Commodity collapse tipped
From:
By Andrew Trounson
May 02, 2006
COMMODITY prices were likely to peak this year and were primed for a fall of up to 50 per cent, analysts warned yesterday as resource stocks again jumped sharply higher.
The gold price hit a 25-year high at $US661.10 an ounce, sparking fresh buying of mining stocks, despite a warning from Canberra-based Access Economics that metal prices are poised to start dropping steeply from the end of the year.
Gold shot up on the back of growing fears over the nuclear standoff between the US and Iran, and expectations that US rates are on hold.
This year will be as good as it gets in metal markets, according to Access's latest quarterly survey of 10 forecasters. Booming copper prices are forecast to fall about 50 per cent over the next two years, with other base metals to fall 30-40 per cent. Gold is forecast to be averaging $US564 an ounce a year from now.
Only joking Wayne but when anything is in a boom, whether it be the stockmarket, commodity prices or whatever you always get people saying it can't last.I am not saying it will not go through the boom bust scenario, but let's just wait and see.
When the overall direction changes, we can all go short and make even more money that we are now going long. :bigthumb:
tech/a
2nd-May-2006, 05:50 AM
Just give the emerging giants a call and let them know.
Better still send them the article.
Development will be rubbing its hands together next year then with such huge savings to be had.
wayneL
2nd-May-2006, 06:00 AM
BTW
I have no opinion either way really, just posted for interests sake.
wonder if these are the same " FORCASTERS " that advised the Aust Govt to sell it's GOLD reserves @ around POG low
or advised young Johnny to sprout how he had secured the deal with China to contract natural gas in $us at a time when the $au was at a near time LOW
Cheers
Coyotte
markrmau
2nd-May-2006, 09:25 AM
I think there is one thing the analysts are missing.
The potential for irrational exuberence in US investors.
Everyone knew that there were no earnings in the tech stocks, but they just kept going up anyway. People convinced themselves that it was a new paradigm.
Now the us investor is focussing on materials and convincing themselves that china will go on forever.
Just wait, the us speculative industry is going to go into absurd overdrive.
I tip copper to tripple in the next nine months, xjo to hit 7000 and then an '87 style collapse.
Market highs prompt crash fears PRINT FRIENDLY EMAIL STORY
PM - Thursday, 27 April , 2006 18:26:00
Reporter: Stephen Long
MARK COLVIN: The stock market has hit record high after record high in recent weeks.
And today, the share price of one of the big four banks, ANZ, hit a new peak after a bumper profit, with many other companies set to follow suit.
There are plenty who think the good times will go on, but some are beginning to argue that too many companies are fully-priced or overpriced.
They fear that, just as in the late 80s, the market is ripe for a fall.
Economics Correspondent Stephen Long.
STEPHEN LONG: Oliver Stone's movie Wall Street has come to symbolise the excesses of the 1980s.
It came out two months after the October '87 stock market crash.
And to Greg Hoffman, Research Director at The Intelligent Investor, the film's opening scenes sound a warning bell about today's market.
GREG HOFFMAN: Lou Mannheim, who's a sort of a crusty old broker, strolls into the office, past all these slickly attired, gung-ho brokers.
(Excerpt from Wall Street)
LOU MANNHEIM: Marvin, Marvin I've got a feeling that we're going to make a killing today.
MARVIN: Oh yeah, where's your machine gun?
GREG HOFFMAN: And he declares that he can't make a buck in this market. He says the country's going to hell faster than when that son-of-a-bitch Roosevelt was around. He says there's too much cheap money sloshing around the world.
(Excerpt from Wall Street.)
LOU MANNHEIM: Jesus, you can't make a buck in this market, the country's going to hell faster than when that son-of-a-bitch Roosevelt was in charge. Too much cheap money sloshing around the world.
GREG HOFFMAN: And we see that as a danger right now. There's an awful lot of cheap money. Australia's Reserve Bank has been printing money at a growth rate of 10 per cent over the past five years, which is a lot faster than our economy's been growing, which means we've got a whole surfeit of extra dollars in the system that need to find a home.
