The London REE Report: The Future

I will get round to answering readers questions about which companies are likely to turn into the next Apple or Microsoft, at least in the relative sense of the rare metals, earths and oxides sector, but first this update on what the immediate future, 5 years or so, promises to bring. But first a big qualification, despite 40 years market trading experience, I can’t see the future any better than the next person, I merely try to make reasoned informed guesses as to what I think comes next. But no one can foresee world altering events like the atrocity of 9/11, nor a natural calamity on the scale of the 2004 Boxing Day tsunami. Thankfully, that event though very epic and tragic wasn’t a world altering event, a sudden agricultural food failure could be. What follows next is about a world that isn’t knocked off course by events that change the path of world history.

Despite the very real chance in the west of a double dip recession next year, or probably more likely a rolling stagnation that doesn’t technically amount to a second recession in the west, it’s unlikely to alter much the rollout of the new technologies, technology that’s heavily dependent on rare metals, earths and oxides. The west’s central banks will turn back to quantitative easing, at least sufficient to keep the continuing rollout of new technology active, partly to stimulate their economies and partly to “save the planet from man-made global warming” even though I’m a sceptic on man-made global warming. Green energy resources are going to be funded one way or another, I believe, and that means a future of still encouraging sales of hybrid cars, electric cars and bikes, solar cell technology and producing electric power from windmills. 3.9G and 4G technology is also coming to our new way of keeping in touch with each other and shopping and trading with each other. Even a dinosaur like me, orders new car batteries via the internet, and replacement batteries for cordless tools. In Asia, it’s unlikely that much more than the pace of their growth and modernisation will do more than moderate slightly, in the next 5 years.

While China is attempting to rein in a economy that’s become unbalanced in the real estate sector, they are not about to reverse the successful policy of the last 30 years. Even if they wanted to, the public’s expectations are simply too high. Nearly all see the benefits modern technology has brought, and all want a lifestyle that’s closer to that of the west. In India, a similar great modernisation is underway, albeit it started later in a less frenetic fashion. Neither country is likely to slip into a technical recession in the next 5 years, and both are practically forced into being rapid adopters of the latest arriving new technologies. Few in dozy old London really understand what this means for the pace technological development over the decade ahead. More people will watch the London 2012 Olympics in India, than the entire UK and Ireland has population. The technology build-out in the sub-continent and in China, will likely drive the arriving technologies adoption rates while we in the west, think it’s us. No one in China and India is going to build much in the way of landline phone systems, nor encourage the whole population to start polluting like wasteful Americans. E-bikes, Tata’s Nano, hybrid and electric cars, wind technology, river turbines, and the very latest in 4G cell phones, are the future for the next decade I think, plus a rapidly rising middle class all across Asia. The west will advance with austerity, Asia will advance with hope.

I’ll end today with the latest internet usage and population stats, that illustrate pretty much where the world is heading and how much further there still is to go. The big question is can we find all the new resources to match up with demand? Preferably outside of China, and will our derivatives gambling banksters be willing to finance them on a timely fashion? I may need to get help in posting the internet table.

While I await help in posting the internet usage table, I’ll end with the Journal on developments in China that suggest in rare metals at least, it’s very much later than we think.  I suspect, that today’s HRE and REE prices are greatly under priced as regards the new “norm” that the future will bring.

JULY 26, 2010

China Fuels Trade Tension With Policies, Report Says

BEIJING—China's drive to support domestic technologies—which has already resulted in high-profile complaints by foreign businesses over government purchasing policies—is likely to continue to cause trade disputes and political tensions with the U.S., says a new report from the U.S. Chamber of Commerce.

"Indigenous innovation is a massive and complicated plan to turn the Chinese economy into a technology powerhouse by 2020 and a global leader by 2050," says the report, to be released this week. "What is worrisome for the business community is that these indigenous innovation industrial policies are headed toward triggering contentious trade disputes and inflamed political rhetoric on both sides."

The report, which was commissioned by the U.S. Chamber and written by James McGregor, a longtime journalist and executive in China who is now senior counselor for APCO Worldwide, says China is becoming increasingly aggressive in using its vast market to push foreign companies to transfer leading-edge technologies. That tactic, it says, is "forcing foreign technology companies to anguish over balancing today's profits with tomorrow's survival."

The report, from one of the world's biggest business groups, adds to the increasingly vocal concerns of foreign companies and governments about the business environment in China, including top executives from firms such as Siemens AG, General Electric Co., and Microsoft Corp.

Executives and officials have raised particular complaint about indigenous-innovation policies that they fear are designed to discriminate against foreign companies or to force them to transfer their intellectual property to China.
http://online.wsj.com/article/SB10001424052748704700404575390903654218646.html?mod=WSJ_hps_MIDDLEThirdNews 

More tomorrow, when I will try just to write about firms with a chance in my opinion of becoming a “company of interest,” to misquote the FBI.

Graeme Irvine. London.