Wednesday, May 30, 2012

Meet The Rare Earth Metals

One of my blog readers (hey veyron, you're famous, again!) has been wanting a piece about the rare earth metals, a group of chemically similar metals used in many hi-tech applications (magnets, batteries, displays, sensors, etc.).  Below I will discuss most of these (in a similar way that I described the platinum group metals not long ago) and later write a bit on investing in companies in the sector.

Update, Lipmann's periodic table did not go up according to two of my readers, so I "copy & paste" this one from wikipedia:

File:Periodic table.svg

The rare earth metals, are strictly speaking, the ones in the 15 metals from Lanthanum (La) through Lutetium (Lu) in the second last "row" above of the elements, these are also referred to as "the lanthanides".  But, in the rare mining sector Scandium (Sc) and Yttrium (Yt) are also considered to be rare earths, as they have similar chemical properties and are often found together with the 15.

Sc has atomic number 21, Yt has 39, and La - Lu have atomic numbers 57 - 71.  Detailed chemical and atomic properties will not be discussed in this article except where the applications of these metals are mentioned.

The mineral ores of the rare earths are the relatively obscure monazite and bastnasite.  I studied Geology in college, and until I looked into the rare earths, I had never even heard of these minerals.


The rare earth metals are really not all that rare, but it is hard to find them concentrated enough to profitably mine.  Currently China produces over 95% of rare earth metal production and processing. China a year or two ago imposed export quotas, much to the dismay of end-users.

These metals have many uses, typically in small quantities, most uses are in high technology applications.  These metals are also used in many military applications, there is some anxiety in the military-industrial complex and the Pentagon, but while our government has talked about it, they have taken no actions.

To a degree, it is possible to replace some applications of rare earths with other metals, and that is being actively investigated.  But, many applications pretty much need the rare earths...


Below each rare earth metal is briefly discussed, much of the below information on each metals is from wikipedia as well as from a presentation from Avalon (a company with a mine in NW Canada) and the rare earth metals blog:  You can get a free email update everyday from that blog.

Lanthanum (La) is mostly used in nickel-metal hydride batteries, these are the batteries used in the Toyota Prius, each Prius uses some 10 kg - 15 kg per car.  Other applications are use in lighter flints (often as "mischmetal": alloys of rare earths), hydrogen sponge alloys (to store hydrogen gas), and for lighting and glass applications.  Lanthanum is cheap and very available.

Cerium (Ce) is the most common rare earth metal, and availability is not an issue.  It is used in glass polishing (cerium oxide) and as catalysts (both in automotive catalytic converters and industrial catalysts).

Praseodymium (Pr) is used alloyed with magnesium in some jet engines, in some magnets, as well as a yellow-green colorant for glass and mischmetal lighter flints.

Neodymium (Nd) is probably the most well known of the rare earths, it is used mostly in neodymium-iron-boron magnets, Nd2F14B (one of the strongest magnets there are, some 20 times stronger than typical iron magnets).  These magnets are found in wind turbines, and are essentially not replaceable in wind turbines.  The Toyota Prius uses about 1 kg of Nd in each vehicle.  Nd is also used in "NdYAG" lasers (neodymium, yttrium, aluminum and garnet), along with other metals.  Nd is also used in glass and lighting applications.

Samarium (Sm) is used in samarium-cobalt magnets (slightly weaker then the neodymium magnets mentioned above), an advantage of samarium-cobalt magnets is that they keep their magnetism at higher temperatures than neodymium-iron-boron magnets (but see dysprosium further below).  It is also used as catalysts (almost all of the rare earths have catalytic properties), in magnets and a radioactive isotope (Sm153) is used in the cancer drug "Quadramet".

All isotopes of Promethium (Pm) are radioactive, it is found in nature in only tiny quantities and has no applications.

The above rare earth metals are often referred to as the "light rare earth elements" (or LREEs).  In general, the "heavy rare earth elements" (HREEs) discussed below are more rare and cost more.  They also have interesting applications.

Europium (Eu) is used mostly for red phosphors on monitor screens and TVs.  Like red?  Then you need Europium.  Eu also is used for other colors, as it has two "oxidation states" that are common, unlike most of the other rare earths.  Eu is also used as a phosphor in euros (glows red) as part of the anti-counterfeiting measures of making euros.  Eu is expensive...

Gadolinium (Gd) is used in magnets and has an unusual metallurgic property: 1% Gd improves the workability and resistance in iron and chromium alloys.

Terbium (Tb) is also used in magnets and as a yellow-green phosphor.  Tb is expensive...

Dysprosium (Dy, the name comes from the Latin "hard to find"), is used in small quantities to make the neodymium-iron-boron magnets mentioned above to be "more permanent", that is, dysprosium helps keep those magnets magnetic at higher temperatures.  All the wind turbines used them.  Dy is expensive...  Dysprosium is arguably the most important of all of the rare earths, in that it is rare but very necessary in permanent magnets.

Holmium (Ho) has some interesting properties: Holmium has the highest magnetic strength of any element and therefore is used for the polepieces of the strongest static magnets. Because holmium strongly absorbs neutrons, it is also used in nuclear control rods. (Wikipedia).  I do not have other information on holmium other than what I retrieved from wiki.  Holmium does not show up in much of the mining literature...

Erbium (Er) is used in neutron absorbing control rods as well as in lasers and glass.  Most of the rare earths are used in laser and glass applications.  Nor does Er show much in the press...

Thulium (Tm) is the second rarest rare earth (only radioactive Promethium mentioned above is rarer), Th is used is lasers, as an X-ray source and in high-temperature semiconductors.

Ytterbium (Yt) has a host of minor applications (source of gamma rays, doping of glass and metals), wiki writes that its electrical resistance goes up as the metal is stressed, so it is used in gauges measuring earthquake movements.  Yb is also under consideration to replace magnesium in infrared decoy flares (much higher emissivity in infrared than magnesium).  The Germans are also looking at making an optical clock that uses a single ion of Yt that is accurate to 17 digits after the decimal point.  If you want learn more, wikipedia is your starting point...

Lutetium (Lu, named after the old Latin name for Paris) is the last of the rare earths.  It is the hardest and densest of the rare earths.  Due to its rarity, it has little commercial use, although Lu is being looked at for various high-tech applications (including for bubble memory).