STEPHEN LONG: Since the air wheezed out of the housing bubble, it's been finding a home in the share market, and cheap credit's encouraged speculators to invest with borrowed money.
Margin lending, where people borrow to buy stocks, is a growth industry, with 150,000 active accounts and billions of dollars at play.
Greg Hoffman.
GREG HOFFMAN: Over the past seven years we've seen marginal lending in the country go from approximately $7.2 billion to about $19.9 billion, and as we sit here that figure's probably north of $20 billion.
So there's an awful lot of borrowed money out there in the market. That's money that, if the market would've pulled back, is going to create an awful lot of problems for people.
STEPHEN LONG: Margin lending is money for jam while stock prices are going up, but if there's a big fall it magnifies the losses.
The problem, says Greg Hoffman, is that so many people dismiss the possibility.
GREG HOFFMAN: We've had 15 years of growth in this country, of economic growth. People forget how bad things can get when the economy takes a downturn.
STEPHEN LONG: And it's not just individuals speculating with other people's money.
The past few months has seen a spate of mergers and acquisitions, and most of the predator companies are using debt and shares to buy their targets, just like in the days of Skase and Bond.
GREG HOFFMAN: It's quite reminiscent of the boom times in the late 80s, when we saw a lot of entrepreneurs making aggressive moves with borrowed money, with the bank's money.
We're seeing it around the world, but in Australia, because we're such a resource-based market, I think that the current euphoria is particularly pronounced here.
STEPHEN LONG: The Australian market's nearly doubled in value since March 2003, and risen by a third in the past year alone.
And the stock prices seem to assume that the good times will keep rolling.
Big banks are trading at multiples 43 times higher than their British counterparts, and the price of many other companies only make sense if their earnings keep soaring.
It's not quite Tech Wreck territory, but if the bubble bursts, it could be ugly.
Greg Hoffman.
GREG HOFFMAN: There's a fantastic study by a brilliant American investor called Jeremy Grantham. He runs one of the largest funds management companies in the world called GMO.
And they identified 27 bubbles in the past, and they noted that in every single one of those bubbles, except the latest one, which they believe hasn't played out, they've noticed that prices don't just fall from the boom time top back to the average, or the mean, they actually fall straight through the mean on the downside.
So what you end up with is a situation that goes from extreme exuberance, a boom, quite quickly can turn into the opposite, to a bust and despair and depression.
STEPHEN LONG: In this stock market there's plenty of bulls roaring that now's the time to buy.
But the cautious are pulling back. And like Lou Mannheim in Wall Street, they're warning that there's not too much around that looks like value.
(excerpt from Wall Street)
LOU MANNHEIM: Stick to the fundamentals. That's how IBM and Hilton were built. Good things sometimes take time.
MARK COLVIN: Economics Correspondent Stephen Long reporting, with a little help from Oliver Stone.
Don't have the link, but the likes of BHP does actually do mining, is very profitable, pays good div's and is only one of a host of good stocks.
No tech bubble here.
A pullback is always on the cards tho.
wayneL
3rd-May-2006, 12:32 AM
Today's revamped daily Aireview covered this.
Don't have the link, but the likes of BHP does actually do mining, is very profitable, pays good div's and is only one of a host of good stocks.
No tech bubble here.
A pullback is always on the cards tho.
Just being devils Advocate...
The likes of BHP might not be bubble priced based on current commodity prices.
But it could be that the underlying commodities themselves are in a bubble situation.
A substantial cut in the price of the underlying commodities will most certainly pull the rug from under the likes of BHP et al.
Cheers
nizar
3rd-May-2006, 12:37 AM
Today's revamped daily Aireview covered this.
Don't have the link, but the likes of BHP does actually do mining, is very profitable, pays good div's and is only one of a host of good stocks.
No tech bubble here.
A pullback is always on the cards tho.
Pays a good dividend?
