE:REMX.
What make this exciting to me and I have bought in recently is the chart:
That looks pretty good to me. Now 27% of the companies in the ETF are Chinese, but that still leaves 73% of the constituents with a chance to do great things for this ETF’s value.
ETFs are meant to make it easy to get exposure to a portfolio and this does the trick nicely.
So failing a sudden burst of sanity breaking out, this is a way to profit and or hedge the craziness.