Yttrium (Y, yttrium, erbium, terbium, ytterbium all have similar names because they were first found near Ytterby village in Sweden, Sweden has some rare earths and they may start mining it soon) is not strictly a rare earth metal, but it sits just above lanthanum (La) and so is chemically similar.  It is typically found with the rare earths.  Its applications include lasers (and related garnets), color phosphors, as a material enhancer (reducing grain size in and strengthening of alloys) and in superconductors (an alloy containing Y is superconductive at a higher temperature than liquid nitrogen -- making it more economical).

Scandium (Sc) has few applications, but it is used to alloy aluminum making its stronger.  Russia controls most Sc production, and parts of the MiG-29 fighter jet uses a scandium-aluminum alloy.


OK, whew!  So how can we invest in this sector to make some money?  It is pretty hard to get the metals themselves (and most of them oxidize in the air), although Lipmann does make a market in some of them (in small quantities).  And because the prices are volatile (down recently), it does not seem to me to be a viable "investment".

There are a host of small mining companies all trying to get rare earths into production in various countries.  Most of these are very speculative, and (IMO) most will likely fail, or in some cases taken over.  Let's look at some companies in the rare earth sector (the charts ALL look terrible...:

Molycorp (MCP), a US company that used to dominate world production of many of the rare earths before China ramped-up production and drove them out of business due to BIG rare earth deposits, cheap labor and lax environmental laws...  Molycorp was brought back to life (partly by Goldman Sachs,, LOL...) and MCP is bring their Mountain Pass (California, near Las Vegas) mine back into production soon, and they are building processing facilities.  Mining is not where the big money will be made, it will be made by the processors of rare earth oxides and material makers (those who can make the materials that Toyota and GE need).  Molycorp JUST received shareholder approval from Neo Material Technologies of Canada (read all about it at: to be taken over by MCP.  This is a big step, as Neo does such downstream processing, and sells such processed rare earth products to end-users already.  Molycorp produces almost all LIGHT rare earths however, so they are not yet a full spectrum supplier, and there are integration risks, etc.

Lynas (of Australia, ticker LYSCF on the "pink sheets") is the other rare earth miner soon to be producing processed product.  They are soon to be opening their processing facility in Malaysia, but there are protests among the locals...  (Why didn't they just build their plant in some remote part of Australia...?)  Lynas will be approximately the same size as American MCP, and is similar in that they will produce the light REEs.  Assuming their Malasian facility is allowed to produce, then Lynas will soon be a real player.

A smaller company called Great Western Minerals Group (GWMGF, also on the pink sheets) apparently does have processing facilities as well.  They own a mine in South Africa that they are hoping to get into production soon.

The above three companies are, to my knowledge, the only three soon to be in real production and have processing components (again, where I believe the money is).  The below companies are much more speculative IMO because they are miners only and may not be able to get up to speed (financing etc., the usual problems in the small mining sector...).

Avalon Rare Metals, Inc. (AVL on the NYSE) has a big deposit rich with the more desired HREEs...  The problem is that the deposit is located WAY up north in NW Canada and it will be years before they can get into production (2017 or so).  Avalon is talking about opening their own processing facilities, perhaps in the USA.

Rare Element Resources (REE) has a mine in Wyoming that they are hoping to get into production soon.  I have not seen any talk about them processing however.

Ucore Rare Metals Inc. (UURAF, pink sheets) has a deposit on one of Alaska's islands, which also apparently has decent amounts of the heavy rare earths.  Alaska is a mining friendly jurisdiction.

Discussion of the above companies

I just read a good article on the rare earth miners (an interview with Jon Hykawy by The Critical Metals Report, read the interview (from 25 May 2012, so very current):  Hykawy believes (as do other authors at that the likely winners will be the first ones to get REE products out into the market.  Even those with high quality deposits (like Avalon) will lose if they don't get product out SOON.  Nor will be it the company that will produce at the lowest cost.  The race will be won by the swift...  Hykawy likes GWMGF and MCP.  He is looking at Lynas to see how they dcome along in production.

I would concur with Hykawy, though HE is the expert not me!  My single pick would be Molycorp (MCP) as lots of information is available about them, and they do seem serious about vertical integration.  Check out the video (with nice music) re MCP's construction of facilities at their Mountain Pass mine:

Perhaps AVL and UURAF would be good candidates for Molycorp to take over someday, as they apparently have nice HREE deposits...

But, ALL of the above are very volatile...  Do not use money that you cannot afford to lose...

Disclosure: I am considering buying MCP myself, a small stake.

Monday, May 28, 2012

MBS Visit

I had thought that after the fairly grueling trip I had in Korea, that I would find Osaka (Japan) to be "coasting" that is, more like America, more English spoken, more bars...  Turns out that it was NOT true.  Read on...

MBS of Osaka, Japan was the third and final supplier I visited.  I left Seoul's Incheon Airport for a short flight to Osaka (non-stop, on a very nice Asiana plane).  When I arrived, I was picked up by Mr. Kazuyoshi Maekawa, the president of MBS.  He dropped me off at a hotel near the "South" train station.  Turns out that they do NOT all speak English, especially at the hotel...  Sunday I had off, so I had a meetup with one of my wife's oldest friends: Kafumi Oshita, hey Kafumi, you're famous!

Readers!  I have a challenge!  I will send $5.00 of Robert's cash to the one who guesses her age the closest.  You have a week.  Winner will have to give me a mailing address if you want your money (I have references that I can send you of people I send cash to, for your reference that I am discrete).  I will not divulge her age, though, it is not cool...  Kafumi was very helpful to me in a couple of respects (like helping me find stuff and eat well without paying a fortune...).  My wife is very lucky to have such a friend.  They studied English together in London.


Monday, Mr. Maekawa picked me up and took me to his facility.  I was told by the Koreans that MBS was very small, and indeed it was.  That does not mean that mean that he does not make quality stuff, quite the contrary.  Most of MBS's bearings are for the automotive sector, but I learned that he makes OEM bearings as well.  Including the unusual bearing below:

Look very closely at that bearing.  Note that the bore is NOT in the center, and is slotted as well.  Also note that the two rows of rollers are NOT lined up (as in almost all automotive, especially wheel, bearings).  This is a special OEM piece for a reducer in a Sumitomo machine.  They call these kinds of bearings "eccentric bearings", you can see why.  MBS landed this contract (to manufacture these strange looking bearings) from Sumitomo by beating out mighty Koyo (Japan's 3rd largest bearing maker, and part of the Toyota keiretsu, Koyo is probably the second or third most respected bearing maker in Peru).

