The U.S. government will increase its domestic stockpiles in lithium, cobalt, and other rare earth metals. In addition, Reuters released news late Friday that the Biden administration will soon release results from a study required by executive order last year. According to the report, the Department of Defense will boost strategic reserves in the coming years as part of an agreement with the State Department.
The effort will reduce America’s reliance on China for these critical raw materials required for electric vehicles, commercial battery operations, and other alternative energy programs. The deal also allows agencies to draw on strategic stockpiles when necessary, according to the report.
Rare Earth Woes
The global economy is heavily reliant on China for rare earth metals. This creates a number of economic, security, and political challenges for all nations – especially the United States. The U.S. only has one operational rare earth metals mine – the Mountain Pass mine in California. However, the country lacks any infrastructure to process these minerals.
Meanwhile, lithium is more abundant in the country – but again the nation only has one active mine. This mine is owned by Albemarle Corporation (ALB) in Nevada. Although an order calls for additional exploration across the country, there remain a wealth of environmental challenges and lawsuits that stifle new mines.
The U.S. imported about 90% of its lithium between 2016 and 2019 from Argentina and Chile. These are South American nations that maintain positive economic and political relations with the U.S. The news will likely fuel a move in ALB stock next week. But it could also drive speculators into shares of Standard Lithium (SLI). It’s a processing company with its eye on accelerating lithium extraction from brine.
Momentum Goes Deeply Negative
Another month, another bout of high volatility on expiration week for options. Investors scrambled as tensions continued to accelerate around Russia and Ukraine. But that is not the only factor weighing on investors. The Federal Reserve continues to drive a wedge into optimism around the market’s 2022 performance as the thought of higher rates drives down tech stocks after two years of rampant speculation.
Tech stocks have no floor at the moment. Particularly the ultra-expensive, yet unprofitable disruption stocks that fill the portfolios of countless exchange-traded funds. Fundamentals don’t matter on the way up, but they do on the way down. There are many, many companies trading at outrageous multiples and maintain negative margins. If you haven’t sat down and read a book about value investing or lessons from the Dot Com bubble, now is the time.