October 27, 2010
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Just eight days after surging 11%, Molycorp (NYSE: MCP ) was on the move again today, up close to 12% on additional speculation that curbs on Chinese exports of rare earth metals would help its business.
So What: Molycorp has more than tripled year-to-date, and now there's an ETF just for rare earth stocks. The latter prompted Joe Weisenthal at Business Insider to call rare earth a bubble. Even so, investor interest in the ETF could propel shares of Molycorp in the short term.
Now What: Weisenthal's right; rare earth mania has created a bubble. Maybe it's not a bond-sized bubble, but with Molycorp and emerging peers likely to need millions in fresh capital to build out their businesses, it's at least a gum-sized bubble. If you must buy shares, open a small position and gird yourself for the possibility of a 100% loss.
Interested in more info on Molycorp? Add it to your watchlist here by clicking here.