How One Report on Rare Earths Proved Remarkably Prescient

The year was 2008…

Economically, the world was still wallowing in the depths of a frighteningly real recession. For many, the frighteningly false recovery that would follow was as yet unimaginable. In many ways, for many of us, it still is.

Over in the political sphere, a young man promising “change” was beginning to drum up some popular support in the presidential elections. For many, the possibility of change in Washington seemed unimaginable. In many ways, for many of us, it still is.

Perhaps more importantly, 2008 was also the year when the stunning Marion Cotillard delivered her Oscar-winning portrayal of legendary chanteuse, Edith Piaf, in the biopic La Vie en Rose, a feat which would make her the first French performer since 1960 to claim that particular accolade.

Curiously, Marion’s was the only one of these three performances to be recognized by the Academy. Not even the Dow’s subsequent 4,400-point rally, nor the President’s earnest lip service to his election promises, earned a glance from the judges. Harsh! As far as acting goes, Obama and the Dow have turned in some of the best performances of all time.

Let’s see…what else?

Oh yes, back in 2008 – three years ago this very month, in fact – a long forgotten, fringy little contrarian newsletter published a column titled “Meet the Lanthanides.” It too met with no fanfare from the Academy. Neither was it elected to an Oval Office and decorated with a Nobel Peace Prize. (And why would it? It had never brokered a single peace deal in its entire existence? Of course, it didn’t start any wars…so there is that…)

Nevertheless, this under-the-radar column did portend an epic rally around a little-known, somewhat dusty section of the periodic table.

“So what are these ‘rare earths’ and why do the Chinese care so much about them?” wrote the intrepid Byron King in his “way-early” lanthanide column. “Rare earths are some of the most valuable, critical metals on the planet. Demand for these metals is soaring, and supply is not.

“In formal scientific nomenclature,” explained Byron, “the 15 rare earth elements of the Periodic Table are called the lanthanides. None of these elements are famous like gold or sliver. None gets shipped in giant ore freighters, like iron, aluminum or copper. You sure don’t learn much about these 15 elements in high-school chemistry class, unless maybe it’s the school that feeds lots of kids into MIT or Caltech.

“In fact, the only people who really study these elements are master’s- and Ph.D.-level chemists and solid-state physicists. Oh, and national leaders in places like China. But without these elements, much of the modern economy would just plain shut down.

“These elements are critical to the modern economy,” Byron continued, “and that is not hyperbole. We are addicted to rare earths as much as we are addicted to oil, except most people don’t know about the rare earth addiction.

“The rare earths play a critical role in petrochemicals, environmental protection, ‘clean’ technology, electronics, automotive applications, optics, telecommunications, computing and defense. Really, without these 15 elements, you could say goodbye to much of modernity. There would be no more television screens and computer hard drives, fiber-optic cables, digital cameras and most medical imaging devices.”

Concluded Byron, in his column published long before the mainstream financial gurus knew their yttriums from their scandiums:

“I’ve already ferreted out one very compelling idea for the subscribers of my Energy & Scarcity Investor service. But I’m still on the hunt for others…and you should be too.”

Byron went on to deliver a handful of stellar plays to his Energy & Scarcity Investor readers. And, needless to say, with rare earth shipments out of China having increased by an average of around $10,000 per tonne per month over the past year, Byron’s readers are sitting rather pretty right now.

Joel Bowman
for The Daily Reckoning