Chris Reilly, managing editor, Casey Daily Dispatch: Nick, you recently said that the current US-China trade war is a sideshow… a distraction, more or less, from a much bigger story… Nick Giambruno, chief analyst, Crisis Investing: That’s right, Chris. People are getting tunnel vision on this trade war issue. They’re not stepping back and seeing the big picture. Right now, the mainstream media have people actually believing that if the US and China can come to an agreement, it will be back to business as usual. This conventional thinking is wrong. Even if they cobble together some trade agreement, this is far from the end of tensions between the US and China. Chris: How so? Nick Giambruno: This is all about China’s overall rise to power… and how the world (specifically the US) is going to deal with it. I don’t think that many Americans or westerners are aware that China used to be the No. 1 power in the world for many years in the past. China’s rise is a natural thing given its size, population, economy, and history. And it’s on pace to be the world’s dominant power once again. If you look at the trajectory of China’s growth, it’s on track to have an economy that’s not just equal to the US’… but double the US’ by 2030. Lee Kuan Yew, the former leader of Singapore, and someone who understands China’s role and history, says that it’s not possible to pretend that China is just another big player… China is the biggest player in the history of the world. Chris, I believe this is going to define our lives much like World War II defined that generation’s lives. It’s the big event for the people alive today. Chris: And it sounds like it’s happening quicker than most people realize… How do you see this all playing out? Nick Giambruno: Either the US is going to accept being No. 2. Or, it’s going to go into some sort of shooting war, which is what happens historically when an established power challenges a rising power. There was a study at Harvard about this dynamic (called “Thucydides’ Trap”) throughout all of human history. Out of 16 prominent examples, 12 of them (75%) resulted in a war. Unless the US and China can find a way to resolve this peacefully and amicably, war seems to be an almost inevitable outcome. No one knows how soon that will happen. But I would argue that this will come to a head sooner rather than later. If the US wants to knock China down a peg, it’s not going to wait until China’s too big and strong. This is just basic strategy. If you have an opponent that you want to attack, it’s to your advantage to do it as soon as possible. Now, this isn’t a good thing. It’s a terrible thing. But nonetheless, it’s the reality right now. And the US’ opportunity to act is very narrow. And in the meantime, there’s a serious investing angle. Chris: What’s that? Nick Giambruno: As tensions rise between China and the US, it’s a near-certainty that rare earth elements (REEs) will come into play. REEs are 17 elements mostly clumped together at the end of the periodic table. All of them are absolutely crucial to modern civilization. They’re used to make key components for advanced electronics like iPhones, electric cars, flat-screen TVs, computers, sophisticated military equipment, and more. The problem for the US is that China has a virtual monopoly on this industry. China produces around 90% of global REE supplies. It also produces nearly all of the world’s more valuable heavy rare earths. The US is totally dependent on China for rare earths. And if tensions rise, China may choose to play the “REE card” – meaning it’ll abruptly cut off REE supplies. | Recommended Link | Top CEO: “If the Internet was the appetizer, [this tech] is the main course.” Source: ITU Pictures It’s the most disruptive technology of the decade... Top tech CEOs expect it to create more wealth than the Internet. Robin Li, CEO of Baidu (one of the 10 largest internet companies in the world) says: “If the internet was the appetizer, then [this technology] is the main course.” Amazon’s Jeff Bezos says “We are now solving problems with [this tech] that were in the realm of science fiction...It is a golden age.” But here’s the most exciting part for you... Investors in this space already had the chance to see an incredible 737% gain in just 5 weeks. For a short time, you can get in with as little as $257. | | | -- | Chris: Interesting… Has it done that before? Nick Giambruno: It sure did… and it triggered one of the most spectacular booms in recent memory. Back in 2010, a Chinese fishing vessel was sailing in disputed waters when it ran into some Japanese coast guard patrol boats. This happened in waters claimed by both Japan and China. The Japanese arrested the Chinese captain. China demanded his release, but Japan refused. Things only got worse from there. In retaliation, China abruptly cut off all REE exports