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Weekend: Eye of the Tiger

Written By Brian Hicks

Posted December 18, 2010

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

While America stumbles and bumbles through the long, dark night…

A young upstart is about to knock Uncle Sam and the rest of the Western world right down the creaky old steps.

Whether you realize it or not, China is in it to win it, and she’s taking no prisoners.

If you doubt that, take a look at this article that appeared earlier this week in The New York Times. Entitled “To Conquer Wind Power, China Writes the Rules,” it details how China plays the role of puppet master in working to corner the production of another market — this time in wind power.

China flexes her muscles

Acting the part of the 800 pound gorilla, the Chinese have now grabbed more than 85 percent of the wind turbine market, aided by rules that stack the deck prohibitively in Beijing’s favor.

From requiring at least 70% of the equipment in their wind farms be domestically produced to low-interest loans and cheap land from the government, Beijing is a Chinese working man’s best friend.

You see in China, they actually base every decision around what we have been so slow to see. They realize it’s about keeping the masses employed and working to use every single advantage they can to keep the wheels turning.

And if that involves bending the rules in their favor, so be it.

China, in other words, is all about China— today, tomorrow, and for the next 500 hundred years.

Our time horizon, meanwhile, extends only as far as the next election or earnings release. It’s bloody pathetic.

That long-range outlook — so ingrained in the way the Chinese look at world — was on full display when I hit the money quote at the end of the article.

Drawn from a gathering of hundreds of big executives from around the world, it involves the mindset of Li Junfeng, overseer of the Chinese renewable energy industry:

You cannot be called a winner if you are the leader for three or five years,” Mr. Li told the Chinese executives. “You can only stand on the top line if you are the leader for 100 or 200 years.”

The Chinese presidents sat quietly and respectfully, chins down. Senior executives from the foreign manufacturers — including Vestas, G.E. and Gamesa — sat alongside them, staring straight ahead in stony silence.”

Maybe they realized they’d stepped into the ring with Clubber Lang, and he wasn’t going to be happy until all of them hit the mat…

It is simply war by other means; the wind turbine industry is just one of the many ways we are fighting a losing battle.

Another battle we’re struggling to keep up with is rare earth elements, also known as REEs.

With obscure names like neodymium, europium, or praseodymium, these all important metals are used in a wide range of applications: high-tech and defense products, car engines, and clean energy. In fact, these industries cannot function without them.

The problem is the Chinese have a stranglehold on them — controlling 95 percent of global rare earth supplies. Wielding it like a hammer, they are about to beat us over the head with it.

As U.S. Energy Secretary Steven Chu admitted in a report released yesterday, “The availability of a number of these materials is at risk due to their location, vulnerability to supply disruptions and lack of suitable substitutes.”

That’s precisely why rare earth metals have entered a bull market. And that’s the good news for early investors…

One rare earth play worth keeping an eye on is the Market Vectors Rare Earth Strategic Metals ETF (NYSE: REMX). It gives investors exposure to 24 publicly-traded businesses involved in the mining, refining, and manufacturing of rare earth metals.

Another is an under-the-radar play trading for $1.30 that we’ve discovered in Greenland. This outfit controls one of the biggest REE deposits in the world and is big enough to supply 25% of global demand for the next 50 years.

The bad news is that it will take years to rebuild this industry outside of the current Chinese dominance.

That gives investors in these commodities a great chance to profit, as market shortfalls outpace the new supply that will take years to come online.

Either way, one thing is for certain: These guys are playing for keeps.

In the meantime, I think investors are going to have to choose wisely in 2011 to beat the market averages this year… Catch up on a few of the best investment ideas from the pages of this week’s Wealth Daily and Energy & Capital below.

Have a great weekend.

Your bargain-hunting analyst,

steve sig

Steve Christ
Editor, Wealth Daily

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