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Dr.Copper Pumped-And-Dumped On China's Schizophrenic Economic Data
Copper fell by its most in 5 weeks today on the heels of China's HSBC PMI miss overnight. This follows the 'economist' commodity's biggest rise in a month yesterday following China's official PMI beating expectations. It seems the farce of Chinese data has now made a farce of the commodity market as anything but an headline-induced algo trade... even though so many 'renowned' investors still view it as omniscient...
Copper is right back to unchanged from before the Chinese data on the weekend... so Dr. Copper is none the wiser...
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Hey, that's "World Renowned"- don't short Dennis on his title or his CNBC per diem.....
I think this headline is from some porn vid.
It's forming a sitting camel pattern. Buy now!
Camels are carrying the MERS virus I heard.
And they're NOT virgins !
God damn if this isn't the stupidest and most worthless article on ZH ever. WTF?
So, copper went up and then fell back to unchanged. Goodness, why is the NY Times not covering this breaking story.
ooks pretty much to what happened to silver today.
But it's kind of weird....
With Ukraine at war and all, and coppy being the main ingredient for bullets... you would expect it to go up...
It's an indicator.
PM's once were a very conservative play that you could park money into and hide from in a bumpy market. What we all see here is a drop signal, happened a lot during 2007-2008. Copper would go apeshit, then the chain reaction up the commodities chain happens. pop-pop-pop Then it shits the bed just like the last 25 times it's happened since then. But usually its only US markets getting fucked around, therefore it's the side show.
When talking on a scale like China's, a real economy, it'll be more like a BOOM-BOOM-BOOM. Scale of economies is much different and copper is something of a currency in China already. See the computer you are typing on? Guess where that happens and what it's made with? Also in an industry running on fumes because of poor consumer credit. Because money doesn't buy consumer electronics, credit cards do. It means it's time to get out of the pool if you want to keep anything.
So if you've got some open trades, close them, bank them and diversify your FX spread. Take a little cash out of the machines just to be sure you've got a little on hand. Might get weird like with Lehman because banking did get weird once, plan on it getting weirder. If you don't have physical metals, I'm sorry, but you'd be lucky to not find a tungsten slug on the market at this point so make sure you test anything you buy.
Good luck.
If not in doubt, get in doubt. fast
- Bob Dobbs
Without the CBs PUT, you'd be completely correct. But what you state is exactly why they have to keep it, although they may add some volatility, so be ready for a media driven volatility event like when everybody was talking in the MSM about Argentina. See, Argentina has been in crisis after crisis since the 1970's with very brief periods of stability, so my question at the time, was, WHY NOW? Why talk about them right now? I couldn't figure out any other reason than they were being told to do it to try to pump the market down.
There is nothing down, no support, no net to catch the fall, only air and space, vacuum. Our whole foundation for all the available credit, which means all the available money, is composed of the valuation of collateral, if equities go down and melt, collateral chains will melt with them. What would come next is sheer chaos. Well it simply will mot be allowed to happen. Inflation and monetization doesn't matter at all in that scenario. The system will be saved, whatever it takes. So short of brief fabricated storms, nothing will happen. I have said it before, that when you run the mathematical models using engineering models, the same ones we use to model a microchip, only modifying the analogies, you can easily see that once you start QE, you can't stop it and expect stability, you can only accelerate it. I hope I'm wrong and economists are correct, although after taking several masters level financial courses, I still believe in the enginering models a lot more. They hide behind human behavior. But for forces this large game theory more than suffices to account for what people will do.
Yawn. Forget Dr. Copper... As has been said, you just buy. Equities know only 1 direction: UP
"Dr Copper" isn't the "doctor" it once was.
While copper wiring will always be in demand, copper piping in residential housing is increasingly obsolete as non-corroding plastics replace it, that's 100's of lbs per home taken out of demand.
Electronics are increasingly smaller, requiring less wiring, think of the old cathode tubes in tube TV's & computer monitors just a decade ago that required several pounds, compared to flat screens now.
I'm not saying copper is doomed to plummet, but that it's traditional role as the "Doctor" has likely changed.
Copper use in N.A. residential construction never exceeded 2% of total demand, Recoverable ore grades half been cut by 40% in 20 years, while energy prices have tripled. Electrification for the majority of the planet is just getting started.
Good points.
You might stand corrected on the total % of demand for copper in the housing market, I've found reference to residential housing accounting for as much as 1/3rd, can you provide a link to your source?
Either way, I'd still note that my reference to the "doctor" referred to the historic relative strength of copper to home building and growth.
There are plenty of EM regions using copper, yes, but it's not going to be at the same level of per capita demand it has been historically.
I also suspect a lot of the price increases for EM demand were baked in earlier this decade, as evidenced in China's massive copper hoards.
Same with electronics, the simple cathode tube comparison I made to modern flat screens acounts for a massive amount of demand.
Like I said, I don't think copper will plummet, but it's not going to explode the way it might have a decade ago relative to economic growth.
