Posted on 09/24/2011 1:15:44 PM PDT by blam
What Are Copper And Oil Signaling?
By Eric McWhinnie
September 24 2011
With the markets in turmoil, investors are looking for indicators that will help clean their crystal balls. Two of the more widely used economic indicators are copper and oil. Copper (NYSE:JJC) is often referred to as Dr. Copper, because of its ability to give insight to the future of the global economy. Oil (NYSE:USO) is often seen as the lifeblood of the economy since it is used in everything from plastics to finished motor gasoline. Recently, copper and oil have given investors reason to worry.
On Friday, copper fell to its lowest level in over a year. Copper prices are down nearly 19% in only a week as the Federal Reserve announced, “There are significant downside risks to the economic outlook, including strains in global financial markets.” Copper had been relatively stable this year with demand strong in foreign markets. However, China (NYSE:FXI), once considered the country to keep demand in commodities (NYSE:RJI) high, continues to slow its economy. In addition to the HSBC (NYSE:HBC) preliminary PMI survey that showed China’s manufacturing may shrink for a third month, Freeport-McMoRan’s (NYSE:FCX) CEO gave a concerning outlook for copper. Richard Adkerson said, “A China slowdown has more of an impact than anything else.” He goes on to describe copper as a window for the global economy, and expects slower growth rates to continue. FCX is the world’s largest publicly traded copper producer, with operating, expansion, and growth projects in the copper industry. Copper also received additional pressure this week due to a decline in housing starts. Housing starts dropped 5% to a seasonal adjusted rate of 571,000 units. It was the largest drop since April.
Although falling oil prices will offer some relief to consumers at the pump, the rapid decline this week has investors on edge. Last week, light crude oil traded near $90, but fell to an intraday low of $77.55 on Friday. It was the lowest intraday low since August. With global growth concerns increasing, brent crude has declined nearly 7% since last week. Also, oil companies such as Exxon Mobil (NYSE:XOM) and Halliburton (NYSE:HAL) are now trading at new lows for the year. On Tuesday, the IMF cuts it global growth forecast for this year and next. The IMF stated, “The global economy is in a dangerous new phrase. Global activity has weakened and become even more uneven, confidence has fallen sharply recently, and downside risks are growing.”
Copper and oil both appear to be warning the markets that a global slowdown is underway. Equities are also signaling this as the Dow (NYSE:DIA) just finished 6.4% down this week, its worst week since October 2008. Furthermore, copper and oil are signaling that investors have lost confidence in the Federal Reserve’s ability to stimulate the economy through Operation Twist.
Now would be a good time to re plenish the oil reserves zer0 let out.
LOL, me too.
See here:
No kidding. Prices are ridiculous.
But But... we need Iphones!
I failed to sell all my nickle rolls at 7c per coin also.
Because there was a rush back into dollars from other currencies. This causes the price of commodities to fall—weak dollars cause them to rise, strong dollars cause them to fall. This is combined with unwinding the holdings of hedge funds which exacerbates the problem.
At 7c per coin, $100 of face value yielded $140 melt value
That’s pretty nice return.
Alas, I missed the boat.
A lot of people got whacked this week. Part of it was the no solution for Europe except Greece going broke and leaving the Euro. This still leaves Spain, Portugal and Italy though Italy makes things.
You then had the (evil) Fed saying they would do the Twist which is really a lightweight QE3. The banks/hedge funds probably took it down cause they want more free QE 3-15 money from the fed.
Well Wed went down hard and leveraged hedge funds sold more on Thursday. On Friday they sold precious metals to pay margin calls with their winners. This included individuals and mutual funds as well.
The stock markets are totally manipulated by the banks, Fed and Hussein. The public has no clue. The media and all of TV are in on it. I don’t watch any of their crap on any channels but CNBC is the worse. TV is for people who like being lied to and manipulated.
Oh, I think we'll have another shot.
At some point, we'll have to deal with hyperinflation...so.
Well, I loaded up the food stockpiles over a year ago.
Why?
My guess is that with all investments dropping, people are returning to cash. The demand to hold money is increasing. Which, when you think about the state of the world's major currencies, is pretty sad.
I have seen videos and pictures of entire new cities (I mean big ones) in china that are empty!
I like to look at prices at New Egg. Memory prices (desktop &laptop) are way down from a year ago. Partly to blame is the iPad which is impacting on laptop and desktop sales
Desktop components prices are down or stable. Hard drive prices are always going down.
LCD TV prices are down. LED-LCD prices are down
The Fed’s recent tactics were not for stimulating the economy. Those were efforts to push markets, and thereby, oil prices down temporarily. [All:] Pay attention to the various kinds of events affecting oil (for example) instead of focusing on the writings of geniuses focusing on technical market trends. Then you’ll see more clearly.
Lower copper and oil prices are good. I hope the investors find alternatives, like turnip sprouts.
Most of the mines in Chile make a profit at anything above $1.95/2.00 per pound. The Peso dropped about 10% in one day last week going from 470 to 518 to the dollar.
Copper also dropped because the CME raised margin requirements after hours for Gold, Silver and I think, copper. A bunch of folks must have had inside information about that and PM’s all dropped wildly in the last few hours of trading.
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