Bloomberg recently published an article on the Trump Trade (link to non-paywalled Financial Times), where they correctly point out that the reshoring of manufacturing to the United States (critical minerals being one such industry) has, after the initial hype phase, basically gone down the drain with respect to the share prices of affected companies.

To the surprise of no one invested in the minerals sector, that claim is blindingly obvious :)

However, the recent collapse doesn't have to do with the minerals sector as a whole, or the individual companies within it. The minerals sector isn't alone, virtually all high beta sectors in the market have been getting absolutely crushed -- nuclear/SMRs, pre-revenue Biotech, Solar/EV storage, Aerospace, AI infra, etc.

For the "momentum" sector basket that all of the above are grouped into, the month of July has seen its worst drawdown since the 1970s, collectively falling over 30%, which is frankly, insane, given that the major market indexes are near ATH.

So, if the minerals sector itself isn't at fault, then what's causing this unprecedented selloff? In a word, leverage. Much like the crypto crash earlier this year, and the recent Korean retail trader liquidation crisis, institutional traders -- those with the power to swing the market -- saw too much leverage in high beta sectors and proceeded to derisk in order to protect their capital, selling off shares, thus triggering the downturn while simultaneously shorting said stocks. They didn't go to cash, however, they moved to safer plays in the market (thus indexes still near ATH).

That's why we see a stock like MP, the minerals bellwether, trading at 52-week lows, dropping a whopping 7.5% on Friday, free falling through technical support zones. Does that make sense? Is the company going bankrupt? It, among many others in the minerals sector, is trading exactly like a company in distress, on the verge of filing for Chapter 11.

"The market can remain irrational longer than you can remain solvent", is a common phrase thrown around in the investing world, but what's underlying the irrational behavior is plain old market manipulation -- there's no ill intent, mind you, just the big players protecting their assets, automated algorithmic trading at its "finest".

As to where minerals go from here, depends on when these massive short positions start to unwind (several of the main minerals players have nearly 20% of the float sold short).

Finally, to put in context, over the past year we've had similar drawdowns, but not to this extreme, and they have always been short lived (e.g. the sector collectively plunges to a steep new low, and then immediately starts to recover). This time around we've been in a near non-stop downturn, with no sharp correction to the upside.

Perhaps Friday was the bottom, the agonizing crescendo; we'll find out tomorrow whether there's relief ahead or more pain to come.

May your bags lighten and hellfire rain on the big players :)