Tesla is putting itself at the mercy of China… and President Trump.

On March 12, the electric car manufacturer announced it was going to switch from an induction motor to a magnetic motor.

Now, magnetic motors are generally lighter, stronger, and more efficient than induction motors.

That’s because induction motors use dense, heavy copper coils. But magnetic motors use a rare earth element called neodymium.

Neodymium makes the world’s strongest permanent magnet, which is why Tesla (and other carmakers) want to use it for their new engines. It takes less of this metal to make the engine work than any other.

But here’s the thing: China controls over 80% of the world’s supply. With a snap of their fingers, the Chinese can cripple the global neodymium trade… And take down any company that relies on a steady supply of neodymium.

But I didn’t write this essay to focus on Tesla and the other companies this could hurt… There’s a bigger investing opportunity shaping up that many people are overlooking.

With global tensions rising around a trade war, China could restrict the supply of the metal. This would send prices through the roof.

In fact, as I’ll show you in today’s Daily, neodymium isn’t the only rare earth element set to soar in the months ahead. This entire sector now has a massive tailwind at its back… and investors who get in now can strike it rich as this trend plays out.

I’ll show you how in a moment… and explain why you need to get in now—even if China sits back and does nothing.

Let me explain…

China Has Restricted Neodymium Before

It’s not crazy to think it will again.

The Middle Kingdom already has strict export controls on this element (among others).

Back in 2010, China and Japan quibbled about who owned a few little islands—the uninhabited Senkaku Islands, which total a couple square miles in the East China Sea.

Ownership of the Senkaku islands has been disputed for almost 50 years… because the islands are near major shipping lanes. And they’ve become even more important as potential oil and natural gas fields have been discovered nearby.

Both countries wanted control over the islands. Japan said China forced its hand and tried to cut off all rare metal exports. China claims it did no such thing.

But here’s the thing… It doesn’t matter who was right. The rumor alone sent metals like neodymium soaring.

Prices of neodymium at the Shanghai exchange at that time were $80/kg. And reports say that, for the rest of the world, prices rallied to $500/kg—525% higher.

This Could Happen Again

Few people have been talking about China’s impact on rare earth elements as much as my colleague Nick Giambruno, editor of Crisis Investing.

He’s been watching this trend closely since September. And now he thinks China could rattle the entire rare earth market—especially if a trade war breaks out…

I recently got ahold of him to get more details. Here’s what he told me:

No one poses a serious threat to China’s monopoly. It can simply hold prices lower for longer than any competitor can stay solvent.

The rare earth element (REE) card is China’s ultimate weapon in the trade war. They’re not going to play their best card right away. But if this gets out of hand, I expect they will play it—as they’ve demonstrated in the past.

Even a whiff of the possibility that China could restrict supplies again would send REE prices—and REE stocks—soaring.

I think there’s a great chance that will happen in the months ahead.

The fact is, one to two kilograms of rare earth metals are used in every electric car.

And China could restrict exports of these metals to foreign countries… allowing its electric car manufacturers to have a huge cost advantage over those from other countries.

How to Play This Huge Opportunity

I agree with Nick Giambruno that rare earth elements are going higher.

Even if China doesn’t use them as bargaining chips, prices will still rise because the demand is much greater than the supply.

The easiest way to play this trend is to buy the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX). It holds a basket of companies that mine rare earth metals. And many of them will thrive if China restricts its exports.

Regards,

Nick Rokke, CFA
Analyst, The Palm Beach Daily

P.S. To learn more about this opportunity, I encourage you to watch this brand-new video presentation Nick Giambruno and his team just released. It includes background details on the one tiny company they think will soar 10x in the coming months if the US-China trade war develops. Watch it right here.

MAILBAG

Today, a common concern about bitcoin…

I’m writing about Nick Rokke’s essay on Wednesday (“The Backdoor Way to Play the Cryptocurrency Boom.”)

I was struck by a quote he made: “Mining fees can be very lucrative. For instance, the miner who solves a bitcoin transaction first receives a reward of 12.5 bitcoin… But mining cryptos uses a lot of processing power… a single bitcoin transaction uses enough energy to power 26 U.S. households for a day.”

If this has even the slightest relationship to the truth, how on earth is the crypto-sphere sustainable? It’s not. There isn’t a digital transaction on earth that requires that much electricity power. The power throughput of the entire global economy would be sucked into a crypto black hole if true.

—Bruce K.

Nick: Thanks for the letter, Bruce. Your concern is one that many people have… Can we generate enough power to fuel an expansion of cryptocurrency use?

The answer is yes, we can. But the technology needs to change.

Bitcoin is very data-intensive because of its proof-of-work protocol for mining new coins. It puts thousands of computers to work crunching numbers to solve an algorithm. The winner is the first computer that can prove it did the work.

This proof-of-work model won’t be sustainable as cryptocurrencies become more widely used. But the Bitcoin team knows this. That’s why they’re working on updating the code.

As colleague Greg Wilson mentioned in May of last year, the Lightning Network will help. This will allow for more transactions to happen “off the chain.”

But not all cryptocurrencies use a proof-of-work model. There are other ways to verify transactions and mine new coins that are less power-intensive.

Crypto developers are becoming more aware of the power usage required to run their blockchains. And they’re coming up with new, innovative ways to reduce the power usage.

Power usage will become less and less of an issue as new, better code gets released into the cryptocurrency space.

Are you still a bitcoin skeptic? Or have you been buying the recent dip? Let us know your thoughts—and questions—right here

ATTENTION INVESTORS…

We’re looking for someone who eats, sleeps, and breathes micro-cap stocks…

…someone who combs the market for little-known companies with explosive potential…

…someone with a deep network of contacts in a variety of industries…

…someone with great investment ideas we’ll never see on Bloomberg or in The Wall Street Journal

If that sounds like you, read on here… you may have what it takes to join our team as a high-profile investment expert.

WEDNESDAY’S BIG EVENT

On Wednesday night, nearly 20,000 people tuned in to Teeka Tiwari’s emergency live broadcast—"The Second Boom: How to Make a Fortune for the Next Crypto Run Up."

He talked about the recent volatility in the crypto space, one of the biggest opportunities emerging in blockchain technology right now, and how anyone can turn even a small stake of a few hundred dollars… into tens of thousands.

Teeka’s agreed to provide a replay of the webinar for just a short time. So if you haven’t seen it yet, check it out right here. It may be the most important briefing you’ll see this year.