WHAT IS DOCTOR COPPER TELLING US?
Copper is no doubt one of the most economically sensitive commodities in the world. Many investors even say the metal has a PhD because of its predictive value. The current rally in copper has been incredibly strong. So strong, in fact, that it makes me question my secular bear market thesis. Of course, it’s important to note that the Chinese stimulus plan has had a huge impact on the price of copper and will likely continue to influence prices in the coming quarters. As for now, the price surge has to be taken as an enormous vote of confidence in economic activity going forward. In the near-term, however, copper is already 5% off its highs and continues to struggle in today’s market. The low volume rally in stocks is not being confirmed by copper which is currently trading flat on the session.
July 29 (Bloomberg) — Copper’s 76 percent rally this year may soon end on signs that China has stockpiled more than it can use in new homes, cars and appliances.
http://www.bloomberg.com/apps/news?pid=20601109&sid=ac_39IFvvSbA
The US Consumer is the end buyer of chinese goods.(raw material : copper)
Only a real recovery at the end of the us consumer, will sustain production capacities at chinese factories.
Im not expecting a quick turnaround.
Puts on FCX were really appealing at $66. They are still attractive today at $60.60
This commodity is just responding to the Dollar Trade and the China Trade.
The Chinese want to buy something of VALUE with all those soon to be worthless dollars they own–no time like the present–cause payback can be hell !
If this economy doesn’t start to perk-up–look to “Bubbles Bernanke” to increase the money supply once again–this next time with greater confiction!!–can’t have the Dollar floating UP in value and an economic recovery at the same time–
Since about 1994, a wide range of asset classes, exchange rates, country monetary bases, central bank balance sheets have seen huge gyrations. There is no market (including oil) that is deeper than all the fast money that is floating around. I’m skeptical that anything has economic predictability, but rather are liquidity indicators. The trick is whether the liquidity indicators are coincident indicators (i.e. falling corporate spreads = buyer interest = flood of 2009 issuance = deleveraging and perhaps positioning for future investment). Does anyone have any thoughts on confirming indicators for copper? There have been quite a few articles recently on Chinese private speculation (Andie Xie; Caijing). Looking at the copper chart (http://www.indexmundi.com/commodities/?commodity=copper&months=300) it looks about priced at 2005 with +/-25% vol. Seems about right with the high vol seen in 2005-2008 … hard to say it is a trend or vol. If copper continues to go up after China makes more announcement on “tightening credit” and the US dollar is going up as well then maybe it’s real.
What do Chinese farmers have to do with the price of copper? Plenty
http://www.theglobeandmail.com/globe-investor/what-do-chinese-farmers-have-to-do-with-the-price-of-copper-plenty/article1256380/
Perhaps more entertainment then hard data indicating a problem. Housewives speculating on forex in Japan had a benign effect; of course, they weren’t leveraged!
if’n ya buys it here’n,
you’s be takin a cropper in copper!