This picture is from his warehouse, the boxes list two part numbers of GREAT INTEREST to Ameru, as we now can buy them from MBS, they are new pieces made at our request...  Yes!  He will do that...  But, he can also sell other quantities on to his larger customers as well.

Ahh, it looks like the picture is not good enough to see the 02474/20 (left, for Toyota Coaster bus, same size as the rent-a-car shuttle buses you see at US airports, the Coaster is pictured in my article on vehicles in Peru that are not seen here).  On the right is the RCT283SA, the clutch bearing for Daewoo Tico (also seen at my article on vehicles in Peru).  I think that MBS bearings are going to work out very well for us...

MBS was founded in 1933 by Kazuyoshi Maekawa's grandfather.  I believe they were the first in Japan to make tapered roller bearings (discussed in my article on bearings we sell in Peru).  The picture below is of Kazuyoshi Maekawa and his father (85) who keeps coming to the office...

I also went on a plant tour at MBS as well, no pictures, sorry!    Indeed MBS is much smaller than the billion dollar (in annual sales) companies in Korea, but MBS makes a very good selection of bearings that complements our Korean pieces, and MBS also makes some hot-selling pieces that we had to give up when we decided not to buy from Koyo anymore...  Now we get 'em in MBS...

I hereby thank Kazuyoshi Maekawa (and his dad) for his great friendship and patience!  Not to mention the REALLY NICE steak place he took me to!

Sunday, May 20, 2012

Iljin Visit

My visit with Iljin came before my KBC visit, but, it has been harder for me to organize that information.  I arrived to Seoul late on Saturday, and took Sunday as a free day to "de-jet-lag".  This part I have described in my earlier article on Seoul, Korea.

On Monday morning Mr. Juno Yoon (actually, in proper Korean that would be Mr. Yoon, but he kindly asked me to address him as Juno, informal, I take that as an honorable thing for him to do).  Juno took me to Iljin Global's HQ near my hotel, where I met some of his team: Jee Hoon Oh, Gi Won Seo and Jeong Ho Cha (the latter two Roberto Arce deals with in our purchases from Iljin).  Jee Hoon Oh ("John", many here in the Orient give us Westerners a break and give themselves a nickname that is easier to remember) was Juno's assistant in our visits to their plants and did the driving.

At Iljin HQ, I was informed that not only is Iljin the world's largest manufacturer of wheel bearings, but that the company is owned by one person (whose name I will not disclose because I know that some of you, my dear readers, might try to ask for a loan...).  It turns out that ALL THREE of our suppliers here are owned by one person or family each...


As I did writing my KBC article, I start at the end, when I was able to take a picture of my hosts (and the car they took me in):

I took the above photo in Changwon, South Korea as they dropped me off at my hotel and into the custody of KBC.  On the left is "John" Oh and on the right is Juno Yoon.  Both are family men, both work over 60 hours per week and both speak English very well.

I am not sure of what John's exact position is, as my contact with Iljin is normally with Juno alone, Ameru's Sales Manager (Roberto Arce) handles most communications with Iljin's export guys.

Juno is the Overseas Sales Department Manager (that is, he oversees ALL EXPORTS from Iljin to the aftermarket (replacement parts), and I believe he still helps negotiates bearings sales to the foreign car companies like BMW.  Juno earlier in his career spent most of his time negotiating with the likes of BMW, Chrysler, GM, Ford, Peugeot and others to sell Iljin bearings on an "OEM" basis (that is, the car companies would buy Iljin bearings as the ones going right into their cars, OEM is an acronym: Original Equipment Manufacturers -- in this case the car companies).

Juno came to visit us (Ameru) in Peru in 2008!  We then started buying Iljin much more quickly as they expanded their product range and we saw more Hyundai cars coming into Peru.  As I have mentioned before, our sales of Iljin bearings has been rising rapidly as we better understand what they make and find the applications (what car they are used in) there in Peru.

Juno is very talented man who has worked very hard to get to where he is.  This is a FACT.  His English is fluent, I know about four words of Korean...


After the short visit to their HQ in Seoul, John drove us to Jecheon (in north central South Korea, about two - three hours away from Seoul by car), where Iljin has the most modern manufacturing facility I have ever seen.  I have mentioned before about being amazed by by what I saw in Korea, but Iljin's bearing plant at Jecheon is the most amazing of ANY facility I have ever seen (but KBC's plants are modern and a wonder to behold as well).

(When I, as a typical American, think of manufacturing, I think of dirty, loud and dangerous factories...  The bearing factory I visited in Spain some 15 years or so ago WAS dirty, loud and dangerous, there was a "big guy" who worked at the hot forge, who picked up each piece of orange-hot metal and placed it into the forge, the rest of the Spanish plant was similar: one machine, one worker.  No air conditioning in the summer either...)

Jecheon is very different.  There are no guys pulling along industrial boxes or pallet-loads of parts.  In fact, there were many women employed there as factory-floor workers.  Why is that?  Because there is little DANGER or strength needed in the Jecheon plant needed to make bearings...  They need educated people who can learn how to run extremely sophisticated machinery, not by hand, but with their brains.  I do not think that I am revealing anything confidential here when I write that it is not "one machine, one man" (like in Spain), but more like "25 machines, one man or woman"...  Yes, it is that incredible.  Lots of robots doing their thing.  I understand now why they did not want me taking pictures on the production floor, they might be the most advanced in the world (for rolling bearings)...

They did let me take SOME pictures though.  The one below is of me standing next to their Welcome announcement (that is, welcoming me to their plant, upon reflection I was so impressed by Jecheon that I should have written how LUCKY I was to be able to visit...).  When they took the picture, we did not realize that the glare from the daylight was reflecting on the screen of their sign, so alas we miss the details of the sign in this picture:

It might be a while before any of you see anymore pictures of me wearing a suit...

Later that day (Monday) we drove to Kyungju (central Korea) and spent the night.  They took me to eat Korean barbecue...  The next morning we saw their Kyungju plant, another marvel.  That afternoon, they drove me down to Changwon for the hand-off to KBC.

Thank you very much Juno and John!