Its not much more than 1%, and market average is 3.9%, work that one out
The Once-ler
3rd-May-2006, 08:58 AM
Poor old Greg Hoffman from the 'intelligent investor' must be kicking himself. I subscibed for a while, but the tips were shocking. Their biggest mistake though was calling the resource boom a bubble about 2 years ago. They may have done OK since then, I don't know.
Julia
3rd-May-2006, 10:02 AM
Poor old Greg Hoffman from the 'intelligent investor' must be kicking himself. I subscibed for a while, but the tips were shocking. Their biggest mistake though was calling the resource boom a bubble about 2 years ago. They may have done OK since then, I don't know.
Not imo, they haven't, Once-ler. My one year subscription is about to end and I definitely won't be renewing it. Haven't followed a single one of their suggestions and thank goodness for that.
Julia
michael_selway
3rd-May-2006, 02:18 PM
Fresh surge in commodity prices raises fears of unsustainable speculative bubble
By Philip Thornton, Economics Correspondent
Published: 03 May 2006
Fears of an unsustainable bubble in commodity prices were fuelled yesterday after key industrial metals such as copper and zinc surged amid thin trading.
The copper price leapt more than 3 per cent in London as traders returning from the Bank Holiday rushed to catch up with a strong increase in New York on Monday.
It jumped by $235, or 3.4 per cent, to $7,235 a tonne compared with Friday's close. Zinc rose $135, or 4.3 per cent, to $3,310 a ton, within sight of the record of $3,445 hit last month.
The increases were scored against very thin trading in the absence of buying from China and Japan, the major consuming nations that begin week-long holidays this week.
"If the natural buyers go away you would expect the market to come off a bit but it's not happening - it shows you that it's a financial market, not a market between physical sellers and physical buyers," one fund manager said.
The International Wrought Copper Council (IWCC), a trade association for copper users, has written to the Financial Services Authority and the London Metal Exchange (LME) warning about the increasing role of speculators.
Simon Payton, its secretary general, said the price had been driven up by a "feeding frenzy" by hedge funds. "It may be great for the producers but we feel that a market built on speculation leaves tremendous problems for out side of the industry," he said.
"The margins on metal is straightforward, so at $3,000 a tonne, it is just about bearable but $7,500 a tonne raises serious issues."
The LME refused to discuss either its conversation with the IWCC or the reasons for the rise in prices. A spokesman said: "The market is operated in an orderly and transparent fashion and we have mechanisms in place to make sure that that is the case."
The copper market is prone to speculation as it is essentially a fast-moving financial market placed on top of a physical market with considerable lags between the mine and the open market.
Last winter, copper prices surged to a then-sedate $4,115 a tonne on rumours that a Chinese state copper trader had taken out a huge bet that prices were set to fall - and then went missing when prices soared 30 per cent.
However, analysts believe commodities are being driven by fundamental factors. On the one hand, supply is being held back by a number of constraints. On the other, the meteoric growth in countries such as China, India, Brazil and Russia - the foursome dubbed the BRICs by Goldman Sachs - is driving demand.
As Barclays Capital said in its recent forecast update: "Very few natural resource companies possess either the opportunities or capabilities to swiftly raise their output to keep abreast of the sustained move up in demand growth."
A survey by Barclays of 200 of its investor clients, including banks, pension funds, mutual funds and hedge funds, showed a massive shift into commodities. While more than two-thirds had no position in commodities at the end of 2004, the same proportion forecast that they would hold at least 6 per cent of the portfolio in these physical assets.
Whether this is speculation or sensible investment is open to debate but the figures appear to show that even conventional investors have woken up to the fundamental forces driving the price.
With the US equity market posting a 6 per cent gain in 2005 and US bonds rising 7.8 per cent, according to ABN Amro, committed commodity investors look wise.
There was fresh evidence of strong demand for copper on Monday from figures showing that US spending on construction rose twice as much as forecast in March, and a snapshot survey of the industry showed hefty expansion in April.
The metal is used in infrastructure projects for electrical wiring and piping. Copper also goes into a wide range of manufactured export goods such as fridges, computers and mobile phones.
Copper had gained 59 per cent this year and zinc, used as an anti-corrosive coating in galvanised steel production, had jumped 66 per cent.
