Skip to comments.Dr. Copper Says Look Out Below
Posted on 06/25/2012 2:52:16 PM PDT by blam
Dr. Copper Says Look Out Below
25 June 2012 by Sober Look
By Walter Kurtz, Sober Look
The dislocation between US equities and Brent crude is by no means unique. A very similar picture is developing between S&P500 and copper. And as with oil, one can blame it on supply fundamentals, but the reality has more to do with a sharp deterioration in global demand as world economies slow.
Miller Tabak : Traders often refer to the red metal as Dr. Copper because it is the only one that has a PhD in economics, and tends to be a great leading indicator of economic conditions. If you follow that thesis, and go by recent trends, Copper could be telling an ugly story for equities. Copper first bottomed in December 2008, while the S&P waited until March 2009. In 2010, Copper made its low for the year in June, vs. July for the S&P. The 2011 peak in Copper was February, vs. May for the S&P. 2012 is almost identical to last year, with Copper again topping out in Feb., while the S&P made its high in March. There are no guarantees that Copper will make a new low for the year, and even if it does that equities will follow, but it certainly bears watching given the historical significance of the relationship.
Copper vs. S&P500
I guess I should buy some puts for FCX.
25 June 2012
Professor James Hamilton has a nice post up on his site regarding the near-term trends in gasoline prices and whats coming down the line. As you likely know by now, oil prices and thus gasoline prices have taken a serious dive in recent weeks and the implications could be important for economic growth. But hes not all that optimistic about the effects on growth. The good news, on the other hand, is that Hamilton says you can probably save a few bucks in the coming weeks if you wait to buy gasoline:
With Brent on Friday at $91.50 and an average retail gasoline price about $3.47, wed thus expect gasoline prices to come down another 35 cents a gallon or so from where they were on Friday. Historically those adjustments usually come pretty quickly. For example, last December U.S. gasoline prices temporarily fell about 25 cents/gallon below the long-run relation, but by March they were right back on track.
If gasoline prices do fall from their value in April near $3.92 to $3.12, that would be an 80 cents/gallon swing. With Americans buying about 140 billion gallons of gasoline each year, that translates into an extra $112 billion over the course of a year that consumers would have available to spend on other things besides gasoline.
So should we be celebrating? Im afraid not. The primary reason that oil prices have come down is because of growing signs of weakness in the world economy. I am very concerned about where events in Europe are going to lead, and recent U.S. data indicate some weakening. Cheap gas helps, but not so much if you dont have a job.
But I will offer this advice: wait another week or two if you can before filling up the tank.
Just like I have been saying, and saying and saying . . .
What is going on in Egypt may blow up the ME sooner than the imminent EU collapse.
I was thinking the same just today.
Many of us see the truth and yet the news media is just ignoring the obvious. Very dangerous times.
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