While I could not take any photos of the production lines, they have bearings on exhibit that visitors can look at and take photos freely.  I am making these next three photos as large as possible so any of you interested in details about bearings can see what the differences are.  This first picture is of "Generation 1" wheel bearings, they are very typical of what the Europeans used for decades in their cars (we call them "double row angular contact" bearings, or "doble hilera" in Spanish).  You can see from where they cut away part of the Outer Ring exposing the steel balls inside.  These are not complicated to make bearings.  LOTS of bearing companies make them!

This next photo shows some details of "Generation 2" wheel bearings, fewer companies these, as they are much more complicated items to manufacture, the steel housings require other equipment... You can see the flange, bolt holes, gearing and other details here.  Note that the bearing itself is tucked away inside the "Hub and Bearing Assembly" (the correct term to use re Generation 2 and Generation 3 bearings).  Again, they cut out some of the finished pieces so that you can see how the bearing fits in there.

One of the Generation 2 bearings that we buy is out 3rd biggest selling piece (US$ terms) this year in Peru.  It is not only a Generation 2 piece, but made with tapered rollers instead of steel balls as the rolling element, making tapered bearings is more difficult than making ball bearings.  That Hub and Bearing Assembly that sells so well for us is their item number "IJ-212001" and is used in the Hyundai Grand Starex, a van you see in many countries, but NOT in the USA.  As of mid-April we had sold 325 pieces of the IJ-212001 valued at over $17,700.  Just the one piece...  Only our "Tico" bearings sell more ($ terms).

The below photo shows some details of Generation 3 wheel bearings.  The piece at the bottom right (front of the display case on the right) shows a complete unit.  Each of THESE Hub and Bearing Assemblies have two flanges, and are even more complicated both to understand what is going on inside as well as harder to manufacture than the Generation 2 pieces.

Ameru has sold (again mid-April figures) over 100 pcs EACH of two Gen 3 items and smaller quantities each of several other sizes.


Why do I go into such fuss and detail about the "Generations" of bearings?  Because these new generations are what the car companies now want (in most part) from their bearing suppliers (and most of their other OEM suppliers as well).  They want already assembled products, thereby being able to use less labor (because all they have to do is fit a Hub and Bearing Assembly onto the wheel), and the OEMs do not have to worry about keeping track of thousands of pieces going into modern cars, they have their suppliers (like Iljin) make advanced technology pieces that simplify the manufacturing (mostly assembly now, the car companies themselves make relatively FEW items themselves...).


Iljin, a company that we had never even HEARD OF until 2006 (when we saw a piece of theirs in Peru brought in by a general auto-parts importer), is a high technology leader, perhaps the world's most advanced in wheel bearings (but, I am not an engineer, nor have I been to see what NSK and the other Japanese bearing companies are up to...).

Working with Iljin is an honor for Ameru.  As Hyundai and other car companies start using more of Iljin's pieces, so we will be selling more and more of their product in Peru.

I'm telling you all: while America sleeps, Korea advances...  Remember, Korea was one of the poorest and most destroyed countries in the world after the Korean War.  What the Koreans have accomplished (not only Iljin and KBC) since then is a wonder that I am pleased to have seen.

Friday, May 18, 2012

KBC Visit

Going with the flow here in Seoul, I just went out and bought coffee.  Actually I did not even have to leave the hotel, there is one right there attached.  $5.00 for a small cup (to go) of Colombian Supremo...


I will write up an article on each of our two bearing suppliers here in Korea (and later our supplier MBS of Japan as well), but I will start with KBC as I have the information better organized.  I have to mention something else: each of the four guys (two KBC men here in this article as well as the two at Iljin) I talked with at length work 60 + hours per week, it is 5:34 PM Friday evening here in Seoul, I would expect that all four are still at work...

I have mentioned that KBC brand is typically very close to 50% of our sales volume.  KBC was a joint venture with large German bearing maker FAG, then FAG bought out the rest of KBC that it did not own, and then mighty Schaeffler (INA brand of German industrial bearings) then went and bought FAG out.  The bearing industry is consolidating, something like what the airlines and car makers are doing.  So, the brand is KBC, but the official name of our supplier is Schaeffler Korea Corporation.  Schaeffler, by the way, is owned by ONLY Mrs. Schaeffler (I believe she is widowed).  Her son helps her run that huge company (they also bought Continental, the German tire and auto parts maker).  I am guessing that Schaeffler is the second biggest bearing manufacturer in the world.


The people with whom we work there at KBC (shorter than Schaeffler...) often switch jobs, but the man helping us now is Sung-Su Kim (Mr. Kim).  Here is a picture of Sung-Su Kim as well as Jong-Woo Kim (not related AFAIK), "Kim" is a very common last name here in Korea (something like 50% of Koreans have the surnames Kim, Park, Lee and Oh).

On the left is Sung-Su Kim and on the right is Jong-Woo Kim.  Hey guys, you're famous!  Just behind them is Jong-Woo's SUV, a Hyundai Santa Fe.

Because I so rarely wear a tie, and recently shaved off the mustache that I had worn since I was 24 years old, I thought some of you might like this of me and Jong-Woo Kim:

Sung-Su Kim runs about 1/3 of the export business of KBC (he covers the Americas (ex. USA) and India and Sri Lanka as well).  He has been working directly with Ameru for perhaps a year now, he briefly worked with us in the past as people were moved around (I have to assume that all that buying and re-organizing by the German owners has kept the pot stirred there).  Sung-Su Kim was very patient with me as we explored a variety of issues, even some delicate ones...  He was one of the two guys who really filled me in on the Korean character, that is, how Korea rose from being as poor as anybody in Africa after the Korean War (South Korea was essentially destroyed in the war) to becoming a mighty manufacturer not only of bearings and cars, but high technology (Samsung smart phones, LED big screen TVs, semiconductors, etc.) as well.  Korea is AHEAD of the USA in battery and magnet technologies.

I met Jong-Woo Kim at their Changwon Plant 3 (I am not going in chronological order for the moment, as I wanted to put up the above pictures first).  Jong-Woo Kim was educated in the USA for six years and his English is very good.  He is a material scientist, and works for their R & D unit.  He took us on a tour of their R & D facility, which impressed me a lot.  They have MANY rooms with LOTS of equipment that I have learned to appreciate (even though I am not an engineer) through the years.  He wants to take a look at the fake KBC bearings (Chinese bearings being marked and packaged by counterfeiters in Peru) that I brought here with me.  KBC even makes some of their own machines...  And some for their parent company Schaeffler in Germany as well.

