Wednesday, July 22, 2009

Dr. Copper says the fever has broken (2)


Copper, long thought by economy-watchers to be the smartest of commodities (thus the nickname "Dr. Copper") is now up 102% from its December lows. Clearly there are some major forces at work out there, one of which is that the world is making considerable progress toward regaining the conditions that prevailed prior to last year's financial crisis. We have definitely seen the worst of the economy, and I would be very surprised if the economy has not been in recovery mode for the past month or two.
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6 comments:

  1. pirate of seven seasJuly 22, 2009 at 11:09 AM

    is just China buying cheap and stocking. I admire your optimism anyway.

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  2. Scott GrannisJuly 22, 2009 at 11:22 AM

    It would be easier to believe this if only the obvious, storeable commodities were up, while everything else was languishing. But that's not the case. This is a very widespread phenomenon.

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  3. brianJuly 22, 2009 at 6:59 PM

    Scott,

    There is no direct correlation between copper and the economy. In the late 90s copper prices were declining yet the stock market was roaring.

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  4. Scott GrannisJuly 22, 2009 at 7:10 PM

    Brian: There may not be much "direct correlation" between copper and the economy, but that is precisely my point. Copper is a good leading indicator, not a coincident indicator, of the economy. Copper was weak headed into 1999, and the economy peaked in 2000 and went into recession in 2001. Copper (and all commodities for that matter) were very weak in the late 1990s, and they were all telling us that the Fed was extraordinarily tight and that in turn presaged a recession. The stock market (myself included) failed to realize that the fundamentals were turning ugly. The market should have paid more attention to copper.

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  5. bitbucket255July 22, 2009 at 9:34 PM

    Copper makes sense as a leading economic indicator, but doesn't it also act as a coincident or lagging indicator of warfare? Copper is used heavily in munitions and military activity, from bullets to C3I infrastructure.

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  6. Scott GrannisJuly 22, 2009 at 9:58 PM

    That's not a persuasive argument. Copper is used in all sorts of things, from homes to machinery. The common denominator here is the most persuasive: virtually every commodity is up in price and by a lot. That's the big story.

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