A similar thing happened with aluminum over the last decade, carbon composites & poly's have replaced many applications.
Residential housing NEVER accounted for anything close to "1/3rd" of the demand for copper- where did you get that from??
OK folks,
Here's an FCX 10K report from 2008, link below, while demand may have changed since and it's also possible that FCX isn't fully representative of demand dispersion, it's fairly obvious that construction demand is a hell of a lot higher than 1% to 2%.
Mindful I've made no empirical concrete claims on demand, only noting 1% or 2% is potentially a serious understatement.
"· Construction (37 percent);
· Electrical applications (26 percent);
· Industrial machinery (15 percent);
· Transportation (11 percent); and
· Consumer products (11 percent)"
This is a link to the report, look to page 39 or hit CTRL + F to search for the word "demand".
You'll need to copy/paste the link, clicking it gives you the Wikivest home page.
http://www.wikinvest.com/stock/Freeport-McMoRan_Copper_&_Gold_(FCX)/Filing/10-K/2008/F2440094
According to the world cooper factbook, World annual copper production of 20 miilion tons, 14% is North American demand, or 2.8 miilion tons of which 30% is used on building construction(commercial and residential),or 900,000 tons, generously attributing 50% of that demand to residential, that equates 450,000 tons, or roughly 2.5% of World annual prodution.
http://copperalliance.org/wordpress/wp-content/uploads/2012/01/2013-World-Copper-Factbook.pdf
Eh -
"Small" error, you took US demand ( 30% of U.S. supply) and calculated it against total global supply, omitted global construction demand..
You forgot to add total global construction demand.
Another argued, correctly, that EM demand would be higher than the U.S. ...more new homes being built in countries with growing middle classes..
I'll go with a rough estimate of global construction demand @ 30%.
Also, historically residential demand is about 2X commercial (we build more homes than office buildings & box stores), my whole point is that copper demand for the residential end is going to drop per capita.
So, 60% of construction demand, that would loosely translate to half of residential demand (we still use copper wires), meaning around 10% less total copper demand relative to historic growth.
Tack another -5% for 110 million households buying flat screens in place of cathode tube TV's & PC monitors for good measure, where FCX evaluated electronics @ 11% total, and knowing a cathode tube contained several pounds of copper, vs ounces at best in new TV's & monitors, which also translates to smaller transformers with lower current demands..
My immediate "guestimate" is that copper will have about 15% less demand relative to historic growth.
It would certainly explain copper's sluggishness the past few years.
The only bullish argument would be supply, in light of what technology has done for oil/gas via fracking & offshore sources, not sure I'd go with traditional metrics there.
There's been a lot of buzz about offshore mining for minerals, more to be revealed there, but I do know residential construction & electronics is going to have a lowered demand impact than it has historically.
Again, there WILL be demand for copper, I just think it's "doctor" nomenclature is outdated.
Copper use in N.A. residential construction never exceeded 2% of total demand
small error? ,you failed to read my post correctly. Try reading it twice. Just the first 5 words
Your words -
"World annual copper production of 20 miilion tons, ..... that equates 450,000 tons, or roughly 2.5% of World annual prodution."
Again, you're citing U.S. construction demand ALONE against TOTAL global supply.
You omit global construction demand.
What about global construction demand vs global supply?
Does copper offer free discounts for construction to all markets but the U.S.?
Get it?
Most of 5 weeks? Last Friday it fell about 95 basis points and today was almost exactly the same... I know technically it fell more today, and obviously that tiny difference matters on margin. But "most in 5 weeks" insiuates a very different headline than "same as last week" especially when after last weeks fall it climb back up, what 1.1 or 1.2%? And even today after this 95BP drop it regain enough that it's... maybe just a 70BP drop as of now cuz it regained, what, about .002% so far tonight?
YTD Chinese copper storage is down something like 12 or 14% IIRC
and PMI is technically on either a stable or slightly positive-stable trend YTD, and that's WITHOUT the new railway/bank lending stimulus from the PBOC
soon as that new liquidity hits the market, companies are going to re-stock on the depleted copper warehouses because they will want to stock up on assets and copper as much as possible while the temporary liquidity measures are in place.
and any new railway stimulus is likewise always correlated positively with copper
so, there's a lot of reasons to expect Q2 GDP and all the PMI numbers on China to continue to increase (which isn't to say Q3 or Q4 won't crash).
copper may have a very bad end of the year but it didn't really show that much weakness today; more than anything it just corrected the overreaction to the fake official PMI numbers but we'll likely see it even out higher below today's lows because, really, the HSBC PMI numbers were actually pretty decent for how bad they could be. anything above a PMI of 48 from HSBC is a pretty soft and lucky landing
One thing that bugs me, regarding China restocking.
I recall that China has used copper as collateral for large transactions/contracts and that the $3 price level means trouble for China.
I find myself wondering, where copper has been treading that $3 level, what that means for their future inventory plans.