I met Sung-Su Kim after Iljin's two guys turned custody of me over to him late Tuesday (in Changwon, a city in the extreme south of Korea, very industrial but very clean).  Here is a "drive-by" picture of a piece of heavy equipment I saw when while being driven around Changwon:

And a bridge near Changwon (another "drive-by" photo):

On Wednesday, Sung-Su took me over to Changwon Plant 1, where they make most of the pieces that we buy from them, here is the entrance:

If you look carefully at the right part of the first archway you can make out the KBC brand name.

Unfortunately, neither KBC nor Iljin would allow me to take pictures inside their plants.  I have to assume, then, that each has proprietary technology that they do want leaked out to the world (and to their competitors).  Personally, I feel it is a real pity that I could not take pictures of such amazing factories.  I have NEVER seen anything like that in any other factories I have visited (OK, I have NOT visited REALLY hi-tech plants like semiconductor plants).  But, in comparing these factories to the one I visited in Spain some 12 years ago, I was extremely impressed with the automation and quality control I saw...

But, they did have display cases, just for for visitors who turn up, like me!  The below picture is the rear axle of the famous (in Peru!) Hyundai H-1 "Grand Starex", you can see the Grand Starex in my article not long ago about vehicles they have in Peru but not in the USA.  The below photos are not very high quality because all pieces were in display cases, and I could not get really close.

That axle uses six bearings (one double row type on each wheel and a pair each of tapered bearings on the pinion and the differential).  In my earlier article as well re the bearings we sell in Peru, I show two of the pieces we sell for the Grand Starex, one of them is the double-row type here, the other piece is a "Generation 2" type made by Iljin.

The below picture shows ball bearings:

You can see part of the outer ring cut away on the big piece at the right.

KBC tapered roller bearings:

Again, the pictures are not very good, sorry...

I spent that Tuesday night in a hotel in Changwon, in a district that was pretty lively...  Do Koreans ever sleep?

The next day, Sung-Su Kim and I flew back to Seoul (rather than endure a 5 hour road trip, security by the way pretty relaxed for domestic flights in South Korea, they let me bring my bottle through in my hand luggage...).  He put me up in a hotel near to the dead center of the city of Seoul, that afternoon I went out and took some more pictures of Seoul (earlier article, just scroll down the page).

On Thursday, I had a nice long and productive meeting with Sung-Su Kim in a conference room there at their HQ in Seoul.  I noted on the way in a congratulatory picture and note from Mrs. Schaeffler and her son, recognizing the fact that Schaeffler Korea sold over 1 trillion Won last year (about a billion dollars).  The conference room had those white boards that you write on with the erasable markers, it was my first shot at doing that...  I filled out three of them in great detail, I think Mr. Kim would agree, as he took several photos for his later reference (we covered a LOT of ground).  I even briefly met his boss (Kun-Soo Han) too.

So, there it is.  A really good meeting with our KBC counterparts.  Sung-Su Kim is really a great guy, a family man too...  But, probably still at work as I finish this piece at 7:05 PM on a Friday here...

DMZ Tour and a bit more about Seoul

Alas, the DMZ half-day tour was something of a disappointment.  First, no Norks (that's only at the Panmunjon on full day tours)!  We only went to see Tunnel 3 (or as our over-caffeinated tour guide "Catherine" called it "Tunner 3"...) and the observation hill, where you can see the two flags (N & S) not far from each other.  So, yes, OK, I did see the NK "propaganda town" (where no one lives) and the stripped-bare mountains (firewood).

"Tunner 3" (I like her version better) was the third one the South Koreans found.  A defector told them it was near a certain landmark tree,  The SKs dug a few wells and pour water down them.  And when the NKs would set off dynamite to advance through the rock, water then blew out of one of them.  The Tunner encroached some 300 meters into SK.  The Norks then said it was a SK trick!  That SK dug the tunnels.  The SK engineers then pointed out that the holes where the dynamite blew could ONLY have come from the north.  Then the Norks said they were mining coal...  And put coal dust over the granite...  Pretty lame, guys...  And they want a nuke...

At the observation post on the hill, you could only vaguely make out the North, partly because of haze, and partly due to the distance (the DMZ is 4 kms wide, and there is an inner fence which divides the DMZ into the approximately equal areas that the Norks and SKs patrol).

Turns out there IS another DMZ in the world, an Aussie on the tour mentioned to me that CYPRUS is still divided, so I was in error about there only being just one DMZ left.

The tour ended by NOT dropping me off at my hotel (where I was picked up).  They just dumped us near the city center.  I did not have my Seoul map with me, making a bad assumption that they would bring me back to where they picked me up.  Lesson learned: When in a city I do not know well, ALWAYS bring my map (or "BMFM" to you cognoscenti).

I shared a nice laugh with the late night crew at Z Chat, I mistakenly wrote DMA rather than DMZ, then someone else said either was better than the DMV...  Well, I thought it was funny.


I mentioned our over-caffeinated tour guide.  Well, considering that all four men here in Korea with whom I worked with (that I had extended conversations with) work 60 or more hours per week, I guess they need it...  There are PLENTY of young people (etc.) who only put in their 40 hours, but they are not the ones who will wind up running the show.

Seoul is over-saturated with coffee shops, both ones we know well in the USA and lots of their own chains as well.  LOTS of coffee houses, with people doing their thing on their Samsung/Android smart phones.  It's even worse among the young here in Korea than in the US, if you can imagine that.

This is the only city I can think of where it is MUCH easier to get coffee than beer, and even harder to get booze!

Thursday, May 17, 2012

Seoul, Korea

Today I finished the last of my meetings with our bearing suppliers.  Due to strict security, I was not allowed to take pictures inside the factories, so I will just comment on Seoul alone tonight, I will have separate articles soon on KBC and Iljin, our two top bearing suppliers (both Korean).

Seoul is a huge city, the population of Seoul is around 16,000,000 people.  By comparison, the METRO areas of NYC and Los Angeles are both around 20 million and Chicagoland is about 10 million.  The first three pictures I took entering the city from Incheon Airport.  The first one shows the first of the skyscrapers I saw, there are tall buildings everywhere in Seoul...

