Who's Smarter? Dr. Copper Or Mr. Market

Tyler Durden's picture




 

Copper is often referred to as the PhD of commodities for, as JPMorgan's Ken Landon notes, "When companies ramp up production of various products, whether during or in anticipation of economic recovery, they demand more cooper." Gold, however, he adds, "is not sensitive at all to business-cycle demand. Its price is driven by the monetary environment." While Bloomberg's chart of the day prefers to take the short-term (last few weeks) view of the world to justify a bullish equity market call, we prefer to look at longer-term cycles and the message is extremely clear - manufacturers are anything but confident, are doing anything but buying copper in anticipation of demand, and despite gold's recent fluctuations it is anything but implying that the world's grand monetary policy experiment is slowing down. What we see from this chart is yet another clear fundamental divergence between Dr. Copper's take on the global economy and the US equity market's nominal recovery.

 

 

Chart: Bloomberg

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Mon, 12/24/2012 - 14:32 | 3093357 larz
larz's picture

we all can agree with the good doctor but can you help me with timing?!??? when?!!!!

Mon, 12/24/2012 - 15:05 | 3093464 Steve in Greensboro
Steve in Greensboro's picture

Probably no divergence if you compared copper/gold to S&P/gold.

Mon, 12/24/2012 - 15:13 | 3093485 sablya
sablya's picture

Wrong, there is an obvious divergence even without gold in the picture.  Here is a weekly chart comparing $copper to $SPX

 

http://stockcharts.com/h-sc/ui?s=$COPPER&p=W&b=5&g=0&id=p23892619436

 

Mon, 12/24/2012 - 16:44 | 3093637 AynRandFan
AynRandFan's picture

Isn't the fall-off in CU demand due to the overbuilt housing markets in China, Vietnam and the rest of SE Asia?  If so, what is the connection to the S&P 500?

Mon, 12/24/2012 - 15:11 | 3093481 aminorex
aminorex's picture

If you pushed this chart back to 1990 copper would look overextended and the market underpriced.  It's all in the timing, folks.

Mon, 12/24/2012 - 15:12 | 3093484 All Out Of Bubblegum
All Out Of Bubblegum's picture

Sounds like a good time to buy copper. Metals will go through the roof when the paper balloon pops.

Mon, 12/24/2012 - 21:51 | 3094027 Go Tribe
Go Tribe's picture

Local coin shop is now selling copper bars. Ridiculous I think.

Mon, 12/24/2012 - 15:39 | 3093540 ensomnoledge
ensomnoledge's picture

 

Check out 1998 to 2000.  Market rallied while copper initially languished.  Cu:Au not a perfect indicator.

Tue, 12/25/2012 - 22:56 | 3095600 sun tzu
sun tzu's picture

Didn't the market eventually crash in early 2000?

Mon, 12/24/2012 - 16:01 | 3093576 fuu
fuu's picture

Fuck you Ken Landon.

Tue, 12/25/2012 - 03:17 | 3094321 Yen Cross
Yen Cross's picture

 Fuu you have balls/

Wed, 12/26/2012 - 10:26 | 3096011 fuu
fuu's picture

I don't really like JPM.

Mon, 12/24/2012 - 16:39 | 3093634 AynRandFan
AynRandFan's picture

CU/AU ratio, meaning simply that copper prices have not advanced as fast as gold.  That has nothing to do with whether the S&P 500 is overvalued or whether economic growth is stalled.

Mish mash.

Mon, 12/24/2012 - 16:46 | 3093639 AynRandFan
AynRandFan's picture

A much more interesting question would be why have gold prices not responded to QE Infinity and QE4evr.

Mon, 12/24/2012 - 16:47 | 3093641 PeteJE
PeteJE's picture

These constant coorelation charts here are meaningless.  (not to say we aren't already in a bear that started first week of Oct. 2012).  Its just these charts make me laugh as it looks like there is meaning in them, when there isn't really any; either one of those lines could converge to find your parity back and acting like you know which one is "wrong" is a really stupid way to approach market prediction.

 

Mon, 12/24/2012 - 16:48 | 3093642 TWSceptic
TWSceptic's picture

But I thought Mr. Bernanke could print prosperity? I guess if he just prints faster it can work, no?

Mon, 12/24/2012 - 17:46 | 3093737 Never One Roach
Never One Roach's picture

What is the price of PMs doing in Japan? Abe has promised serious printing so we should see a serious rise in PMs priced in yen, yes?

Mon, 12/24/2012 - 19:59 | 3093931 one_fell_swoop
one_fell_swoop's picture

OVERLAY TWO CHARTS. IMPLY OUTCOME.

Tue, 12/25/2012 - 16:46 | 3095176 Venerability
Venerability's picture

I thought I posted this already, so if someone removed it for propaganda purposes, they should be very ashamed:

Rash of strikes by copper workers in Latin America. Major one began yesterday, in fact.

Ergo, Dr. Copper looks pretty darn good, no matter what the rest of the Commodity Complex is doing. 

 

 

Tue, 12/25/2012 - 16:48 | 3095178 Venerability
Venerability's picture

Zero Hedge needs to police this, if some posters are hacking into the site and deleting posts because they don't jibe with their propaganda push.

Tue, 12/25/2012 - 18:07 | 3095281 the_market
the_market's picture

Copper warehouses especially in China, the world's largest copper importer, are already filled due to the cheap prices. So where should a sudden copper demand come from? I'd say the relationship shown in the graph is not systematic...

Tue, 12/25/2012 - 21:36 | 3095514 pfairley
pfairley's picture

'Doing anything but' ...double negative creativity.... doesn't make it better writing.

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