Show Me the Metal

Posted On Oct 26, 2012 By Dave Gonigam

October 26, 2012

  • Photographic evidence of the rare-earth breakthrough Byron King’s been expecting for nearly two years… plus, the “next big thing” on his radar
  • First read on third-quarter GDP (try to contain your excitement)… and a breakdown in the S&P
  • The “renminbi bloc”: China’s next step to the end of dollar supremacy
  • Comic relief from debt-ridden Argentina: Repo man goes after a warship
  • “Revenue enhancements” on autopilot: The $11.6 million traffic camera
  • Reader’s encounter with the long arm — er, heavy hand — of the law

  It’s a big deal! said the email from Byron King. The italics and exclamation points are in his original.

“It’s! A! Very! Big! Deal!” he added.


The project emanating from a location in Russia he only half-jokingly called “Area 51” has borne fruit.

 Or more accurately, it’s borne rare earths. Below is a picture of a round ingot of terbium. For comparison’s sake, it shown with a Canadian Gold Maple Leaf. The terbium is worth more — about $2,400.

And there’s more: In the picture below is a vial. Inside the vial is another rare earth, dysprosium. It’s more valuable than three Gold Maple Leafs.

The significance: “It’s the only such metal manufactured entirely outside of China since the days of the Cold War.”

By now you know the critical background: China produces 95% of all the world’s rare earths — essential for everything from mobile phones to wind turbines to ballistic missiles. For the last several years, there’s been a mad scramble among a bunch of companies outside China to bring new production online.

For a brief, glorious moment that started in the fall of 2010, you could throw a dart at any name in the rare-earth space and make money. It was over by early 2011. Byron got his Energy & Scarcity Investor readers out of industry darling Molycorp (MCP) at $53… after a 178% run-up in a little over four months.

This morning, MCP is a shade below $11.

“Savvy investors are finished,” Byron explained last year, “listening to stories about how some Canadian junior named XYZ Co., with four employees in Vancouver, has an ore body on the far side of nowhere.

“Now, people want to hear about the metallurgy, at a graduate-level of chemistry, and not just arm waving. Investors want feasibility studies and engineering diagrams from serious laboratories. ‘Show me the test tubes!'”

  Now the ante’s been upped: It’s “Show me the metal!”

This entire time Byron had an eye on a “dark horse” candidate in the race to produce metal outside China. He knew he was onto something when he visited Russia’s “Area 51” last year.

The name isn’t hyperbole: In the early years of the Cold War, the secrecy surrounding the plant was the stuff of Soviet legend. When it opened in 1951, at the direct order of the dictator Joseph Stalin, it was known as “Secret Laboratory No. 10.”

The secrecy is no longer operative (or not as much), but the immense skill set is: For over 60 years, the lab has performed cutting-edge research and engineering of nuclear materials and related substances — including rare earths.

A team of 37 specialists was assigned to process ore from an old mine on the far reaches of the old Soviet empire. “They identified over 80 distinct minerals,” Byron says, “of which 25 hosted RE elements.

“Holy smokes!” his email added, conveying his geologist’s astonishment at the feat.

Thus the disk of terbium and the vial of dysprosium. “It’s the FIRST successful isolation of heavy RE metals by a non-Chinese company likely since the days of the Cold War.”

Show me the metal, indeed. The dark horse just crossed the finish line: Great things lie ahead for the Canadian-traded company that did the wheeling and dealing with the Russians — and a few other nationalities — to get the job done.

Meanwhile, Byron has his eye on a different metals breakthrough — one he says makes rare earths look like “small beans.”

This breakthrough, he says, “will set off a technology resource boom so immense, I believe it will change our nation on an evolutionary scale.”

“Communication and transportation… energy and electronics… medicine, construction and defense: Products — and profits — from just about every industry imaginable will experience a quantum leap forward. This isn’t about just one breakthrough… just one stock opportunity… or just one natural resource play — it’s much, MUCH bigger than that.”

It’s so big that Byron has convened a conference call of five leading experts to walk you through the possibilities. It will be available for your review starting this Sunday.

Access is invitation-only. You can secure your spot by following this link.

