"Rare earths are the hot investment opportunity," said some of the hucksters who call me, hoping in vain for an investment of the Laquedem fortune in the rare earth metals. [The rare earth metals are elements 58 to 71, also known as the lanthanide series, and include no household-name elements.] Because the rare earth metals have similar electron structures, they tend to be found in bunches and to be difficult to separate chemically. Until recently, they had no special uses, but recently some have been discovered, particularly for neodymium, which is used to make the batteries for hybrid cars, high-performance magnets for munitions, and computer displays.
The hucksters' pitch is that industry is demanding more rare earth metals, and China controls the world's supply (about 90%, currently) so the prices are bound to go up. I enjoyed the sales pitch, but didn't buy any.
China figured out what the commodities brokers were pitching: it is cutting its exports of rare earths by a third for 2011. (Here are stories from Financial Feed and Bloomberg on this.) This is its second export cut in three months; the first was in September when it cut the rest of 2010's quota by 72%. It's also on the lookout for people who might bootleg neodymium to Japan. I was surprised to learn that China credits its former leader, Deng Hsiao-P'ing (1904-1997), for seeing this opportunity in 1992. We're only 18 years behind.