Mile after mile after mile:

after mile after mile (the river is called the Big River):

The view from my hotel in the Gangnam-Gu area (first night):

After spending a night each in Kyungju and Changwon I arrived back in Seoul last night.  I took the below pictures today, the first is in central Seoul, "almost" a pedestrian mall like in Europe:

The below picture I took of a booth (with a cross in red) sponsoring Christianity here in Korea.  You would have to look very hard to see the "666" business written there, evidently there are people here who do not like "Goldman Sachs 666" either (you know, CEO Lloyd Blankfein saying he's just doing "God's Work" after all...).  But, I remained a moment, and the tiny lady in front of the booth (just to the right in a white coat) began to sing.  She sang beautifully...  I recognized the song, but she was singing in Korean.  I thought and I thought, but it would not come to me...  She sang like an angel.  After I walked on, it came to me: "Amazing Grace".  I walked back and gave her a contribution.  She made my day!  Ma'am, I do not know who you are, but at least I have a picture for the world to see you.

Later, I dropped by a place serving Guinness on tap, Happy Hour!  The kind waiter took the picture of me with my beer and the munchies they gave me (Korean vegetables, they eat LOTS of vegetables over here).  And, yes, I am beginning to learn how to eat with chopsticks...


I wish to thank my two main hosts here in Korea (pictures of them and their assistants in other articles coming soon), Juno Yoon (Iljin) and Sung-Su Kim (KBC).

Kahm-S'Ahm-Ni-Da, my two great friends in Korea!

Wednesday, May 16, 2012

Jecheon, Kyungju, Changwon and Seoul

I will have much more write about my Korea (and later Japan) later, when I have some time to compile my notes & comments and see what pictures I can get get up here on my blog.

Overly briefly, I saw the most advanced factory (at Jecheon) I have ever seen (bearings anyway, I have never been to a semiconductor plant...), robots everywhere...  LOTS more machines than workers.  Absolutely incredible.  And the other factories I visited were EXCELLENT facilities too.

I'm telling you guys, America is not going to catch these guys unless things change fast, else, stick a fork in it, we will LOSE our manufacturing bit by bit as hungry Asians (60 hour weeks by EVERY white-collar guy I spoke with)...  These guys are serious people, not wasting time on Facebook or trying to be web designers or working for obstructionist government...  Korea's government WANTS manufacturing, and it is clean, they fish in their rivers in Changwon, a big-time manufacturing city.  Changwon was MUCH cleaner than an equivalent American manufacturing town.

Korea has good food!  Strange but good!  I have gained weight...  In Kyungju, my hosts treated me to Korean barbecue... In Changwon, we went to a real hole in the wall, ancient-style place for fish soup yesterday.

I need dinner as I write, I promise a BIG ARTICLE on this and related topics as soon as possible (rare-earths too, veyron!).  Some pictures, but they would NOT let me take pictures inside the plants, apparently NO ONE who owns technology wants to let their competitors see how they do what they do.

[Note to my ZeroHedge readers, I have a great idea I am thinking about writing as a contributor...]

O/T, but no (or VERY few) iPhones are here, ALL Samsung phones w/ Android.  Mr. Kim helped me check some stocks on his Samsung there at Changwon airport 3 hours ago...  CAREFUL w/ Apple, yes, they are doing great in the USA (and probably Europe and Lat Am), but Asia (Korea anyway, Samsung-land) likes Android.  I will study what JAPAN uses in a few days.

This has been the most interesting trip of my life in many ways, wow, oh wow.

Sunday, May 13, 2012

DC, NYC and Seoul

Ahn-Young-Ah-Say-O!  (Good Day!)  I know that some of you have received some of these details, but for what it's worth I will tell the tale of our/my trip to Washington, New York and now Seoul (on the eve of visiting Iljin, our second biggest supplier).

It was wonderful to see our daughter again in DC, she has a tiny apartment, but in a good zone with plenty of good shopping close at hand (inc. a Whole Foods right across the street).  She is pretty happy, all things considered, but likes Chicago better than DC.  She might want to move back.  We also got to see my sister Amy (busy, as she has 5 children) and my mother's cousin Alan Jones, Jr.  He was a colonel in WWII and Korea, he was briefly captured by the Germans...  He told us that there were NO rats in the POW camps as they had all been eaten...  May is a nice month in DC, but there is always the risk of rain.

New York, as you can imagine, was a hectic visit even for the 3 days / 2 nights we were there.  We lucked out and got tickets to go to the 9/11 Memorial (free).  I asked Carmen not to make is stay long, else I would start crying or kill Muslims...  She then went on to visit the Tenement Museum (yes, about the ghettos on the Lower East Side), while I went over to the Federal Reserve Bank of New York (yes, it is 33 Liberty St.) to try and take their tour where they show you all the gold they store there (+/- 7000 tonnes, I believe it is the second biggest gold pile in the world).  To my regret, the three cops at the entrance told me I had to book tickets online MONTHS in advance, so no tour for me.  I made up for it by going to Stack's (the famous coin shop on 57th St.) and bought gold...  That was the day gold fell some $33 so I saved a little.  Still, I really had my heart set on seeing those 7000 tonnes...

NYC is famous for walking.  And walking fast!  Walk, walk, walk.  We ate at the famous Umberto's Clam House, where mobster "Crazy" Joey Gallo (Colombo Family) was gunned down during his lunch (although the location has moved).  Apparently Umberto's is still owned by someone in the Genovese family...

So late Thursday night, our daughter dropped me off at BWI airport at 10:00 PM for my 6:00 AM flight Friday (she had to work...).  BWI is a crappy place to spend the night, COLD and the bar closed at 10:00 and they charged me $8.00 just to connect to the Internet...  I was lucky to find some "virtual friends" up late at "Z Chat" (a new feature of ZeroHedge) to keep me company!  6 hours on the plane to San Francisco, then 13 more to Seoul...  Ugh.  At least I slept some (I took Helena's suggestion, but I always do that anyway when I fly...).

I arrived in Seoul mid-afternoon on Saturday (the International Date Line can mess with your head, especially throwing in jetlag).  With some help of some kind ladies at Seoul's Incheon airport, I figured how to take the bus to my hotel, where I now write before I go eat.

Seoul is a huge city, I have heard 13 million and 15 million people reside here.  Tall buildings everywhere.  Oh, and the people walk fast here too.  Even on the weekend!

I even got to practice Tai Chi today in a park along the river.  Did the forms I know, and the Yang Long Form twice.  As I ran and walked back to my hotel, I went past the Olympic stadium, where there was a baseball game going on.  I could see through a gap, and it looked pretty packed in there.  The announcers had the crowds singing and stomping, you do not see that in Miami.  The ground trembled when they all stomped...  What, with all the walking, Tai Chi and running outside, I am kind of sunburned...