Even the gold price, which hovered below the record of $661 an ounce set last week, is being driven by fundamental factors, analysts said.
Ross Norman, a director of thebulliondesk.com, said: "There is always a danger in saying that 'things are different this time' but there are some fairly compelling reasons that we are seeing a once-in-a-century, or perhaps even longer, rise in demand for resources - perhaps since the Industrial Revolution."
He said that while issues such as rising inflation and geopolitical tensions had helped push up prices, it was easy to overlook the mismatch between supply and demand.
Production in South Africa is at its lowest since 1924, development of new mines is being slowed by new social regulations while Latin American governments are turning increasingly nationalistic towards their natural resources.
On the demand side, there are signs that investment and pension funds are looking to increase their positions. At the same time, demand has been spurred by the creation of exchange traded funds that allow investors to buy almost directly into gold. On top of that, the creation of exchanges in places such as India and Dubai has increased the ease of investing.
Mr Norman said the ratio of the oil price per barrel to the gold price per ounce - traditionally between 13 to 15 - showed that gold could be worth $950 an ounce.
"Gold has underperformed relative to other commodities and is playing catch-up," he said. "There are lot of people looking to get in at the bottom whenever it falls, which shows the character of the market."
The role of speculators has also been a matter of heated debate between consumers and producers in the oil market. Crude prices have surged seven-fold, from below $10 a barrel during the 1998 Asia crisis to almost $75 a barrel in recent days.
Western countries have blamed Opec, the producers' cartel, for withholding supply and being opaque about the volume of reserves and production. In return, Opec states have blamed the high and volatile oil price on hedge funds.
Strong global growth, especially in China, has led to a surge in demand for the "black gold". Meanwhile, the slump in prices at the end of the last century provided little incentive for the investment in exploration and refining, creating supply problems now.
On top of this, growing tension between the UN Security Council and Iran over the regional superpower's nuclear ambitions and mounting civil unrest in Nigeria has raised concerns over supply disruptions.
Mohammad Hadi Nejad-Hosseinian, Iran's deputy oil minister, raised the temperature further yesterday, saying there was "some possibility" of a US attack on his country. He said prices could hit $100 a barrel by the winter.
US oil rose 50 cents to $74.20 a barrel, while London Brent crude gained 21 cents to $74.10 yesterday.
Don't blame us for what is happening, say hedge funds
The hedge fund industry looked to pour cold water yesterday over a growing chorus of malcontents blaming it for the "super spike" in the price of commodities.
A letter from the International Wrought Copper Council to the Financial Services Authority and the London Metal Exchange claimed speculators were driving prices to levels that no longer reflect supply and demand.
The trade body echoed the sentiment of Lord Browne of Madingley, the chief executive of BP, who last week decried hedge funds and speculators as the engine driving soaring oil prices.
He said: "The increase in prices has not been driven by the fundamentals of supply and demand. It is the case that the price of oil has gone up while nothing has changed physically."
BP's head of supply and trading, Vivienne Cox, said trading in oil commodities by hedge funds had increased tenfold over the past five years. Certainly, the hedge fund industry is booming and managers are increasingly active in commodity markets, which have proved extraordinarily profitable for a handful of funds, both here and in America.
In recent months, the UK funds Armajaro Holdings, Winton Capital and Red Kite Management were among those to have done nicely from winning bets on copper alone.
But the hedge fund industry insisted that commodity prices were being driven by a range of factors - an increasing diversification into alternative assets by the traditional big investors; the voracious appetite for raw materials from China, Japan and India; low stockpiles; disruptions to production - and not simply speculation.
Fred Demler, who manages the base metals desk for Man Financial, said: "Fundamentals are driving prices. There's a view that we are in a commodities 'super cycle'. Sure, the hedge fund community has grown, but 95 per cent of hedge funds have no exposure to commodities."
Commodity markets were too big and too liquid to be cornered by any single class of investor, hedge fund managers said.
I'll be blunt.
The market commentators were saying this over a year ago.
At that point the (pension) funds were not too interested in commodities.
