Thursday, December 30, 2010

Every Year it is Something; This Year it's Rare Earths

Usually during holiday trading there is some nonsense sector that gets bid to the stratosphere by the daytrading community only to come crashing down to earth a few months later.  It could be biotechnology stocks with no revenue, it could be Chinese solar stocks, it could be dry bulk shippers, it could be dot coms.  You name it, they'll find something to move to the stratosphere on a news story or "theme" that sounds great in principle but will eventually end in tears.  This year's flavor are rare earth metal stocks.  Many of these don't even have a mine open but have "prospects".... others are related to rare earths like you are related to Kevin Bacon... perhaps 4 degrees rather than 6.  My favorite is Qiao Xing Universal Resources (XING).... the name looked familiar but the ticker is one that stands out.  I looked at this name perhaps 2 years ago when it was a ..... telecom related company.  Now, I see in that short span of time they have reinvented themselves as a mining company.... somewhere in China a few guys have to be laughing at how easy it all is.  But all that matters is money and not reality - so for those of you who caught yesterday's 80% move in China Shen Zhou Mining (SHZ) I raise some gadolinium to you.

Molycorp (MCP) and an Australian company named Lynas  (LYSCF) are the only 2 that really have any near term prospects (by near term I mean they will actually be opening mines by end of 2011 or first half 2012) and actually deal with rare earths... and even the rare earths they deal with apparently are the 'less rare' ones.  But no need for facts, it is holiday trading and the dot coms of 2010 are here.  (I know, I know there is a "real theme" behind these companies just as there was a real theme behind Chinese solar, and internet taking over the world, and the huge increase in global trade and Iomega)

As for the market, one wonders why it is open.  1/4th the normal volume, and an index that crawls up or down 1-3 S&P points a day.  Just open the rare earth metal stocks and let everyone else take the week off.

No position

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