Mr Lennon H!  Or one of you ZH guys inform him that indeed many of the women here DO have cosmetic surgery to make their eyes look more western!

As soon as I can figure out how to load the software into my laptop and get the pictures in, I will try to post some pictures of this energetic city.  KOREA is ahead of us in magnets and batteries.  Asia is catching up, you can see it here.  These guys WORK!  And study!  America has some attitude adjustments to make if we want to lead again.  The competition in the future is going to be brutal...

But, "they do not all speak English!"  So, my little phrase book has helped a lot!  They like all three words I can pronounce in Korean...

Tonight I review my talking points and papers for Iljin.  I will likely visit a bearing factory, which will be very interesting for me.  I will try to take pictures!

Saturday, May 5, 2012

Review of Barron's -- Dated 7 May

I sit here in a DC Starbucks waiting for my turn to get ready for young-people's keg-style party.  Maybe I will finish this article today, maybe not!  WE will be the only ones over 40 there (maybe over 30).  By the way, can anyone tell me what "Beer Pong" is?

Barron's this weekend has as its Cover Story a special section on America's Top 500 Companies.  This is their annual salute to companies that have done the best job of GROWING their businesses, whether organic growth or by acquisitions.  I can instantly see three problems with their methodology (Sales Growth 2011, Cash-Flow-Based Return on Investment (three year median and 2011 vs Median(?), for a total of three equally weighted measures), the single biggest problem (for me) being extreme volatility in each year's rankings.  Take a look at their Top 10 in 2012 vs. 2010:

N. R.
CF Industries Holdings
Southerrn Copper
Phillip Morris Int'l
Henry Schein

CF Industries is a fertilizer company that bought Terra Industries (another fertilizer co.) and so it is in top spot by doubling its size while fertilizer prices have gone up.  Companies like Visa and Intel are up there because of good growth of recent profits AND sales based on our "growing" economy.

My thought:  A good list for speculators and traders, not so much for "Buy and Hold" guys like me.


Alan Abelson starts off with a long and winding parable on the purchase of upcoming IPO Facebook, which I would venture to say would be very risky to the downside even if they price at around the low-end price of $28.00.  Me either Alan, no thanks, not for me or deal old mom...

He then goes on to mark the Second Anniversary of the May, 2010 "Flash Crash".  He notes that it was at this point that frustrated investors just threw in the towel on stocks as the machines took over.  And NONE of the causes have been fixed.

And you would expect him to glare at the new employment numbers..., as he does!  Payrolls increased a less than expected 115,000, but two other surveys showed a DECLINE in payrolls...  The guys Abelson is talking to all say that things are growing much more slowly than hoped.  "QE3 Looks like more of a possibility than it did a few days ago."  Ugh.


Michael Santoli's title ("Streetwise") is "Buy Stocks Slowly as Prices Fall".

"Sell Stocks Quickly as Prices Fall"  <-- fixed it for ya!


"He Said":

"It's great that people get together and collaborate...all in the interest of having a great financial system."

I ought to make you all guess this one, it is so revolting...  JP Morgan CEO Jamie Dimon.

Hey, Jamie?  What collaboration?!  Where is all of the MONEY that MF Global and Corzine sent you?!?!



Jonathan R. Laing writes a positive piece on United Continental, which is now the world's largest airline.  United has been under pressure lately because of the costs of integrating Continental.  But, with a pretty good route system and good hubs, he thinks that this one may the big winner among the airlines.

I have to write one more time: the airline business has LOST more money than it has made!


Andrew Bary writes a positive article on Phillips (PSX, the refining and marketing operations), which was just spun off from Conoco.

Many spin-offs do quite well afterwards.  The additional piece of Phillips is that they have a profitable chemical business as well.  Worth a look...  2.6% dividend...


Johanna Bennett writes a positive piece on generic drug maker Watson, which has just acquired a Swiss rival, now making it the third largest drug maker.  The combined company (WPI) has a good stream of upcoming generics coming soon.  But...

Lots of positive stock review in this edition...


Jim McTague ("D. C. Current") writes that even though there is now more money in retirement accounts than in 2007 (the previous peak I guess), that many investors have become sour on buying stocks...  Why?

Because of the SEC changing the rules up to 2007, turning the stock market more into a casino than before.  Oh, and then the flash crash.  Investors had just started pouring real money into the markets early in 2010, then May's flash crash drove many out for good.  McTague cites prescient authors Sal Arnuk and Joe Saluzzi (Broken Markets) who wrote a book in 2008 about HFT destroying investor confidence.


Lately, I have read and reviewed each "CEO Spotlight" as they have been interesting.  This week I decline.

But, should you be interested, it is about John Stumpf, CEO of TBTF bank Wells Fargo.


Bill Alpert interviews Dan David (Co-Founder of GeoInvesting), who investigates all of these little Chinese companies listed over here.  MANY have been found to be frauds. And the SEC does little about it.

Mr. David found a few himself (a company named Muddy Waters is probably the most famous of these investigators).

My suggestion?  Don't little Chinese stocks you do not know REALLY WELL!


Editor Thomas Donlan now writes that Apple is now the new whipping boy by various levels of our dearly-beloved .gov.  Apple has also picked up a hate club because of their Foxconn partners in China (who actually provide a much better deal to their workers than if they had stayed in their villages...).

Apple is, legally, doing what it can to pay lower taxes (what they SHOULD do), yet government at all levels rails against them and wants them to do it favors (HQ city Cupertino, CA wanted free Wi-Fi for the whole city, for example).

Donlan says that we have seen this all before (Microsoft and IBM were scorned and hated).  Donlan says we should admire Apple because of their success (undeniable).

Or else Apple might suffer a fate like GM, US Steel, RCA and others who looked invulnerable in the past.  On the other hand, maybe Apple could move to business Ireland...


The Market Week section has an article ("Current Yield") by Randall W. Forsyth about how Treasuries just keep getting stronger and stronger (with the yields going down).

Investors are accepting yields on 10 year bonds ( an almost unbelievable 1.88%) under the Fed's own stated inflation goal of 2.0%.

This means, according to Antal Fekete (famed economist, read his stuff, it's all online), more capital destruction...


Simon Constable writes ("Commodities Corner") about the price of rice going up.  The USA as well as other big W. Hemisphere producers are harvesting less...

