Street Calls of the Week
The future is now for Strategic and critical commodities at the heart of the current global macro alignment
I am moved to write this article because what started out in 2023 as a theory in NFTRH, is now reality. Especially so, given the administration and party in political power.
MP Materials: First Mover
While there have been many instances of benefit to the US critical materials mining industry since Trump took the White House, Thursday (July 10) drove home the point as this news regarding MP Materials (NYSE:MP), also highlighted in 2023 as a key player in a future new reality, has in essence been semi-nationalized and prioritized by the US government as a closed-loop producer and processor of critical commodities, in this case, Rare Earth Elements.
On the announcement noted above, MP is up 44% on massive volume, as of this writing.
But this is not about just one day. While I have traded MP, mostly successfully since 2023, I did not hold the stock until yesterday (the day before this explosion). There is a lesson here. While I had advised in NFTRH last weekend (NFTRH 870) that I was looking to buy the pullback/flag, I almost did not buy it back. Luckily, I decided not to be miserly to try to catch every nickel, adding it just above support. The self-loathing I’d have had if I had not bought it back would have been substantial.
A Long-Term Setup
So the lesson is that in the current macro, it is best to identify the main themes and trends and be like Old Turkey (from Reminiscences Of A Stock Operator) and sit tight. You can trade yourself right out of a major opportunity. While MP has issued big-time news, there are other critical commodity producers and prospectors out there. They require patience, but in light of the MP news, maybe not as much patience as might have been expected.
It’s a global war and strategic asset-grab. First visualized in 2023, but with the current US political environment and its effects on the global political environment, the future is now. That future extends beyond REE into other critical (to varying degrees) commodities and resources like Copper, Uranium, Nickel, Platinum/Palladium (PGM) and even, potentially, Thorium.
If interested, it is time to be studying up on which companies are the most viable in each of those areas, whether they be in production, development, or exploration. As for PGM, I prefer to simply buy the metals (e.g. PALL, PPLT, SPPP). But the real levered gains will be in finding the right companies prospecting for and producing these materials. Proof? Well, simply look at MP above.
Final Note
The above is not the writing of a perma-tout, parroting “commodity super cycle” til the cows come home. I believe in managing the markets we have, not the markets we want. So while there are still caveats to the idea of a new multi-year commodity bull (hint: watch the Silver/Gold ratio * primarily, among other indications), you can believe that this is article is written by someone who simply wants to be right, no matter the macro backdrop.
As to that notion, I do believe that, subject to one more potential macro liquidity problem **, the future is now.
* Silver’s commodity-like aspects relative to gold can give the Silver/Gold ratio “early indication” status.
** While I think an interim liquidity crisis is more likely than not (acting as the trigger to future Fed inflationary policy), it is not a sure thing and a new critical commodity bull may well have already started.