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The Fanya Metals Exchange Collapses

Published 08/26/2015, 02:52 AM
Updated 07/09/2023, 06:32 AM

In an early morning vigilante move, a group of investors in the city of Kunming, China in only what can be described as “daring citizen’s arrest” accosted a Mr. Shan Jiuliang, the Head of the Fanya Metals Exchange, and turned him over to the police.

The Fanya Exchange trades in rare earth metals and also ultra-rare and unusual products that can’t be hedge, hence you have unlimited risks to investors on the downside if the metal goes to zero. Back in the spring of this year a regulator reported that this exchange was among the highest risk investments in China. Also an important fact, which I tweeted about was that much of the refined product was being held at an unregulated storage facility. The reason I raised the proverbial eyebrow was that the World Exchanges, Comex and LBMA for example, only use registered or certified suppliers and storage points so that they know the purity and quality of what they take or make delivery of and that it’s unencumbered.

What this means for investors

The Fanya Metals Exchange will have to liquidate its holdings in all its listed holding. The bull market in the rare metals the exchange has been stockpiling were in a rally during the last two years, but that's now over. So they bought the highs and will sell into the lows. You can find a list of the metals, which are used in Military, Aerospace and High Tech industries.

Who ends up with what?

As I see it, things can only go two ways. The Chinese military, in the midst of its largest expansion, will buy everything but very inexpensively, or the dump on the market will end up at places like Apple (NASDAQ:AAPL) and Westinghouse for military and aerospace production. More than likely both will happen, but one thing for sure is that investors will get hammered for most of their investments.

Alternative investments? Never buy unsecured or non-certified metals. Always try to buy recognized hallmarks on bar bullion or only use sovereign coins. Never borrow to buy alternative investments as your risk jumps exponentially. Always look at metals as a long term invest and not a get rich quick plan.

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