But, he expects that prices will be volatile as the results are not in from Asia.


Facebook will IPO very soon, between $28 and $35 is the range they expect.  EVERY big broker is in on the one...


Two Apple insiders sold some $62,000,000 of AAPL stock on April 27...


The Mighty Peruvian Sol dropped a tiny bit vs. the buck this week, less than 0.1%.


Verdict this weekend:  yes, sure, buy it!


The frat-style beer keg party last night in DC (I write now on the train between DC and NYC) was a big success!  Even though we were over 20 years older than any of the others attending (22 in total)...

My wife played "Beer Pong" for the first time last night.  On her first toss, she landed a ping-pong ball right in an opponent's cup!  Bravo, mi amorcito!

Wednesday, May 2, 2012

Precious Foreva!

I have been experimenting with my camera that my wife gave me.  I will be bringing it along to Korea and Japan on my upcoming trip.  So I took the below picture at my office today:

That one picture is truly worth 1000 words, please study it carefully...


The little gold coins are 1/10th oz Gold Eagles.  They are 16.5 mm (1.65 cm) or about 0.65 of one inch (5/8ths of an inch) in outer diameter (see my article here here).

The two bullets standing up are the 9 mm for my Beretta, the other three are 7.62 x 39 mm for my AK.

And that bottle?  Take a good look...


You're looking at freedom there.  All of the above have been (or currently are) under attack at various times in our country's history.


Why, it almost makes me feel like a highwayman...

Tuesday, May 1, 2012

How I Met My Wife

At the request of one of my readers, I will now tell the tale of how I met the lovely girl who would go on to become my dear wife.

In 1981, two of my old friends from college and I were all free for part of the summer, I was 25 years old.  I had applied to go to work for Uncle Sam and was going through a long and involved application process, the two of them were in graduate school.  We talked over going somewhere, and I volunteered to research trip ideas.  Three weeks later I suggested Peru, as it was cheap and looked like an interesting country.  My friends accepted, and so we went to Peru for five weeks (I will tell other parts of this story in the future, tonight I will tell just the most important part!).

The three of us were in Cuzco (the capital city of the Inca Empire) one cold morning, preparing to board the train to the famous ruins of Machu Picchu.  We had assigned seats and boarded as soon as we could, it was COLD at 6:00 AM and at 10,500 feet up...  Trains and buses in Peru (like here) have two abreast seating, which meant that one of us always had to sit next to the "stranger".  And it had to be either or my friend who spoke Spanish (our other friend did not).  That day it was my turn.

We found our seats early and waited for train to fill and start the 4 and 1/2 hour journey to the ruins of Machu Picchu.  Soon after we had seated ourselves, a pretty young Peruvian gal stopped at my row and studied her ticket.  I looked at mine.  There was some confusion as to who was supposed to sit on the aisle or the window.  I just ended it by just asking her to take the window seat.  I had this little idea that "maybe she was off to visit her sick mommie in Quillabamba", the last stop of that train, as she was not dressed like a tourist.

The train left the station, began its switchbacks up over the mountains to the north of the city, and then it was all downhill from there, right along the Urubamba River, the sacred river if the Incas.  Because of the very early departure, we had not had breakfast...  I was beginning to think about eating, when it might happen and how...  I remembered I had a big bar of chocolate in my bag, so I took it out and opened it.  "Blick" as I broke off a row, and offered it to my friend R, and "blick" again as I offered a row to H.  I then found myself in a quandary...

I had earlier been reading up on Peru, and its conservative social culture (remember this was 1981).  The three of us were trying very hard not to be obnoxious tourists.  I did not know the proper thing to do.  To offer my neighbor a row of the chocolate to my neighbor or not.  Here in America of course, we have that old saying: "Don't take candy from a stranger."  I had no idea if such an offer would be considered offensive or not.  I really had no idea.  After mulling this one over a few moments, I decided to be a neighborly all-around good guy (like I am) and offer her a row.  If she took offense, I would immediately apologize and do the 1981 version of STFU after!

So, I offered the chocolate, and she accepted it.  She explained that the three of THEM (she was chaperoning her sister and her sister's fiancĂ© therre to Cuzco & Machu Picchu) had not eaten either.  We talked just a bit, not much though.  Pretty little thing!  When we arrived to Machu Picchu, she went off with hers and I went off with my two friends.  The three of us had several hours to explore the ruins, but got separated.  About 40 minutes before the train's departure, I saw a LONG line for the buses to take everyone back down to the bottom of the valley, next to the river.  I did NOT want to take the chance that I would miss the train, so just hauled ass down the mountain, half running half walking.  800 feet down.  Once I arrived to the train I found that was early, but all sweaty and dirty.  I walked upriver around a bend, took off my undershirt and rinsed it in the river and gave myself a sponge bath in the cold water.  I then squeezed the water out of my undershirt the best I could, and went aboard the train, and hung up my undershirt to dry, knowing that it then be COLD again in Cuzco when we arrived back that evening.

Passengers started arriving again, including my two friends.  We quizzed each other on where they had climbed to and what they and I had seen.  And the Peruvian girl came back as well, to the same seat next to mine.  I excused myself to her about hanging my undershirt to dry, and I hoped it would be dry enough to put back on before Cuzco.  The train pulled out right on time.

On the return part of the trip, we started to converse more, a lot more.  She told me that she was a secretary (what's a secretary I can hear the younger readers say...) in Lima, working for Proctor and Gamble's operations there in Peru.  I told her that I was waiting to hear back from the government re my next job.  We then went on to talk about this and that.  It was hard for me, as my Spanish was not as good then as it is now.  If you do not know a foreign language fairly well, it is hard to talk for four hours...  At one point she told me that she had lived in London for over a year.  I thought about that for a moment, and then told her, in English, "If you LIVED there more than a year, then YOUR English is going to be better than MY Spanish!  Let's talk in English!"  She then told me, no, that I was in a Spanish speaking country, and that was that.

As we neared Cuzco, I knew I had a decision to make...  I was the "least macho" of three of us guys, and yet there was an opportunity to ask out a nice young lady (when in Lima) and score a psychological point vs. my friends!  So I did ask her for her phone number.  She gave it to me, her work number.  We then said goodbye there at Cuzco station.  We did indeed get together there in Lima for a date!

And that is how I met the great love of my life, and mother of our child!