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Chinese Pig Farmers Speculating On Metals
Some interesting quotes:
Copper, nickel and other base metals stockpiled by speculative Chinese investors including pig farmers may be sold when “market sentiment turns,” said Scotia Capital Inc.
Pig farmers in Guangzhou province were buying copper or nickel, Liu wrote, citing CCTV. Residents in Wenzhou city of Zhejiang province, “famously investment savvy,” are reportedly using bank loans to stockpile copper scrap, with one merchant saying he has stored 20,000 tons, Liu wrote.
Metal traders have reported incidents when “a rich man walked into our office and asked us what had been the lowest and highest prices of nickel,” Scotia’s Liu wrote. “After telling him those prices, he said the current price was low and he placed an order.”
China, the world’s largest metal consumer, uses around 5 million tons of copper and 400,000 tons of nickel a year. Shanghai exchange-monitored copper stockpiles expanded to 76,107 tons last week, the highest in two years.
“The scale of the speculative investment is hard to quantify, although some local observers put the number at some 200,000 tons for copper, and at 50,000 tons for nickel,” Scotia’s Liu wrote.
In other news, Goldman Sachs recently announced that they were freezing all US-based recruiting efforts and are now solely focusing on the "famously investment savvy" inhabitants of Wenzhou in the Zhejiang province.
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they are just gambling; its not investment to them; it gamble.
...and the diffrence between gambling and investment is?
In gambling the odds are in favour of the house but there have to be some winnings.
In investing it is task of the investor to figure out when the odds are in his/her favour.
By your definition playing in poker tournaments is investing.
nice. i wonder if the likes of johnny chan, phil ivey, chris ferguson et. al. are employed by goldman sachs.....and run the HFT blade grids when they aren't playing at harrah's...
Poker players don't get those good of odds, they're playing a game that is basically fair amongst participants, unlike GS.
Aren't these farmers investing?
By your definition, playing poker professionally is investing
So in otherwords, we are 'gambling' in this current investment environment since the odds are clearly in favor of the house (Wall Street)
to tell you the truth i don't know; but China is a bubble, and a bigger one than the US; and when that thing pops, 1929=201x for the Chinese; to much debt; inventory and infrastructure for a non existent demand.
"too much debt" ?? With a saving rate of 30%+ and the largest foreign reserves in the world ??
"infrastructure for a non existent demand" ?? I don't think you have ever been to China...
I don't think you know what you're talking about.
wanna bet; check out YIWU and other credit indexes ( don't know them by heart ), check out the percentage of newly built ( past 2 yrs ) CRE and RE in metropolitan areas, then check out the percentage of exports y-o-y, rate of domestic consumption, and after you have done all that check out the percentage of people who are going back to the country and percentage of businesses that have declined for more than 40% and compare all that to the number of square feet of CRE built in the past 2 yrs. Than we can talk, your assumptions mean nothing. Oh and savings rate has always been high, so it doesn't have any effect on the current situation, and ill bet you 200 C shares that the Central Government will lower savings rates in the next 6 mths in order to velocity faster and to support the equities markets from implosion.
You make a common mistake. Chinese markets are in a bubble. Chinese economy is not.
No bubble in the Chinese economy?
http://sovereignspeculator.com/2009/08/19/hugh-hendy-walks-around-china/
The US Dollar is the biggest bubble in the history of the world.
And we shall call him Gamblor
Here the flip side. These farmers have the physical commodities that don’t spoil.
What does people that invest in the stock market have?
Chinese farmers are more clever than western investors. At least the have something tangible of value to exchange for other things of value. Western investors have papery things of (soon) no value and electrony things that never had any value and think they are rich. BWAHAHA.
But papery and electrony things have growthyness!
Yet even tangible items have to have some sort of demand and liquidity if you want to get rid of them at some point.
When it seems the entire world is waiting for China to save them, it appears everyone is gambling with money they can't afford to lose.
"... and it's gone! "
you're right
where I live the casinos are sprouting ever since Chinese population exploded
70% of all visitors to the casinos are Chinese
hey, its their money and their gamble
Chinese are gamblers, tax evaders and thrifters at the same time
that might be smart to some people but it sure as heck is not supporting the argument of a Chinese miracle economy. their economy is what it is because of low wages and exports.
I am Jack's diseased rotting Comex market.
I had a Chinese-American girlfriend (first generation). She had a master's degree. A brilliant writer, a brilliant woman. And she bought a lottery ticket every week. I explained to her that the odds of her winning were equivalent to being struck by lightening three times during a lifetime (true), and that maybe she ought to skip buying her ticket. She answered,"What if they pick my number this week!" It was also custom to wear new underwear Chinese New Year's Day. Very unlucky not to. Luck, fate, gambling... the I Ching... it's all part of the core belief system.
i also know someone called paul tudor jones who is supposed to be a good trader.
i heard he likes to put on bruce willis' old tennis shoes when things aren't going well.
hmmmmm. i wouldn't mind having his core belief system.
What have they to loose, GS is a government guaranteed bank, they can speculate till the cows come home!
