Written September 28th, 2011
Copper has been called one of the better economists throughout the modern age since it’s used in everything from cars to housing to pretty much every mechanical knickknack you can imagine. So what does it tell us when copper falls 30% in a few months? Probably that the recovery that equity buyers are hoping for isn’t around the corner. Probably that the Chinese miracle that some have been betting on is NOT a new economic model of government interference that works. And probably that consumers and real estate have NOT yet stabilized.
That’s JJC with SPY overlaid. The correlation is obvious and the lead time for copper is about in the range of 1-2 months. Judging by that, today’s 7% decline is a bad omen for the equity markets. Dr. Copper has been wrong before, but she tends to be better than most of the other economists out there, so it’s probably worth paying attention when she tells you that equities are sick.
Relevant ETFs: JJC, SPY, SH
Written December 14th, 2010
There are some funky moves happening in commodities and it will take time, perhaps even years, for all the dirty laundry to be aired and balance sheets to be cleared. At the center, of course, is JP Morgan (JPM) which has been rumored as getting squeezed in silver, while at the same time holding a dominant position in copper. One thing is for sure, there are big players afraid of revealing their hands.
Look at copper:
And now at silver:
And here’s just one of dozens of articles on JPM: this one from ZeroHedge.
Now if silver is going to squeeze higher, would that make copper the easier position to unload to cover any margin calls? Is JPM actually short, or just short against forwards from clients? In other words, is JPM getting squeezed on a timing issue or is it taking a prop directional position?
I have a long position in the precious metals and continue to see opportunity for them to be stores of value in a volatile time, but I’m not a big fan of the industrial inputs as I see a major slowdown coming. This might would put fundamental pressure on copper, which could result in a magnified move if indeed JPM gets squeezed as (if?) their silver:copper spread goes crazy.
Written May 5th, 2010
Structural deficiencies make the euro vulnerable (and the US a safe haven), but demographics, savings rates, and fiscal policies will make the emerging markets currencies more attractive once the dust settles.
The emerging markets are not the place to be these days, but then again, neither are the developed markets. As risk trades get taken off the table emerging markets, small caps, high yield, etc. will continue to come down significantly. At some point we will look in those areas for the potential opportunities. For now, we wait.
As long time readers know, we have continued to build a cash position, and we maintained our short euro and short yen positions. Additionally, we have a diversified metals portfolio, which we anticipate will actually decline (except for gold) as financial assets face a correction regardless of class.
Europe continues to be the focus, but soon I believe it will shift to China and determining how it will sustain its growth. We will write more later today, but copper should be one of the main signals to look at.