They are now.
Funds are moving out of the greenback and into US dollar based commodities because they will continue to rise as the greenback weakens.
This trend of funds accumulating positions in commodities, especially metals, is still warming up.
The fundamentals driving all commodities are very tight and show no sign of weakening.
While market tightness is in place, expect occasional parabolic spikes.
Funds will probably finish their accumulation phase by year's end.
Get out your worry beads in 2007, maybe... but for now the trend is up, volatile and scary!
Odysseus
3rd-May-2006, 07:21 PM
Access Economics gets the whole situation fundamentally wrong. (1) China, India and other countries need commodities urgently to continue their industrial revolution. There is no way that they are going to stand still, and they have the money to buy what they need as they earn astronomic amounts by selling clothes etc. to the West. (2) Access Economics sees problems on the supply side. And indeed there ARE such problems. But if you have a shortage of supply on the side of the suppliers and a growing demand on the part of those who need the goods, prices can only go in one direction. There simply is no other way. This situation can only come to an end if either demand stops, or supply becomes plentiful, or supply stops altogether. The first two are extremely unlikely for the time being, and although supply is well short of what it needs to be, it is unlikely to collapse entirely. One has to agree, of course, that the supply problems are serious, but so long as there is any supply at all and the demand is there to meet it, money will be made by those supplying. OTHER FACTOR ALTOGETHER: there is a psychological problem behind such over-negative forecasts. People have difficulty taking in the magnitude of a disaster, but also to take in the magnitude of its opposite. This boom, for once, is for real, like a few others in history. It's not a boom artificially created by cheats like Bond and Chase, nor by conjurers like dot.com people
phoenixrising
3rd-May-2006, 11:20 PM
Just being devils Advocate...
The likes of BHP might not be bubble priced based on current commodity prices.
But it could be that the underlying commodities themselves are in a bubble situation.
A substantial cut in the price of the underlying commodities will most certainly pull the rug from under the likes of BHP et al.
Cheers
Agreed Wayne, i don't want to use those famous words "this time it's different". I just see the "Chindia" argument to compelling atm.
I also subscribe to the "bear" theory also, but happy to run with the bulls when on the loose.
A side note, i must have the record for the slowest ton (me and Gillespie)
See if my next is quicker.
Cheers
phoenixrising
3rd-May-2006, 11:24 PM
Pays a good dividend?
Its not much more than 1%, and market average is 3.9%, work that one out
Thaks for that Nizar, I hadn't checked that out properly
The Bureau of Labour Statistics, in the compilation of the CPI, overstate by 30% the prices tracked by the CPI. (In the US)
This 30% overstatement mitigates to an uncalculated % the effect of monetary inflation.
Rather, the *inflation* has been redirected.
Has it been redirected into assets?
Housing, Equity?
The surge in commodity prices more accurately represents the level of monetary inflation, as of course the demand for product has risen with the money supply. This traditionally results in *price inflation* as more money chases the same goods, profit margins rise faster than the costs of production. This has not happened. In fact the opposite has happened, price has fallen. Purchasing power has increased. The very antithesis of the definition of inflation.
China, far from being an economic giant, has become the manufacturing base for US and world consumption within the commodity based product market. The price that they can manufacture at is of course an artificial price.
It is a price devoid of ethical costs.
Therefore, should US and world consumption falter, the economic growth of China would crater. Taking steel as an example. Without government subsidy, the steel industry in China would be bankrupt. This is true for many products, where the margins are nonexistent, and no capital expenditure is possible.
This cratering of business in China would nigh on bankrupt the banks that have made the loans to the various industries, and the financial sector could come under extreme pressure.
The revaluation of the Yuan is a very problematic issue. Should the Yuan revalue upwards against the US$, then Chinese goods become more expensive in the US and world, thus dampening demand.........and cratering the Chinese economy whose margins are so thin, that they can only be maintained on huge volume, should the unit costs be spread over lower gross revenues.........disaster.
Should China blow up it's economy, then prices in the West will start to show very high inflation.........as the effects of ethical costs are priced back into the margins.