The whole world is short the dollar ... time for the unraveling.
Not quite yet... Let's do one more 'flight to safety' first because that was the best and easiest trade I made all year... Like waching the tide flow in and out.
It is nice to get a little added clarity as to where the Asian commodities led boom that will be the locomotive of global growth is originating.
drop in the bucket. all those short-term loans & forced lending? big portions of those funds make it straight back into the stock market. lot of the exec's during the 2007-08 run-up were taking their companies funds to macau & living like whales. china cut back the number of visa's to macau in an effort to thwart this kind of craziness. you think it still doesn't happen? ha ha ha
munt
It is not about the core belief system, it is just the normal reaction to market. A way of doing things.
You're right. It's a natural/normal reaction. But I still think there is some cultural nuance to it all. Over here we have an underlying belief in "Individualism" that seems to affect/distort decisions. It's all the same, with various distortions.
Chinese pig farmers have pork and copper. PBOC has U.S. Treasury and agency debt. Who is the bigger fool?
and the shanghai composite is down 4.30% this AM, off almost 11% in a week. I've said over and over again it will hit the EM in a much bigger and faster way than it would the US....
-OJ
Wasn't Cornelius telling everyone to short Copper back in April when Copper was trading around 1.80?
Nope... just calling the bubble back then.
Where are the pig farmers getting the money to stockpile commodities? I wonder if it has anything to do with the Chinese government forcing state owned banks to ramp up lending to stimulate the economy. That flood of money couldn't have found its way into Chinese stock prices and worldwide commodity prices could it? Nah...
Sounds to me like some of these farmers are having trouble buying (or selling) PM's... Why else buy base metals (and physical, no less)?!
2010: "The Year Of The Dead Duck"?
Only because they couldn't break into the stock market.
"Pork is considered unsuitable for stock due to its greasiness"
http://en.wikipedia.org/wiki/Stock_%28food%29
http://www.google.com/search?rlz=1C1CHMQ_enUS307US317&sourceid=chrome&ie=UTF-8&q=strategic+pork+reserve
Strategic Pork Reserve
fight club/zero hedge bible http://www.scribd.com/doc/18755224/anarchoprimitivsm
And what do you use copper / nickel for? Hmmmm. Thanks for the link Cheeky Bastard.
If the bubble bursts in China, What will happen to U.S. Treasury and agency debt? Not a pretty picture.
Sell!
http://www.chinadaily.com.cn/china/2009-08/18/content_8582318.htm
Frak. Where the heck is the $200 billion+ that gets sold every week going?
I sure hope we're not just saying we sold it, and hiding the unsold treasuries at the back of the drawer, like a fat chick with a shoe problem.
In exchange US$ with hard assesst.
http://www.reuters.com/article/newsOne/idUSTRE57H20A20090818
Ahem,
You guys assume that these pig farmers are peasents.
CAFO's are thriving in China. They sell product around the world and hedge their risk with pork belly, and grain futures.
It's easy to hold physicals when you know how to hedge.
Just because you live in the country, it's doest'n mean you aren't savvy in the markets.
Right. The guy with 20,000 tons of copper isn't keeping it under a blue tarp in his back yard. These guys are making a strategic bet.
Even the guy with 100,000 tons of copper may be storing it under a tarp, or whatever is the cheapest method possible. He probably has a few tons scattered around his home at least.
The 1 Quadrillion dollar question is "What do we have under our TARP in our back yard." Is that a strategic bet?
When will GS launch a Chinese Pig Farmer ETF so they can manipulate that market too?
You're all wrong.
When it all goes to hell in a handbasket the same farmers you're making fun of will be selling you a pound of bacon and a handmade copper skillet to fry up in for a nice shiny bar of gold.
I like my eggs over easy thank you very much.
200000 tons/ (5000000 tons/ 365days) ~ 15 days supply
two weeks of copper supply does not seem excessive
(unless the supply/demand curves are really steep)
Really pity anyone that tries to do something different, particularly in China, as the mob of brilliant investor bloogers from ZH have to 'ave a go.
Assuming the population of 1 billion people have spare currency they are natural savers as the interest rates are negative and majority of assets far too expensive, cash in the mattress, unless you can get a cheap loan to buy a ghost condo so your one child has at least a chance to go to Uni.
There are speculators in the stock markets and then again you have speculators in the physical commodity markets. Copper a poor mans gold and storage does not cost very much. Good on them, at least they accumulate assets, not for their well being but their childs well being. The propensity to invest is limited and with no social net the need to have cash invested into something of value is a must. Especially when the stock markets are shakey and their life savings may be little.
The biggest economic events of the century are in the make. The impact of exponential population growth, a power shift to billions of Asians building up wealth and an explosive monetary cocktail are threatening the western economic hegemony.
Read the rationale behind it at www.commoditypress.com
Learn form the most knowledgeable persons like Jim Rogers, Peter Schiff and Marc Faber.
And never forget: Mainstream financial analysts did not saw the 2007-8 events coming. They don't see the unfolding commodity boom coming either. So watch out for biased opinions, listen to those few who are knowledgeable and you will outperform.