52 seconds capital

Month: October 2025

Surely you have a favourite misnomer of your own.

You know, a name or a label that sounds wrong?

Like Greenland (which is mostly covered in ice) and Iceland (which is mostly green).

Or a Koala Bear (which is not a bear but in fact a marsupial).

But few misnomers carry as much geopolitical weight today as ‘Rare Earth’.

That is ONE. SOLID. MISNOMER.

The 17 metals that constitute Rare Earth are not actually rare; they are in fact relatively abundant in the Earth’s crust (some of them more than Gold, some more than Copper).

The true challenge, and the heart of the current standoff between China and the US, is not in locating them or owning them – it is in refining them (as Elon Musk so emphatically stated earlier this year).

The process of turning ore into usable, high-purity rare earth is complex, environmentally hazardous (and that is precisely where the shift to China occurred a few decades ago!), and incredibly expensive (if you are not operating at a massive scale).

And since then, China has strategically built an unassailable lead on this very capability. This dominance allows them to control the market for products made from Rare Earth (Think here of: Permanent Magnets, Batteries, Electromobility, Aviation).

Which brings us to the current high-stakes drama.

Talks over the weekend have reportedly yielded a temporary reprieve: a reported one-year postponement of China’s new rare-earth export restrictions, seemingly in exchange for the U.S. holding off on planned 100% tariffs. (I say ‘reported’ twice in a paragraph because China has not yet categorically confirmed the postponement)

Even if China does confirm this [postponement] later this week after the Trump-Xi meeting at the APEC summit, one thing is clear:

A one-year extension is not a win. It is a telling sign of how much leverage China holds over the US and the Rest of the World on Rare Earths.

All this underscores two uncomfortable truths for the U.S. and its allies:

1. Despite having rare earth deposits domestically, the US will continue to remain critically dependent on China’s rare earth products.

2. China’s dominance is not just about its own mines. It is about a well-tuned supply chain that now includes countries like Myanmar and Laos (See image for Largest Producers of Rare Earth Products for 2024; source www.rareearths.com)

Rest assured the aftermath of the Trump-Xi meeting at the APEC summit might well have the usual trappings of yet another ‘epic victory’ for the Trump administration, but the core point wouldn’t have budged an inch:

China continues to maintain a chokehold on all finished products from rare earths.

By

Avinash Menon, CFA

Founder and CEO,

52 Seconds Capital Limited

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For years, market watchers spoke of the ‘Powell Put’ or the ‘Fed Put’ – the implicit belief that the Fed would step in to support markets during a significant downturn.

But, as events in 2025 have shown, that ‘Put’ or a ‘Back-Stop’ has been eclipsed.

Since the ‘Liberation Day’ tariffs announcement in April, we have entered the era of the ‘Trump Put’.

The pattern is striking:

1. a market-jolting policy threat ….

2. …is followed by a swift, clarifying statement that backstops the sell-off.

Rinse and repeat.

Social media derides this as ‘TACO’ (Trump Always Chickens Out), but that misses the point.

This is not about cold feet or chickening out; it needs to be looked at for what it is:

A PUT – a price floor under the market, activated by political and policy rhetoric.

To be clear: backstops are not inherently great for equity markets (or for that matter outright bans on short-selling, as the US temporarily did in 2008. I found it difficult to understand that then and even after all these years think of that one event as a Top 5 Absurd Market Event. See image).

Equities are meant to price in risk and uncertainty freely. By their nature, they are not supposed to have price floors (except at zero).

The only legit backstops we should celebrate are those driven by corporate share buybacks (while debatable they are grounded in fundamental value and cash flow).

The jolt-and-then-provide-a-backstop, on Oct 10th, was particularly chilling: a flash crash on tariff-related anxieties, followed by an almost immediate recovery on reassuring comments.

The finesse around the execution was particularly unsettling.

There is no other way to say this except acknowledge that The Efficient Market Hypothesis, which posits that prices fully reflect all available information, is under siege.

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The core mandate of most Central Banks is clear: ENSURE PRICE STABILITY (A select few, like the Fed, also target maximum employment).

But their recent behaviour does raise this fundamental question: are they still solving the price stability problem? or have they conceded that fight?

This is fundamental because Central banks, the very institutions tasked with fighting inflation, are in a historic panic-driven gold rush.

Here is the data:

2022: 1,082 tonnes. That was the highest level since records began in 1950 and double the 2021 figure.

2023: 1,037 tonnes

2024: 1,045 tonnes. Marks the third consecutive year of a 1000+ purchase.

2025 (Projection): 600-700 tonnes, as de-dollarization and reserve diversification become entrenched policies.

The numbers show this is not a vague trend; it is driven by clear, repeat (but somewhat patchy) buying by Central Banks worldwide.

Why do I say, ‘somewhat patchy’?

Well, look at some of these buying patterns:

The PBOC paused its 18-month gold-buying streak in mid-2024, only to resume months later.

After a record 2022 purchase, Turkey briefly turned seller before launching a new, ongoing 27-month buying streak.

And then, there are some non-traditional buyers showing clear intent in 2025.

Which Central Bank has made the highest net purchase of Gold this year?

Russia?

No.

China?

No.

Surely Indonesia then?

No.

It’s Poland.

Next largest buyer?

China?

No.

It’s Kazakhstan.

The frenzied nature of the buying from the very fountainheads of monetary policy is unusual.

Central Banks are expected to combat inflation using interest rates and liquidity operations. Not by hoarding a ‘store of value’ themselves.

So, why the frenzied buying?

If it is to hedge themselves against the very inflation they are mandated to control, then it’s ironic!