100  The major U.S. stock indexes opened the day flat. The Dow is a hair above 13,100, the S&P at 1,413.

Earlier it was shaping up to be an ugly session; futures were down big after Apple delivered an earnings “miss” and Amazon recorded a loss for the first time since 2003.
But all that turned around when the Commerce Department turned in its first guess at third-quarter GDP — up an annualized 2.0%. Anemic, yes… but better than the “expert consensus” of 1.8%.
Never mind that most of the increase was driven by federal government spending — up 3.7% — and defense spending in particular — up 13%. Spending by private business? Flat.
After another test of the $1,700 level overnight, gold has recovered to $1,717.

  With this week’s market action, the S&P 500’s steady move up since June 4 is now over.

“Much was made over the 25th anniversary of the 1987 crash last Friday,” writes one of our resident technicians, Jonas Elmerraji. “And we can see how the financial media would want to bring up the panic, since fearful thinking has been so commoditized these days.

“However, there really aren’t many similarities between then and now — but that’s another story entirely. There’s no reason to panic this time around. At least not yet.”

Jonas and Greg Guenthner are eyeing several levels where the S&P might find support — including the round number of 1,400 (a significant level back in August) and 1,376 (the 200-day moving average). Stay tuned…

  China has quietly taken a huge step toward supplanting the dollar as the world’s reserve currency.

A report from the Peterson Institute for International Economics concludes a “renminbi bloc” has formed in East Asia. That is, since the Panic of 2008, seven out of 10 major economies in East Asia have tracked the renminbi closer than the dollar. That includes South Korea, Indonesia, Malaysia, Singapore and Thailand.

The lone holdouts are Hong Kong, Vietnam and Mongolia.

Indeed the report finds the currency’s influence extending beyond China’s backyard. Turns out the renminbi is now the dominant reference currency in India, South Africa, and Chile.

“China has long vowed to raise its currency’s global sway, along with the rise of its economy, which became the world’s second-biggest last year,” crows a China Daily story summarizing the report.

“There’s been no question whatsoever,” mused Chuck Butler in this space last June, “that the Chinese have gone well down the road to removing the dollar as the reserve currency of the world.

“It will take time, lots of time, but the Chinese have awaken from their slumber, and everything they’ve put their minds to, they’ve accomplished. They wanted to be the biggest exporter, and now they are. They wanted to pass Japan as the second-largest economy in the world, and they did.”

Chuck worked alongside Addison to tease out the implications in The Little Book of the Shrinking Dollar. We still have a few copies on hand, yours for the taking.

  The state’s favorite automatons…

It’s nothing new for the state to spend most of their time and resources on innovating new ways to pick its citizens’ pockets… but since hatching one lucrative scheme, our latest addition to the War on You file, it looks as if they can afford to sit back and relax those frontal lobes for a bit.

You might be all too familiar with the traffic cameras that have been flourishing in our city streets the last few years. According to the Insurance Institute for Highway Safety, in the United States “red light cameras are used in approximately 541 communities and speed cameras are used in more than 119 jurisdictions.”

Just to give you an idea of just how lucrative these little robotic highway robbers are: A single speed camera on New York Avenue in Washington, D.C., pumped out 116,734 tickets and collected $11.6 million in revenue in less than two years.

In fact, during fiscal 2012, D.C. made $85 million and didn’t have to lift a finger, except when it came time to hire someone to cash all those checks, of course.

And next door, in our own neck of the woods, The Baltimore Sun reports, “Maryland speed cameras generated $77 million in revenue for the fiscal year that ended June 30. That’s twice as much as the state collected in alcohol taxes.”

We’re still digging up a national figure … which we’d imagine is no paltry sum.

In any event, government hunger for “new taxes and weird fees” is now on autopilot. Consider yourself on notice.

  As long as I am president, they can rob us of our frigate, but no vulture fund can take our liberty, our sovereignty, our dignity,” Argentine President Cristina Kirchner defiantly announced… just after her foreign minister tattled to the U.N. on Ghana for taking their ship.

This is only the kickoff to what we think might be an ongoing theme. As insolvent countries the world over scramble to recover outstanding debts by any means possible, the methods of doing so may get wackier and wackier.

So if you’re an investment fund that foolishly lent money to a government for a warship, you cajole another country to seize it on your behalf. We could use a little planetary entertainment these days… let the “debt games” begin, we say.

“The three-masted tall ship,” RawStory reports, “which has a crew of 300, has been held near Accra since a Ghanaian court backed an order sought by a Cayman Islands investment fund, which says it is owed more than $370 million by the Argentine government.”

