Even China cannot feed a permanent bull

Grauniad Unlimited ^ | 5/15/2006 | Larry Elliott

[oblomov]

Gold is through $700 an ounce for the first time in a quarter of a century. Platinum prices have gone through the roof. Copper is now so expensive that the metal in a two-pence coin, as my Guardian colleague Richard Adams noted last week, is now worth 3p. Oil is trading between $70 and $75 a barrel; stock markets in New York and London are at their highest levels in six years. The MSCI - an index of 49 stock markets in 49 developed and developing countries - hit an all-time peak.

So beware: all of this has bubble written all over it. It is a time of extreme danger for the unwary, with all the sadly familiar tell-tale signs of trouble ahead. There is the sense of supreme optimism that this time the permanent bull market is for real. There is always a reason why it's different this time, and this time that reason is China.

[oblomov]

Copper is down nearly 10% this morning.

[bkepley]

I don't get it. The stock market was at 10000-11000 more than five years ago. It's still there. That's a pretty pathetic bubble.

[Always Right]

Homeowners become better off but if national output is unchanged, people who don't own houses are worse off. The net effect is zero.

That statement makes no sense. If assets go up, people that own them are better off. That does not mean people who don't own them are worse off. Bad logic.

[bkepley]

On the other hand my 401K is looking pretty good the last couple of years.

[oblomov]

To a lib, a capitalist economy is zero-sum.

[Always Right]

On the other hand my 401K is looking pretty good the last couple of years.

Darn you, I must be worse off since I don't own your 401K...

[oblomov]

The major indices mask a great deal of growth in certain sectors. For example, the DJIA still contains INTC, MSFT, PFE, and EK, which have performed poorly...meanwhile the Russell 2000 is near all time highs.

[bkepley]

--For example, the DJIA still contains INTC, MSFT, PFE, and EK, which have performed poorly...meanwhile the Russell 2000 is near all time highs.

Near all time highs meaning..we're only getting back now to where we were x number of years ago. Where's the bubble?

[wolfcreek]

At 1.5 cents to produce a penny maybe they should go. Aluminum anyone?

[oblomov]

Actually, the R2000 is at least 20% higher than it was in 2000.

The ATH was just this last week.

I think that there is a bubble, but it is in some commodities - such as copper, zinc, and oil.

[oblomov]

steel is cheaper - we used it for pennies during WWII.

[BJungNan]

Copper is down nearly 10% this morning.

That's because of a huge infusion of raw copper from everyone melting down their pennies.

I've gotten the process down pretty well in a small garage operation we set up. I was making trips to the banks to collect pennies but there were too many of the new bi-metal ones in the mix.

We now hit the people that run the coin sorting machines in the stores and buy the pennies off of them. We take them in bulk so they do not have to prepare them for deposit.

They have some new pennies mixed in, of course, but the percentage is still acceptable. We can have some mixed in and still meet the content standard we need for grade b copper.

[ClaireSolt]

There is broad growth throughout the world, not just China.

[babydoll22]

"meanwhile the Russell 2000 is near all time highs. "

What is the Russell 2000?

[Iscool]

That's illegal...

[jiggyboy]

If you're melting down pennies made after 1982, you're getting 97.5% zinc.

[BJungNan]

That is why you can't get your pennies from the bank. Those pennies are all new.

[BJungNan]

What's illegal?

[ContemptofCourt]

On the other hand my 401K is looking pretty good the last couple of years.

Except when you figure in the devaluation of the dollar over the last couple of years, and realize that the market's gains have all been due to the dollar's losses.

[bkepley]

--Except when you figure in the devaluation of the dollar over the last couple of years, and realize that the market's gains have all been due to the dollar's losses.

All the same, I'd rather it was gaining than losing.