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It seems like only yesterday that rare earths, the 17 members of the periodic table of elements that aren't all that rare, were all the rage. Legitimate fundamental arguments could be made for investing in rare earth stocks such as Molycorp (NYSE:MCP), the largest U.S.-based rare earths miner. Investors opting not to stock-pick in the unfamiliar, volatile rare earths universe also had and still have the luxury of turning to the Market Vectors Rare Earth/Strategic Metals ETF (NYSEARCA:REMX).

There was time when Molycorp and some of its rivals were considered fascinating growth stocks with the rich valuation metrics to match and there was a time when REMX was viewed as one of the more compelling options among new sector funds.

Unfortunately, those days have since passed. Yes, Molycorp and REMX are up more than 14% and 8%, respectively, year-to-date, but that's not saying much. Colorado-based Molycorp has plunged more than 20% in the past month. The stock closed below $27.50 on Wednesday. The 52-week is above $79. REMX now trades around $16, more than $10 removed from its 52-week high.

It's hard to blame China for this. China, the world's largest rare earths producer, controls 95% of the export market for the 17 metals. The country's chicanery with its rare earths quotas is well known at this point and that reluctance to significantly expand exports hasn't really dented demand.

In fact, it's not really slack demand that is crimping the share prices of rare earths miners and the corresponding ETF. Rare earths are used in array of everyday products ranging from smart phones to tablets to electric and hybrid cars. Not to mention advanced global armed forces are among the most voracious buyers of rare earths, which are used in missiles and night-vision goggles, just to name a few products.

In other words, investors have all but decided the rare earths theme is trade-worthy, but not one to bet on over the long-term. Simply put, most investors feel comfortable with the stance that the best news the rare earths industry can offer has probably come and gone.

The other drag on rare earths equities is the view, and statistics support the assertion, that supply will catch up to and perhaps surpass demand sometime in the next two or three years. Since rare earths are commodities just like other metals such as copper, gold and silver, they are subject to the same supply/demand dynamics.

With the supply/demand element about to move against rare earths miners, the bull case for this sub-industry remains flawed, indicating investors would do well to stick with the basics such as gold, platinum or palladium.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: Rare Earths: Lost Glory