Therefore the US economy, with it's trade imbalance with China, is in no immediate danger, as China is addicted to US consumption in the same way as the US is addicted to the low price of commodity items from China etc.
You would expect therefore with the removal of liquidity, not a crash in asset prices, but a crash in commodity prices......and, or, an increase in inflation dependant on demand for commodity items, which should equate to the same outcome.
jog on
d998
rederob
4th-May-2006, 05:56 PM
You would expect therefore with the removal of liquidity, not a crash in asset prices, but a crash in commodity prices......and, or, an increase in inflation dependant on demand for commodity items, which should equate to the same outcome.
True.
And just as the US has printed money willy nilly, so too could the Chinese.
With an exception: China does not have the debt problems of the US in printing money as its current account balance is around 70 billion (US$) in the black (the US is $225 billion in the red).
I don't know what China's national debt is, but US national debt is over $9 trillion and someone needs to pay the interest on that.
Wouldn't it be ironic if China just picked up "liquidity" ball dropped by the US and played the same game they did for another 50 years.
In any case, I am hoping for a decent correction soon as it will present an excellent buying opportunity: Another few percentage points down would do the trick.
The rebound will quickly recover all losses and launch higher again.
There is nothing wrong with the global economy right now, so with commodity supply constraints and demand unmet, higher prices are here to stay a lot longer.
Knobby22
4th-May-2006, 08:54 PM
I agree with you rederob.
Ducat, if the yuan wet up then imports would become cheaper to China, end result, no real effect.
rederob
4th-May-2006, 09:51 PM
BHP billiton says copper markets remain very positive
Last Update: 3:29 AM ET May 4, 2006
MELBOURNE (MarketWatch) -- Global miner BHP Billiton Ltd. (BHP) said Thursday that its view of both refined copper and copper concentrate markets remains "very positive" as disruptions to production look set to continue and stockpiles remain low.
"From such low levels it will take some time to rebuild stock to normal levels," BHP said in a statement.
"Large net inflows of fund money have also added to price rises but it is difficult to know when this will end."
The deficit in copper concentrate looks set to persist with China taking over from Japan as the largest market, BHP said. Treatment and refining charges are expected to fall.
Bobby
4th-May-2006, 10:18 PM
Hi Red,
What are your own thoughts ?
Bob.
rederob
4th-May-2006, 10:33 PM
Hi Red,
What are your own thoughts ?
Bob.
Bob
At post #15 on this thread.
Cheers
michael_selway
4th-May-2006, 10:45 PM
BHP billiton says copper markets remain very positive
Last Update: 3:29 AM ET May 4, 2006
MELBOURNE (MarketWatch) -- Global miner BHP Billiton Ltd. (BHP) said Thursday that its view of both refined copper and copper concentrate markets remains "very positive" as disruptions to production look set to continue and stockpiles remain low.
"From such low levels it will take some time to rebuild stock to normal levels," BHP said in a statement.
"Large net inflows of fund money have also added to price rises but it is difficult to know when this will end."
The deficit in copper concentrate looks set to persist with China taking over from Japan as the largest market, BHP said. Treatment and refining charges are expected to fall.
Yeah its funny how diff views in regards to copper the analysts have below
BHP Billiton says copper surplus unlikely, even by 2008
E-mail | Print | | Disable live quotes Last Update: 7:12 AM ET May 4, 2006
MELBOURNE (MarketWatch) -- Global miner BHP Billiton Ltd. (BHP) said Thursday that copper from mines is unlikely to catch up with surging demand by the start of 2008, a longer period than most analysts are predicting.
"The major independent analysts forecast that the market will move back into surplus later in 2006 or in 2007," said John Crofts, BHP's base metals marketing director.
At the end of 2004, analysts had been predicting a surplus at the end of 2005, which hasn't yet happened, Crofts said from London on a conference call.
"Even a surplus in 2007 looks more doubtful as disruptions to production can still continue to restrict," he said. "This is consistent with BHP Billiton's assessment of the market."
