rare earthsabout what i term the Linear Supply Restriction the...

rare earths

about what i term the Linear Supply Restriction

the market place always makes it own level

where demand is balanced-to or outstrips supply that demand permeates into opportunity

how it does that is to circumvent obstacles via other mechanisms...
the marketplace is never static unlike linear attempts to control pricing and/or supply, so,
dynamic pricing actually impels participants into alternate actions when there is a bull
market driver as we have seen since the 1970's and with expanding populations,
without alternate methods, the demand is likely to keep an incline......
any linear attempt to control supply is met with a dynamic pouring of venture capital
into discoveries, R&D and supply chains

recently, there have been editorials about an oversupply of rare earth...
if that was true, the US itself would not want the push they have made, via the WTO, so,
I completely discount this narrative ...if it were true that there was an oversupply then
taking away a linear restriction of supply would create an obvious instant glut, considering
the current restriction we're thinking of is in the region of 88 to 95% of current global supply

can we be realistic about what is and what is not happening
...mostly, that to go from R&D of new methods to replace these metals are all in their infancy,
that demand for current technologies are more likely to be expanded now that that linear restriction
has been removed and that momentum to find decent mining companies and decent supply is
genuine (we know this from the number of miners chasing discoveries) technologies are, on balance,
likely to continue for rare earth and not, as is editorial du jour, likely to bring prices of technologies down....

afterall, if you use the logic of more source supply = lower prices, you can also use the logic of
more source supply = more investment 'in' technologies that use that source supply as the source supply itself is
assured as is such a vital part of a business model....
an expanding supply chain contributes just as much to technology expansion and often without affecting
the prices set by the market place for those goods
for instance, in some cases, services reliant on a technology expand at a greater rate, so, the services themselves
make up slack that discounting brings (see space travel....hello!) and we have a new positive feedback loop
if prices do sag then an equilibrium is fist found in services, products made for service industries expands
...all these things serve to bolster the industry, supplier and the supply chains involved unless the
demand side disappears....industry itself is just as prone to better-the-devil-you-know, for example,
a new technique that comes to market, to replace the spigot that only dribbles, has a bigger challenge to
itself when that spigot is turned on full.....you get the idea, that, the whole point of R&D to replace rare earths
has not even gotten a lookin and suddenly the US contingent have pushed to the WTO to make access mandatory
in favour of the market place itself

...all free pricing auctions find their own level demand/supply and
for new technologies reliant on methods that dont use rare earths
must now compete harder as their one real point of leverage has been
yanked away (no pun intended)

keep in mind that any technology is just an idea in motion...
any technology that no longer has a leverage, the LSR, working in it's favour and no longer benefits from
the idea(s) behind it, thus, bringing natural market forces into play, if
that idea is not already proven and available at-market
the market place reverts to the mean of supply, that is, the security of continuance of it's products....
there is a business chasm between a safe business practise, that is, based on the
continuance of secondary supply to customer
(goods/services created by the original supply, for us, rare earth) and
any new idea that might replace the current business model

.....you cannot have your cake and eat it too, when your idea's benefit and its competitive advantage, is based on
someone else losing and the market is re-set, to it's correct natural state, or, in other words, level playing field
and that happens before you get your ideas to market, then,
the market likes it's shortest-distance-between method of doing business, ask any CEO of a major component manufacture
unless the new technology can bring such huge monetary advantage the
CEO will stick with what they know best: let someone else be the test dummy

so, any logic that is used by editorials about rare earth's are not the same ones used by industry or
prospective investment....mostly the editorials are self-serving to themselves as much as i am self-serving in
promoting my own investments....i mean, the point of editorials is to sell a narrative to an eager audience that has
already made it's own demand of attention....this has little to do with actual business or expansion, rather has
more to do with the editorial filling the need of the emotive and thus attentive/reflective reader and once that
emotive period is exhausted both the reader and editor are onto other ideas with the editor benefitting and
the reader generally clueless after the event (Ted and 24 hour news, say no more!)....

more mines (read: supply) means more pressure to perform, more pressure to lift standards,
more pressure to increase wage costs, safety standards, quality of actual supply to industry:
there are always instances of abuse within an industry and we'll likely see plenty as the
LSR lifts and (editorially) we'll get an insight into who's been naughty when the lights were out and the market
place quickly measures the best place to source supply based on that too....again, this highlights
how the market place decides where to get supply as supply itself can marr a manufacturing company....

think on that for a moment as it's an important point

....supply reputation still remains high even in the world of technology, maybe, even more so given
our continuous attention to technology...where a tech company sources supply becomes a fillip for editorial bait (see above)
and thus companies that source from reputable bourses and miners becomes a marketing weapon of it's own....


if you do control 88% of what comes out of the spiggot and suddenly
you add wage lifting, safety assurance (insurances), regulation costs, delivery speed-increase costs and
the demand by downstream industry for other higher standards (editors, thankyou), then, you see,
these things serve to re-balance and not in a single direction....
these "new" costs were easily avoided before the LSR was quelched by the WTO and
they'll pressure small miners whom have two alternatives: hike prices or close down

correct market fluctuation only equates to balance of price, not a forecasting of ever-lower prices

if you set a control of 88% then that linear supply control is always going to be beaten by a dynamic
demand and if you think about all the flow-on effects then price will also move to rebalance
even if a momentary price shift occurs that's out of the ordinary as the "ordinary" market place of old is gone.

Thinking that removal of a price mechanism (of control) will permanently shift prices in one direction is
editorial thinking, not business thinking...what removing a linear restriction does is facilitate more of
what we're already doing...and keep in your thoughts (as i have to) that the US REMX ETF saw a strong high
that was supposed to be because of this linear restriction, well, look at the chart and you'll see within
it's first 12 months price release, the ETF headed below the 12 month M/A and has not looked like trending up since
.....again, the value of the linear restriction had not been an advantage for many holders of the ETF
yet it has been an advantage to some traders in the sell-to-open

....so, why would i buy a rare earth stock now when even that price "advantage" has been taken away?

1). it's BECAUSE that advantage, the LSR, has been taken away...
2). because the market place has been allowed to move to it's own balance
3). most editors tell you one way prices must go, yet, they are not traders or
industry CEO's but are forecasting vague round-aboutish thinking.
4). expansion is a natural phenomena of a general bullish phase we are seeing globally for technology
5). the 'body' that controlled 88% of source supply is now subject to pressure to
add to their operating costs even before going to market
and this = reflation or inflation, as we've seen in indsutries before
6). there is a strong push in Canada and the US, recently, to get rare earth mines off the ground
and these investors are sticking with their plans, they understand the market place, they know the numbers
7). the stock i hold is a long-only instrument, in a steady sovereign-friendly country with level-headed management

I have noted 88% controlling nature based on recent mine finds/output/location
and that 95% is great for editorial punch, yet, numerically historic

(I am long ASX:SPX stock and intend to hold for longer than 90 days)
J C-T (handle: joules MM1 www.asiaonthebid.com)