What Is "Rare Earth Elements"? Why Care?

Posted November 10, 2010

There has been quite a buzz about “Rare Earth Elements” (REE) recently. So what constitutes a Rare Earth Elements? There are approximately 17 REEs including Yttrium and Terbium. They are critical to modern day technology, industrial manufacturing, and green energy. What’s interesting is the fact that REEs are not rare at all, but that the extraction process and/or the cost to manufacturing them makes them hard to come by. Currently more than 90% of the production is controlled by China or by Chinese mining companies. The question now is how investors could take the advantage of this. The emerging of innovative ETFs continues as Van Eck Global recently filed with Securities and Exchange Commission for the Market Vectors Rare Earth ETF. This ETF, ticker REMX, was approved very recently and started trading on 10/27/2010. It is the first and only one of its kind to access 24 companies that specialize in mining and production of the “rare metals”.

In our Dynamic Allocation Growth Portfolio we currently have exposure to the precious metals mining industry through Market Vectors Junior Gold Miners, GDXJ, which focuses on small and mid sized companies. We also have a position in the basic material sector, the iShare Dow Jones US Basic Material, IYM, which gives us exposures to companies involve in the production of a wide variety of basic materials, including the agriculture business. We have not yet committed to the rare earth elements area yet, but if and when we do, this ETF (REMX) will most likely be the way we invest.