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'There May Be A Bubble Occurring,' Says Rare Resource Chief

If you’re looking at rare earth stocks in the wake of the recent headlines, don’t make a move until you hear the surprising statement made on Fast Money from Molycorp CEO Mark Smith.

In an exclusive interview Molycorp CEO Mark Smith tells Fast Money ”I don’t think short-term prices in rare earth (minerals) are prices people ought to be counting on."

He goes on to say, ”they are really spiked right now and there may be a bubble occurring because of all of the news and the frenzy.”

Smith is referring to reports that China continues to block the export of crucial rare earth metals used in high tech products such as computers and cell phones.

In recent weeks those headlines have sent prices skyrocketing; China accounts for a staggering 97 percent of production.

As you probably noted, Smith used the term bubble which implies a crash lies ahead – however Smith doesn’t see sharp declines anytime soon.

”The Chinese government has indicated that they plan to continue to reduce export quotas which suggests the supply and demand situation will stay fairly tight,” he says.

(For the record, it’s worth noting that our news partner Reuters said on Wednesday October 20th that ‘China denied plans to slash export quotas.)

But whether that’s the case or just rhetoric Smith suggests taking a convervative view.

”When you see prices that increase by 600-700% in a 30-day period you have to be very careful and not make future plans based on those kinds of increases.”

What else must you know about this 'under the radar' trade. Don’t make a move until you hear our entire conversation with Molycorp CEO Mark Smith. Watch the video now!




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Trader disclosure: On Oct. 21, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Cortes owns (K); Cortes owns (TSN); Cortes is short crude oil; Cortes is short gold; Cortes is short (RSX); Cortes is short the U.K. Pound; Cortes owns U.S. Treasuries; Cortes owns the S&P 500; Terranova owns (APA), (AAPL), (AXP), (C), (CRM), (GOOG), (GS), (FCX), (MMM), (ORCL), (PCP), (PEP), (PFE), (TBT), (UPL), (VRTS), (XBI); Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Weiss owns (AAPL); Weiss owns (QCOM); Weiss owns (PWER); Weiss owns (VZ); Weiss owns (CSX)

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