When the repo man shows up for a warship…“Ghana is smashing a law that guarantees the operation of military navigation,” Argentine foreign minister Hector Timerman protested to the U.N.

But… the U.N. didn’t get as juiced up as he’d hoped, “I explained to the foreign minister,” U.N. ambassador Gert Rosenthal said, “and he knows that the Security Council is concerned with the maintenance of global peace and security and that this case is not exactly threatening world peace.”

Verdict: Be big boys and girls and figure it out yourselves. Now go to your rooms.

  “About six months ago,” writes a reader with a lengthy, but compelling War on You tale, “I was riding my bicycle about seven miles to a MBA orientation meeting.

“I came to a red light in a three-way intersection, where a half-mile offramp was one way coming from my right. I stopped, waited until the only possible cross-traffic light (offramp) was yellow and zero traffic was visible past the offramp (again, over a half-mile) and proceeded a second or two before my green light.

“Within seconds, from almost immediately behind me, came a police siren and lights (early afternoon, sunny day) and a motorcycle cop was directing me to pull over.

“My immediate thought was just get out of the way for the policeman to go past me. But within seconds, I realized he meant me.

“I got to a ‘safe’ spot and pulled to the curb and then up on the sidewalk.

“The officer got off the motorcycle and with his hand on his gun and came up to me asking me for my driver’s license. I informed him I didn’t have a D.L. and asked him why he was pulling me over.

“‘You ran a red light,’ was his reply. He asked for any state ID.

“I asked him if the ID he was asking for could be used against me. He said, ‘I will use it to cite you, and you will pay a fine.’

“Mind you, most often, I carry my U.S. passport, but I was thinking I may have left it at home. I said I had only a business card. He said that wasn’t a state ID. Immediately, he proceeded in ‘touching’ his phone and called for a police car backup. As I was beginning to dig through my very full backpack, he stopped me.

“Again, I asked him if the ID he was asking for could be used against me. This question really set him off.
In a few minutes, the police car showed up and two more officers got out and quickly approached us, one of them taking my backpack and demanding my cellphone off my belt. He ordered me to turn around and proceeded to handcuff me (painfully tight, I might add), then forced me to sit on the curb.

“When I told the officer that the handcuffs hurt and were cutting off the circulation to my hands, he told me they were as tight as they needed to be.

“Another officer began to search my backpack, pulling out all things personal and private, and then a very small utility multitool that included pliers, screwdrivers, a small knife, etc., I use for quick fixes on my bike and such. He put that aside, treating it like a weapon.

“As it turned out, he found my passport that was buried in a bunch of mail and paperwork. Evidently, that brought up more suspicion and they accused me of not cooperating with officers doing their duty.

“I told them I wasn’t sure I had it with me and if I was allowed to search my backpack as he did, I would have found it.

“‘Are you going to cooperate?’ was the next question the motorcycle cop asked. He had his citation book out and said he was going to cite me for running a red light and not fully cooperating/producing the proper ID upon request (I can’t remember exactly as it was written). I sat on the curb in almost total disbelief and rather angry.

“After the motorcycle cop was finished, one of the other officers began to ‘assist’ me in getting to my feet, unlocking the handcuffs and suggested I cooperate more ‘next’ time. I was handed the citation and told I was allowed to go.

“The citation-writing officer said, ‘Have a good day,’ as he turned around and went to his motorcycle.
Forty-five minutes later, I was allowed to go on my way, but I had already missed my appointment. I was also so upset at that point. All I wanted to do was ride off the anger and adrenalin.

“The cop was one closer to meeting his quota for the day! At least the motorists were safer for me being temporarily ‘apprehended’ and properly fined…

“You are doing a good job by reporting government’s abuse of ordinary citizens. This is the best content I’ve ever read in your newsletter.”

The 5: Clearly, we’ve struck a nerve. As Addison says, every one of us is “the target of a deliberate, vicious and calculated assault.”

It’s why he put so much time and effort into his latest research project this year: You can see his “Liberty Manifesto” right here.


Dave Gonigam
The 5 Min. Forecast

P.S. Final reminder: Access to Byron King’s conference call on the lucrative opportunities in “technology metals” is available starting this Sunday. To get in on this exclusive event, click here.

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