Copper price 'set to plunge by 20pc'
By Tom Stevenson (Filed: 04/05/2006)
The soaring price of copper could drop by a fifth in the next two to three months, a senior trader on the floor of the London Metal Exchange has warned. The dealer, who asked to remain anonymous, said recent market fluctuations were typical of the trading pattern prior to a significant change of direction.
"I expect a 20pc correction. The market will be volatile and illiquid for a while before it cracks," he said. The LME accounts for around 90pc of the world's trade in copper, dwarfing rival markets in New York and Shanghai.
The London Metal Exchange
The price of copper has risen by 60pc this year, with the cash price for immediate delivery reaching a peak of $7,391 a tonne this week, a five-fold increase on the $1,400 at which the metal traded only four years ago. At yesterday's lunchtime fix of $7,231, copper has generated huge profits for the speculative funds who have piled into commodities but caused pain for industrial users.
The scepticism on the LME's trading floor is confirmed by the prices being quoted by brokers for delivery on the longest contracts, which are much lower than the current cash price. "Copper is the only commodity in the world, where you can buy for five-year delivery at a 45pc discount," the trader said. "The market is saying the current price is unsustainable or that supply will kick in to meet demand."
An escalation in the volume of speculative trading, and the growing use of commodities as a diversification for pension funds away from equities and bonds, has contributed to the soaring price of the metals traded on the LME. It is estimated that 80pc of trades derive from financial rather than industrial traders.
Big investors such as Hermes, which manages the retirement funds of BT and the Post Office, Calpers, the largest public sector fund in the US, and Sainsbury's pension fund have all announced plans to increase their exposure to commodities.
The International Wrought Copper Council, which represents copper fabricators, wrote to the LME and the Financial Services Authority saying: "This investment or speculative activity has come to dominate the market, tending to divorce it from its industrial base.'
For recent entrants to the market, a downward lurch like that expected by traders would be a stomach-churning reminder that the rise and rise of commodity prices in recent years is not one-way traffic.
Investors are divided between those who believe metal prices are in the early stages of a multi-year upward "super-cycle", driven by demand from the developing economies of China and India, and those who think recent rises are the last gasp of an unsustainable bubble.
Merrill Lynch recently compared the price performance of commodities with listed futures, including copper, with those such as rubber and steel that cannot be traded so easily using derivatives. On the basis of this analysis it concluded the influence of speculators on the market was "unprecedented" and analyst Richard Bernstein warned that "commodity prices always fell in the 12-month period subsequent to extreme commodity speculation".
Trading has soared over the past 18 months at the famously raucous LME, where a twice-daily round of five-minute "rings" sets the prices of six metals - zinc, tin, lead, copper, aluminium and nickel. During a short but intense dealing session, traders from eleven member firms face each other off from positions on a circular red leather-upholstered banquette.
Well i hope the gains taking place ATM continue over night.
Could be a very interesting day on the market tommorow.
Chances are that it will all fall apart over night though.
SIGH
Seems like i need to take some lessons in Yo Yo ing.
rederob
5th-May-2006, 07:11 AM
Copper Surges to Record on Supply Concerns; Zinc and Aluminum Prices Soar
May 4 (Bloomberg) -- Copper prices surged the most in 18 years, reaching a record, after BHP Billiton Ltd. said labor disputes and equipment and worker shortages may persist at mines through 2008. Zinc also soared and aluminum climbed to the highest since August 1988.
``Almost every mine is working at full capacity and is under a lot of stress,'' Diego Hernandez, president of BHP's base-metals unit, said today in an a London interview. Melbourne-based BHP is the world's largest mining company.
Copper has risen 74 percent this year as disruptions at mines from Indonesia to Mexico limited supply and demand grew. Mining companies Antofagasta Plc and Kazakhmys Plc yesterday reported first-quarter production declines. The price rally has sent shares of producer Phelps Dodge Corp. to a record high today and boosted costs for makers of copper wire and pipes.
