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Dear Readers,

Another week, another tariff related blow-up between China and the US.

Yup, that old chestnut.

Though frankly, if you’ve been following, it shouldn’t come as much of a surprise that China has once again tightened its rules in relation to the export of rare earth exports.

China first placed restrictions on their export in April.

So, what was the tipping point? Well, considering it was announced mere hours after the Gaza peace treaty was signed (in other words – no coincidence) I’m not surprised it was a shock to most.

But if you go back to September 30th, you’d find the straw that broke the camel’s back.
Source – Financial Times

Oh cool, so just a small story about the Dutch government taking over a privately owned semiconductor company. Formerly known as NXP Semiconductors, a state-backed Chinese investment consortium acquired Nexperia for $2.75bn in 2017.

The following year, the consortium began selling its shares to Chinese technology group Wingtech. From the above article.

The Dutch government has taken control of Chinese-owned semiconductor maker Nexperia, warning of risks to Europe’s economic security after alleging “serious governance shortcomings” at the company.

In a statement on Sunday the Dutch Ministry of Economic Affairs said it acted because of “a threat to the continuity and safeguarding on Dutch and European soil of crucial technological knowledge and capabilities.”

Do you get the sense that things around the world are slowly starting to slip out of control?

Again though, this happened in the Netherlands, what does a trade dispute between the US and China have to do with them? Washington last year added Wingtech to its “entity list,” accusing the company of helping China acquire sensitive semiconductor manufacturing technology. The designation requires US companies to seek a licence to sell to them. Those licence requests are often denied.

New rules that extend the sales restrictions to subsidiaries of companies on the entity list, meaning that Nexperia would be subject to restrictions because of its Wingtech ownership.

And around and around we go.

However, this seems the best bet about why China suddenly ramped up the rare earth export restrictions. The Dutch government only made this news known publicly on October 12th. China understood the message and acted.

This is the near-term future for all of us, and seemingly unending back and forth between the two superpowers and their desire to control some of the most important commodities on earth. Preferably at the others expense.

Perfectly in time for the upcoming peak in the 55–60-year peak of the Kondratieff commodity cycle or long-wave. Doesn’t mean you have to sit on the sidelines watching though, there are opportunities here for those nimble enough to seize them.

Let’s review now what’s at stake here for the US and globally. How does the US intend to overcome Chinese export restrictions and what opportunities does this new strategy provide for savvy investors?

Let’s find out.
The noose tightens.

I can appreciate the fact that not everyone reading this would be across the rare earth market nor have too much interest in tariffs and trade wars. Perhaps I can explain what’s at stake then.

Western companies have warned that the renewed US-China dispute over rare earth materials will lead to “broken” supply chains and higher prices for chips, cars, and weapons as industry executives plead for de-escalation between the two trading powers.

Last week, Beijing tightened those rules further, requiring foreign companies to get approval to export magnets that contain even trace amounts of China-sourced rare-earth materials and restricting the sharing of magnet-making expertise with foreigners.

In response, US President Donald Trump threatened to impose an additional 100 per cent tariff on imports from China ahead of a meeting with Chinese President Xi Jinping this month.

China dominates the production of rare earths, processing about 90 per cent of the world’s supply chain and more than 90 per cent of magnet manufacturing. I find it ironic when you consider there are genuine fears that both these superpowers will be at war with each other.

And China decides now is the time to deny the US the exact material their high-tech weaponry requires to work properly.

The biggest problem of course is just how interconnected the world is today. And so, the decisions the US and China are making against each other are dramatically affecting everyone else.

Jimmy Goodrich, an expert on semiconductor supply chains at the University of California Institute on Global Conflict and Cooperation, said: “If enforced, and the US doesn’t respond strongly, Beijing could have complete control over the entire advanced semiconductor supply chain. Even US AI chips made in a US fab sent to a US AI lab would need Beijing’s permission.”

Goodrich said no chip company with business in China would risk non-compliance with the new rule. If you ask me, just how China can possibly enforce this inside the mainland United States remains a huge “if.”