to Japan. It also cut global exports by 40%. The average price of REEs skyrocketed by over 20 times. And over the next couple of months, companies in the industry went up many times higher. This one incident caused a veritable mania in REE stocks that lasted for nearly a year. Chris: Got it… But what makes you think China will play this card again? Nick Giambruno: China’s already stated loud and clear that it won’t hesitate to do it again. One notable example was an article in the People’s Daily – the largest newspaper in China and official media of the Communist Party – which included a rarely used phrase in Chinese that translates into something like, “Don't say we didn't warn you.” This specific phrase carries historical significance. It was used before China and India fought a war, and also before war broke out between China and Vietnam. This is truly unprecedented. China has never openly threatened to restrict REE supplies to the US, much less with such harsh language. Plus, in May President Xi Jinping made an unusual visit to a state-supported complex in Ganzhou, which is known as the “Kingdom of Rare Earth” for its rich REE deposits. It’s not every day that China’s No. 1 shows up at a dirty mine in the middle of nowhere. The timing of the trip was no accident. It was meant to send a message to the US. Chris: Wow… If people didn’t think this could happen before, this definitely paints a clearer picture. Is there a way for readers to get exposure to REEs if they do take off? Nick Giambruno: The best way to get exposure to rising REE prices is to invest in REE-related companies. You can get an idea of what options are on the table by looking at the MVIS Global Rare Earth/Strategic Metals Index. This index includes the largest and most liquid companies involved in REEs. The companies on this index must generate at least 50% of their revenues from rare earth and strategic metals. Or they have to run mining projects that have the potential to generate at least 50% of their revenues from these sources. This index doesn’t include every single REE company in the world, but it does include most of them and gives us an idea of the options out there. It’s a great place to start your research. Chris: Great stuff. Thanks, Nick. Nick Giambruno: My pleasure. Chris’ note: For a more specific way to profit off REEs, Nick just recommended an explosive play… and it’s your ticket to riding US-China tensions higher. Right now, it’s still under his buy-up-to price… but it might not be for much longer. Crisis Investing subscribers can access this pick here. If you’re not a subscriber, you can access this recommendation by signing up today. Learn how – and see another massive opportunity on Nick’s radar – by watching this video. 
Reader Mailbag Today in the mailbag, praise is pouring in for Doug Casey’s essay on America’s “broken” health care system: I read Doug Casey's last article and I enjoyed every word as usual. I like his "franc parlor.” He is totally right on everything, and at the same time, I was laughing all the way. Who dares to speak that way? I live in Canada, but I am from France. I am 70, but I look way younger. Why? Because of good French ways of living: three meals, not very big; lots of vegetables and home cooking; no snacks (which are unheard of in my generation) and no soda; walking a lot; no smoking; drinking occasionally with meals, etc. Americans are huge! I see them at Niagara Falls lining up for all-you-can-eat breakfast restaurants. What breaks my heart is the children, who are already overweight... Regarding going overseas for treatments… three years ago, I needed teeth implants. I went to Armenia for it. I paid eight times less than in Canada. I wonder how much it would have cost me in the States. The result was top-of-the-line. My sister went to Serbia, and she was very happy with the results and the treatment. Thank you, Doug, for your honesty. – Anne-Marie Thank you for this excellent article. I appreciate your view on the current medical system. It does not compare to some other countries’ systems. Sad to say, I see too many people buying junk food and failing to walk more than a few hundred yards. This is sad! What would Jesus do? All through the Bible, you will find “man” was expected to work and assist those in need. Assistance is not portrayed as enabling, but rather as helping another who can then take care of himself. – Lynette If only others would tell it like it really is, Doug. I’m just a little old lady, but your ideas and opinions certainly resonate with me. I send on your wisdom, but I have only a few friends and relatives who will read anything in-depth. Please keep giving us your wisdom. And thanks! – Sandy As always, send any questions, comments, or concerns to feedback@caseyresearch.com.
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