Indulge me, please.
I am commodities knowledge challenged.
Who is this a vote of no confidence against?
The purchasers of copper...the sellers...the users, producers?
Is copper not a viable commodity in a society that uses it for many, many things?
Granted, the price at 3-4 dollars a pound was kinda high, in my opinion, considering the recycle ability of it and the fact that is not used as exclusively (being replaced by fiber optic, etc) as it once was.
So, what is the story?
Will my pennies go back to being made of copper?
Copper and Zinc are good indicators of orders of material, and future orders, used in construction and fabrication.
Indulge me, please. I am commodities knowledge challenged. Who is this a vote of no confidence against?
I suspect that RinaseaofDs meant that it was a vote of no confidence in the economy at large.
The spot price of certain commodities - and the Baltic Dry Index - are believed by many to be so-called "bellwethers."
A bellwether is one that leads or indicates trends. The term is derived from the Middle English bellewether and refers to the practice of placing a bell around the neck of a castrated ram (a wether) leading his flock of sheep. The movements of the flock could be noted by hearing the bell before the flock was in sight.
-Wikipedia
Regards,
You have a couple of good posts that aver that copper is regarded as the belwether to the economy. If copper is in demand, then stuff must be being built. In the same way that DJ Transports are regarded as a “health indicator”. If stuff is being sold, it is being shipped.
Now as to the underlying cause or causes: One is certainly the deteriorating demand from China. As it turns out, some Chinese speculators developed huge stockpiles of copper when it was in demand. Well, they can’t just let it sit there; they have to borrow against it, to use it as collateral for loans. To lever up, as they say. At minimum, to help pay for the warehouse rent. But with the price of copper plummeting, those loans become undercollateralized and lenders demand a “top off”. The copper hoarders then sell copper, but they are selling it into a declining market. Which exacerbates the decline. In many cases, the Chinese copper holders have (fraudulently) taken out *multiple loans* against their copper. So some of it is super-leveraged. They are in effect getting a margin call.
This is one of a few core differences between most commodities and stocks. While it is true that a stock can go to zero and some think or believe that commodities cannot because they are representations of real things, trends...uplegs and downlegs in commodities can go on much, much longer than *anyone* can believe. Much longer. And then even longer. Who on earth thought oil would go from $110 to $40? That’s really a giant move on any kind of basis, especially for such a vital commod.
It is also happening with USDollar, relentlessly strong and causing serious disruption in the rest of the world. Yaaaay! Oil got cheaper! People trying to call a turn in copper or oil or the USD are getting cornholed, over and over. One reason is the incredible turmoil roiling currency markets. Volatility in forex is causing all manner of distortions in the stock market and various commod markets. Just saying. Not decrying it.
However, Maxine Waters told me via private email that these oil price changes were the fault of evil speculators. Just passing that on.
By the way, I don’t know if they are still doing it, Goldman Sachs had several giant metals warehouses that they established in crumbling Detroit warehouses they probably got for free in various BKs and foreclosures. (Base metals, copper, zinc, nickel, not especially gold/silver although they are certainly involved in those markets) They worked to manipulate the domestic market by withholding stocks and delaying deliveries. Their market-cornering practices engendered a lot of complaints and I think they were quietly told to back off.
It’s a vote of no confidence in the global economy, the media’s attempt to fluff the economy by either ignoring bad news or by flat out lying about economic statistics, and in the US economy as the ‘emerging engine’ to lead the economy in China’s stead over the next couple of years.
One poster here brought up the Baltic Dry Index, that is another extremely reliable leading indicatory. The other, highlighted today in the WSJ, is the recent spate of share buybacks.
Of all the bellwethers, that one is the most troubling. Reason is that a share buyback ISN’T about boosting the stock price, as the WSJ would have you believe. The share price DOES rise, but that isn’t why its done.
It’s done because corporate leadership and the board agree that there is no better place to deploy the capital at the moment. Period.
If you did that sort of thing prior to 2008, you’d be fired as a CEO because it signaled that you were out of ideas for how to fuel growth.
What the share buyback trend indicates is that growth is off the table in boardrooms as a reasonable expectation of CEOs. Boardrooms are in consensus that minimizing the damage is good enough for the short term to keep the CEO employed. Not at all a good sign, especially if the world is looking to the US as a haven.
Last but not least - Swiss banks moving to negative interest rates. Taboo until this year. German banks have signaled, basically, that there aren’t many other alternatives.
For the first time in what is probably our lifetimes, the sound financial advice of the moment is stuffing the family mattress with something valuable, but not currency.