I will be doing a YouTube interview with Max Convexity Tuesday at 3pm EST. For more information click here

I wrote about rare earth a week or so ago, but this is likely to be such an important area going forward I wanted to revisit it this morning…….

Critical Minerals: The Next Front in the U.S.–China Economic War

The trade conflict between Washington and Beijing has shifted from tariffs to something more elemental—literally. China now controls more than 60% of the world’s production of critical minerals and close to 90% of processing capacity for key inputs like rare earths, graphite, gallium, and tungsten. These materials aren’t obscure commodities—they are the building blocks of semiconductors, EV motors, wind turbines, and precision-guided weapons. In a world that’s digitizing, electrifying, and rearming simultaneously, whoever controls the mineral chain controls the future of industry.

Beijing knows this. In response to Trump’s “Liberation Day” tariffs, China tightened export restrictions on rare earths, graphite, gallium, and germanium—explicitly targeting the technologies underpinning the U.S. defense and AI sectors. This is asymmetric economic warfare. The U.S. can sanction Chinese tech companies; China can sanction the raw materials those companies—and their Western competitors—need to function.

The U.S. has made progress at the margins. MP Materials has restarted mining in California, and the Lynas plant in Texas is beginning to process rare earths. But as Alpine Macro notes, the U.S. still relies on China for roughly 70% of its rare earth imports and nearly all refining. Building a domestic supply chain will take years. Processing capacity requires billions in capital, specialized chemistry, and lenient environmental policies—advantages that China’s state-backed system already has.

Meanwhile, Beijing’s grip extends beyond its borders. Chinese firms such as Shenghe Resources hold stakes in projects from Greenland to Australia. Even if the ore is mined outside China, much of it still flows back there for refining. The result is a global mineral system where China acts as both gatekeeper and price setter.

That control has consequences. The 2010–2011 rare earth embargo on Japan sent prices up tenfold; Alpine Macro estimates that new restrictions on gallium and germanium could double or triple prices again. Supply shocks in even one segment of the mineral complex can ripple through the broader economy—from chip fabrication to electric vehicles to the energy grid.

Winners
U.S. and allied producers such as MP Materials (MP) and Lynas Rare Earths (LYSCF) are the most direct beneficiaries of China’s export controls. Their pricing power increases with every new restriction. Midstream refiners and metallurgical specialists like Energy Fuels (UUUU) and Vital Metals (VML) could see windfall margins if they can scale processing capacity. Industrial and defense conglomerates investing in domestic sourcing—General Dynamics (GD), Lockheed Martin (LMT), and Northrop Grumman (NOC)—are also positioned to gain from policy tailwinds.

Losers
China’s export curbs will pressure downstream manufacturers in the U.S., Europe, and Japan that depend on imported magnets, catalysts, and high-performance alloys. EV makers with heavy rare earth exposure—Tesla (TSLA), Toyota (TM), and Volkswagen (VWAGY)—face higher input costs. Clean-tech developers relying on wind and solar components will struggle with supply volatility. And smaller regional miners that lack government backing will find it hard to compete with the subsidized giants on either side of the Pacific.

Bottom Line
Critical minerals have become the quiet front line of the U.S.–China rivalry. Tariffs raise prices; mineral embargoes can stop production altogether. China’s dominance is so entrenched that breaking it will take a decade, not a year. In the meantime, the market is drawing its own conclusion: the next commodity supercycle won’t be driven by oil—it will be driven by dysprosium, neodymium, and graphite. Investors who understand that the new geopolitics of energy is really the geopolitics of materials will be early to the trade that defines the next decade.

Regional banks are back under pressure as we talked about on Friday. SKRE got a shoutout here. Zions and Western Alliance disclosed significant loan losses tied to borrower fraud, following earlier bankruptcies at First Brands and Tricolor that forced JPMorgan to take a $170 million charge. Those events reignited fears of broader credit weakness and sent the KRE Regional Bank ETF down last week. High-yield and investment-grade credit spreads widened, while Treasury yields dropped as investors fled to safety — the 10-year briefly fell below 4% for the first time in six months.

So far, the data point to idiosyncratic issues rather than a systemic crisis. Delinquency rates across all loans remain within pre-pandemic norms, though commercial real estate (CRE) remains the most vulnerable pocket, with delinquencies above 2015–2019 levels and still rising. Losses have been concentrated in smaller lenders, where competition for growth likely eroded underwriting standards. By contrast, the large-cap “fortress” banks like JPMorgan and Bank of America remain well-capitalized and insulated from credit contagion.

The more opaque threat lies outside traditional banking. Non-bank lenders—private credit funds, insurance firms, and CLO managers—now hold about half of all financial assets globally and dominate the leveraged loan market. These institutions are heavily interconnected with smaller banks through credit lines and loan participations. An IMF stress test suggests that if NBFIs were to draw down these lines under duress, about 10% of U.S. banks could see capital ratios fall more than 100 basis points.

In other words, the system isn’t breaking—but fault lines are visible. Elevated CRE exposures, rising consumer delinquencies, and the quiet leverage embedded in private credit all suggest that risk is migrating rather than disappearing. The Fed and Treasury have tools to contain regional shocks, but investors should expect tighter credit, higher defaults in smaller banks, and a gradual repricing of risk across the entire credit spectrum.

For now, this looks like a late-cycle credit tightening, not 2008. But if the losses spread from the periphery (regional banks and NBFIs) to the core (large money-center banks), the narrative will change fast.

Meanwhile, last week I talked about the possibility that NVDA may have to share it’s dominant spot as the first order AI winner. This is interesting, and something to keep an eye on. Not sure what the ramifications are at the moment, but figure there will be ramifications…..

Thursday October 23rd 2-3PM EST

Covered call ETFs are everywhere — and everyone thinks they’ve found a “safe” way to collect yield in a sideways market.

The truth?
Most of them suck.

They cap your upside, mislead investors with “yield” that’s really your own money coming back, and often trail just owning the stock by a mile.

Join me for a brutally honest breakdown of how these funds actually work — and what you should be doing instead.

🔥 Why “high yield” covered call ETFs are often just returning your own capital
📉 How most call-writing strategies quietly destroy compounding
🚫 Why owning covered calls in bull markets is like running a marathon in a weighted vest
💡 The simple structure that can fix these problems — and where the real daily income opportunities are hiding

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