Geopolitical concerns and the threat of confiscation of reserves are valid, but is that enough to justify this scale of buying?

1000+ tonnes? Year-after-Year?

This leads to two critical points:

1. What happens when Central Banks realize that their massive gold stockpiles generate zero cash flow? There is a massive opportunity cost there!

2. And if these are the leading moves to build a war chest to pay down ballooning public debt, then history offers a stark warning.

Look no further than the Central Bank Gold Agreement (CBGA) of the late 1990s. Coordinated selling to manage the price led to a 10+ year bear market.

Now, imagine the reverse: A coordinated gold sell-off (again!) by indebted nations could trigger an unprecedented price spiral.

Central Banks’ gold stockpiling ultimately reveals a lack of confidence in the fiat system they oversee.

In other words, Central Banks are preparing for a scenario that their own policies may have helped create.

Traditional Central Banking as we knew it appears well past its shelf life.

And that may not really be a bad thing.

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Avinash Menon, CFA

Founder and CEO,

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Kalshi surged past Polymarket in trading volumes last week.

Both entities are regulated by CFTC (Commodities Futures Trading Commision)

It’s a weird world we live in today when you consider that what was being traded in such record volumes by both Kalshi and Polymarket was ‘Predictions’

Is that [Prediction] even an asset class?

The regulatory vacuum here does ring a bell, right?

Remember the early days of Bitcoin?

Regulators scrambled to answer a basic question:

Is it a commodity?

Or a security?

Or a currency?

And that confusion around the choice of ‘box’ created years of uncertainty.

We now appear to be at the same inflection point with Prediction Markets (on the definition of the asset class that is; this isn’t about weighing the pros and cons of ‘Crypto-assets’ against ‘Predictions’)

The CFTC oversees Kalshi and Polymarket.

But doesn’t the CFTC govern commodity futures – like contracts on say the price of wheat or oil?

A bet on ‘Will the Fed cut rates by 25 bps or 50 bps?’ is not a ‘futures’ on an ‘asset’; it’s a wager.

This is a fundamental mismatch.

There is another obvious elephant in the room here: Insider Information.

Futures is largely about inside knowledge (a farmer hedging his wheat crop against a price change is using specialized, insider-driven knowledge. The farmer will indeed potentially know more about the future path of the price of Wheat than you or I), so what really is then the point of boxing in ‘Predictions’ with ‘Futures’?

Surely, that is as ‘light-touch’ and as ‘definition-less’ as it can get when it comes to regulation.

This lack of definition creates a massive blind spot for insider trading. (Calling it an ‘Event Contract’ instead of a ‘Prediction’ does not give it better definition)

Laws preventing a government aide from trading stock on non-public information are clear.

But the laws preventing that same aide from betting on an event contract about a policy decision are untested and murky.

The ‘asset’ they are trading is simply not defined.

Sure, the CFTC is an expert at ensuring market integrity for commodities, but policing information asymmetry in geopolitics and policy is far outside its mandate.

It’s a fundamentally different challenge.

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Avinash Menon, CFA

Founder and CEO,

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Yesterday’s FOMC meeting was billed as the Fed reclaiming its ‘independent voice and the triumphant return of consensus’

Was it an interesting exercise in Group Think? Absolutely.

But was it a reclamation of ‘Independence’ and a ‘Return of Consensus’?

Let us not kid ourselves.

Yes, the headline takeaway was that the Governors Michelle Bowman and Christopher Waller, incidentally both Trump appointees as well, who dissented in the July FOMC, fell back in line, leaving only Stephen Miran, the ‘Politician-Governor’ as the lone dissenter with a 50-bps move.

July’s double-dissent, the first in over three decades, was promptly relegated to history.

And yesterday’s outcome was billed as an excellent display of consensus.

Markets, of course, love the idea of a united Fed. Market commentators rushed to declare that Powell had successfully guided his committee back into harmony and the entire committee (except You-Know-Who) had completed a victory lap.

The Board of Governors.

Unified and independent against the Politician-Governor.

End of story?

No, it’s not.

Look closer – especially at those dot plots.

Powell framed the cut as ‘risk management’ with the Balance of Risks appearing to shift towards unemployment over inflation.

But the committee’s own projections betray him:

1) The decision on whether there will be one more cut or two this year was razor thin – 10 vs. 9. That’s not consensus, that’s as divisive as it can get.

2) And buried in those dot plots? A subtle but a real dissent nevertheless – one policymaker signalling no cuts at all in 2025!

So yes, Miran grabbed the spotlight as the ONLY dissenter (and with the blackout window ending today, he will be everywhere with his soundbites starting tomorrow); but in reality, there were 2 dissents.

So yeah, the Fed’s show of unity is more performance than reality.

(In general, we have short memories. We move on fairly quickly. Such is deluge of information hitting us. In reality, it’s only been a few weeks since Gov. Kugler stepped down (her place in the committee was taken by Miran). Strangely, there was no reason offered whatsoever for her decision to leave. See extract from the FOMC MoM July 2025)

Yesterday’s meeting wasn’t the Fed reclaiming independence. Far from it. And yes, as those dot plots show: the jury is still out on whether the Balance of Risks have shifted.

Behind the choreography, the FOMC committee appears visibly less ‘independent’ and deeply divided on the path ahead.

Yesterday, in reality, was less about ‘reclaiming independence and consensus’.

But appeared more an exercise to formally introduce market participants to The Black Sheep within the FOMC’s ‘incredibly cohesive’ Board of Governors.

So yeah, all-in-all a whole lot of curated Group Think.

By

Avinash Menon, CFA

Founder and CEO,

52 Seconds Capital Limited

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