Well put, late cycle "mkt climbs a wall of worry", but CJ does raise an interesting point re possibility of simultaneous maturing Lynas & RE industry intersecting next global downturn, which won't be pretty.
Re: “This time is different”, one of the better articles IMO, which also goes some way to explain the divergent growth Lynas currently surfing ROW vs China (although 5% drop in RE exports YTD contrary, but that may policy driven rather than demand):
The Business Cycle Is Different This Time—Thank China
Diverging Chinese and U.S. growth are behind the confusion in global markets right now
Commodities and stocks have started 2018 with a bang. U.S. oil is trading over $60 a barrel for the first time since 2015, and the Dow has breached 25000. Inflation, though, remains in check despite a U.S. expansion in its ninth year. Investors can be forgiven for being both pleased and befuddled: where exactly are we in the business cycle?
Part of the confusion stems from widely employed language about a “simultaneous” uptick in the U.S., Europe, China and Japan. Global economic powerhouses are all growing, sure, but there are nuances. China experienced a steep slowdown in 2015 followed by a rapid rebound in early 2016, but is now cooling. The U.S. has been slowly healing from the carnage of 2009 and—until recently—hasn’t shown much sign of running up against any big constraints in labor or industrial capacity which could choke off growth.
That divergence ought to be broadly positive for developed world equities—but at best neutral for commodities this year.
China remains the 800-pound gorilla in these markets: it consumes half of global copper and iron-ore supply and is now the largest net oil importer. The country’s credit growth, producer prices and the real-estate market are now drifting downward.
Even so, oil and copper keep testing post-2015 highs—investors dazzled by European and U.S. factory growth hitting post crisis highs may be ignoring the all-important China slowing. Buoyant U.S. industry and a lackluster China likely mean commodities won’t repeat their stellar 2017, even if prices could temporarily move higher this spring as winter pollution curbs on Chinese industry are eased.
A slowly cooling China may not be good for commodities: But it could benefit U.S. stocks because it means less pressure on inflation from material prices. Unlike the mid-to-late 2000s when skyrocketing oil helped goad the Federal Reserve into a series of sharp rate increases, a slowing China and buoyant U.S. oil production—which should translate into steady oil prices—will allow the central bank to focus primarily on domestic wages and industrial capacity utilization, which are only now beginning to pick up.
The global business cycle isn’t broken, it’s just more segmented this time around. With another late 2000s-style commodity driven inflationary blowout unlikely, investors should stay focused on the U.S. itself—-wages, industrial capacity utilization, and investment—-for the timing of the turn in the cycle and equities.
So trying to draw a line thru it, China manufacturing basically "out grew" ROW demand (resulting imbalance now creating friction) and realised it in the current 5YP, directing the economy inward. That has resulted slower growth, which we are witnessing domestic RE demand. The upside is China slowing, taking a breather to restructure & rebalance some of the excess, incl enviro degradation, has taken the heat out of the late cycle run, extending this unique cycle further. In addition to "investors should stay focused on the U.S. itself" I'd suggest a close watch on Chinese growth as a trigger is also warranted.
In that context the Lynas thesis is easy, particularly skewed to ROW, particularly EU, basically well above system growth NdPr into now highly developed (more cost efficient) NdFeB into purpose designed, high efficiency PMM, underwritten by the drive to employ energy more productively.
Uniquely positioned to demand growth converging from a number of sectors 2019 into next decade. Interesting aside, when the cycle does turn will Lynas be regarded as a commodity play, or a specialty chemical company, or a manufacturer?
(20min delay)