However, this does give China one very large bargaining chip in the lead up to this month’s now critical meeting between presidents Trump and Xi.

There is little doubt that since April this year these bans have hurt the US and its dream for AI dominance and domestic production of EV vehicles, weapons, and industrial base.

That doesn’t mean the US has been sitting idly on their hands. On the contrary, their response may produce a sneaky opportunity for you.

When the going gets tough…
No, sir, the Americans aren’t sitting on their hands here, they have decided to act. Look at the following headline from a recent Financial Times article.
Source – Financial Times

The Trump administration has said it will take a 10 per cent stake in a Canadian mining company and allow a controversial infrastructure project in Alaska as it aims to break US dependency on China for critical resources. 

And in a similar vein, here is another article, also from the Financial Times.
Source – Financial Times
The Trump administration has held talks with the developer of a giant lithium mine in Nevada that may lead to it taking a stake in the business, sending the company’s shares more than 90 per cent higher.

These articles suggests that the US government is going on an almighty spending spree to secure the rights to the critical minerals and rare earths it needs to successfully ward off future Chinese export bans.

But it’s not just the US administration.

One of the world’s biggest banks, US giant J.P Morgan recently announced its support for this. See the article below.
Source – Financial Times

From the above article (the bold text is my own):

JPMorgan Chase will take stakes in companies of up to a total of $10bn to help fund growth in areas it deems critical to US security, the latest sign of Donald Trump’s “America First” policies being adopted by big business.

The investment plans are part of a broader 10-year initiative that JPMorgan announced on Monday through which it is aiming to facilitate and finance $1.5tn in so-called critical industries.

This is no longer just a trend. There is now a veritable tsunami of money rushing into this sector. Those who think they may have already missed the boat when it comes to rare earth miners need to look again. I have already seen for myself the effect this has had on certain Australian stocks.
Source – Australian Resource and Investments

Lynas Rare Earths and Noveon Magnetics have announced a partnership to establish a domestic US supply chain for rare earth magnets. The US also has made an alternate market for miners and producers which provides a fixed floor in terms of costs that ensures China can’t decide to flood the market in the future to dramatically drive prices lower.

Rare earths, and commodities more generally, really do reflect the drivers that push the economy to the final peak of the current real estate cycle. These sectors – and a few others, such as generative AI – attracts all the speculative money and drives prices of exposed stocks to unheard-of levels.

Look at the numbers being bandied around here – can you truly afford to miss out?

And if you do decide to invest, just how long should you expose your capital when you know the peak for two of the most economically important cycles, the real estate and Kondratieff super commodity cycle, are coming to an end?

A tough decision: what to buy, when to do so, and how long to hold?

Fortunately, help is at hand. Become our latest Boom Bust Bulletin (BBB) member and learn the innate timing of the economy via studying the land market. A September edition of the BBB dived deep into the technical patterns stock investors need to learn to execute successful trades.

Plus, those same members benefit from learning how to time the economy and thus their own investments. A great example of the practical guidance members can receive. All for just $47USD a year – outrageous!

Here’s an example of a stock that might potentially be reflecting the developments I have outlined above.
Source – Optuma

The chart above is for Firefly Metals (ASX – FFM) and this company is exposed to titanium, vanadium, gold, and copper. This is an example that today, across the entire spectrum of stocks, anything exposed to this sector is now moving higher. Do you think China will never again pull the rare earth export ban in the future?

Do you think the US will stop attempting to invest in companies like $FFM above to solidify their own supply chain? Me neither.

The opportunity is here. Time is fast running out. Leverage what time is left to really boost your own investment returns.

Sign up now.
Best wishes,

Darren J Wilson
and your Property Sharemarket Economics Team

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This content is not personal or general advice. If you are in doubt as to how to apply or even should be applying the content in this document to your own personal situation, we recommend you seek professional financial advice. Feel free to forward this email to any other person whom you think should read it.