00:04 Speaker A
Time now for our stock of the day, Rare Earth stocks. MP Materials, the largest rare earth producer in the Western hemisphere is down now after two straight days of gains and closing Monday at a fresh record high. The sector though, has been up since Friday on reports that China is adding new export restrictions on rare earth minerals. That’s stoking another round of trade tensions between the world’s two largest economies. China controls nearly 70% of global rare earth mining and close to 90% of processing capacity. That means any policy move from Beijing can quickly ripple across industries from electric vehicles and clean energy to even the chips that power AI. Still with me is my round table for for today, Lale Akoner, Michael O’Rourke, and Brooke DiPalma. And Brooke, I want to start with you here on the moves that we’re seeing in some of these rare earth stocks because a lot of these policy linked trades, they’re gaining a lot of of attention this week.
01:02 Brooke DiPalma
Yeah, we’ve seen some major moves when it comes to these uh rare earth stocks over the course of these past two days. We had critical metals jump more than 36% in the pre-market trading. US rare earth was up about 11%, MP materials up about 8%, as well as others like energy fuels and Neo Corp also rose about 14 to 15%. And this really is based upon this notion that uh Beijing’s new export controls on rare Earth are really designed to essentially force the US to drop these restrictions on selling these chips to China. And so it really is part of this larger conversation undergoing and the impact that these rare earth uh, you know, restrictions can have and investors really looking to gain when it comes to these uh specific stocks as well.
01:54 Speaker A
Now Lale, you’ve said China’s rare metals ban could dampen the AI revolution. Walk me through some of that concern and the broader implications there.
02:07 Lale Akoner
Sure, I think first of all, the market does um think that actually this could trigger a fear of of a supply squeeze if you will. Um the fact that they’re obviously very dominant in in these exports. And also the market is pricing in that the US will simply have to accelerate um its efforts to build an independent uh rare earth um supply chain. And these are very important uh materials obviously for magnets used in EVs, in defense, in AI, and and and in critical tech. And therefore you could see that the market is being um a little cautious in terms of how they price in its effect on on on the big tech. I also see um investor sentiment um being affected by this notion of capital rotating into the more real assets which have strategic utility and hence the capital flow that we are seeing at the moment. But yes, I think the volatility does tell us that the market is concerned about what it would mean in the short term for the for the AI trade.
03:22 Speaker A
And speaking of volatility, crypto has been on the move quite aggressively since these renewed US-China trade tensions. And this is coming as gold is at a record high. Michael, you’ve been writing about the so-called debasement trade, which is essentially investors losing confidence in central banks and shifting towards hard assets. Is crypto part of that story at all?
03:49 Michael O’Rourke
Well, it’s been part of that story and been part of that trade, but I actually think that trade is probably has a lot more hype to it than substance. So, like I said, there there are underlying notions there, whether it is, you know, expected Central Bank easing, um whether it is, you know, these geopolitical concerns, whether it’s fears about devaluation of the dollar or, you know, American exceptionalism being over. Um what we’ve seen is this euphoric run, especially in things like, you know, gold and silver, obviously both hit another set of record highs this morning. But you know, I think a lot of this, you know, goes back to the pandemic in 2020, when the Central Bank wound up doing a massive QE program, doubling its more than doubling its balance sheet. And where we’re we are today is we’re reversing that process. You just don’t see it on a daily basis. But that has, you know, that lack of confidence in governments. and again, that goes from everything from the elections we see to government shutdowns, the lack of the inability for governments to pass budgets, has fueled this trade thus far this summer.
05:06 Speaker A
Right. into this fall.