RichKid
8th-May-2006, 10:47 PM
Some weakness across the board in the metals today, nothing major yet but this volatility might get nastier. Even strong bulls expect corrections and some people are bound to get caught out (including me).
jft
8th-May-2006, 10:58 PM
Have a look at Alan Kohler's interview with Marc Faber on Inside Business yesterday ... its an interesting viewpoint.
http://www.abc.net.au/insidebusiness/content/2006/s1632456.htm
Cheers,
John
Bobby
8th-May-2006, 11:32 PM
Have a look at Alan Kohler's interview with Marc Faber on Inside Business yesterday ... its an interesting viewpoint.
http://www.abc.net.au/insidebusiness/content/2006/s1632456.htm
Cheers,
John
Thanks !
Bob.
RichKid
8th-May-2006, 11:39 PM
Have a look at Alan Kohler's interview with Marc Faber on Inside Business yesterday ... its an interesting viewpoint.
http://www.abc.net.au/insidebusiness/content/2006/s1632456.htm
Cheers,
John
Thanks for that John, he's quite a character.
noirua
10th-May-2006, 09:39 AM
Resources boom and a warning:
http://longterm.blogspot.com/
tech/a
10th-May-2006, 10:15 AM
Nice link But appears you may not have read it.
What he doesn't understand ( and if he did understand he wouldn't be a politician he'd be a rich investor) is that there is almost no similarity between resources and tech in terms of valuation. In the end a bubble is all about valuation and major metal companies and oil companies trading well below the market multiple IS NOT A BUBBLE. A company with no plan to ever be profitable raising $300M is a bubble. A company earning a few million dollars, selling for billions is a bubble. Companies trading at 50 or a 100 times earnings is a bubble. A company trading at 10 times earnings is NOT. Was the treasurer forecasting the end of the tech boom in 2000???
And finally the best warning of all from the same article.
DON'T TAKE YOUR ECONOMIC ADVICE FROM THE GOVERNMENT!!
bvbfan
10th-May-2006, 05:58 PM
If Costello think commodities are going to collapse then why is he making 36billion in tax cuts.
Either he is an idiot or doesn't believe what he's saying
Smurf1976
10th-May-2006, 07:52 PM
If Costello think commodities are going to collapse then why is he making 36billion in tax cuts.
Either he is an idiot or doesn't believe what he's saying
Or we're about to see some serious money printing. :2twocents
rederob
10th-May-2006, 08:29 PM
DON'T TAKE YOUR ECONOMIC ADVICE FROM THE GOVERNMENT!!
This is what our taxes pay for:
http://www.abareconomics.com/australiancommodities/index.html
ABARE cannot conceive of gold averaging more than $560 this year, yet the report has data to end February 2006!
Then again, ABARE reckons that copper will average less than $5000/tonne this year, which means they will be right if copper now collapses to a shade over $4000 and stays there for the rest of the year.
I think if the people that wrote about the markets invested in them, they might do a bit better.
Anybody who wants to jump off the commodity juggernaut is welcome, but I reckon it has so far to go before a major correction (I am looking at about 20%) that it's just not worth it right now.
I think it is worth revisiting this issue in a few months, when oil prices will be over $80, and we can see what damage the across the board high prices are doing to consumers.
coyotte
10th-May-2006, 11:10 PM
Just set your " stop losses "
Ride it to the top and just over
and you can ALLWAYS re-enter
KISS
Coyotte
professor_frink
11th-May-2006, 08:50 AM
Or we're about to see some serious money printing. :2twocents
does anyone here know at what rate we are printing money? Most people are aware of the U.S expanding their money supply at an exponential rate, but what are we doing here?
coyotte
11th-May-2006, 10:29 AM
does anyone here know at what rate we are printing money? Most people are aware of the U.S expanding their money supply at an exponential rate, but what are we doing here?
post on Kitco last week 9.5%
(US 8%)
Coyotte
rederob
11th-May-2006, 07:49 PM
Base metals are up between 2% and 3% in early European trade (pre-NY open).
I got the feeling today that Oz investors were reluctant to get into commodities any more than they already have.
However, metals are being pushed up by fund money that makes our allords insignificant, so prices are still trending strongly north.
By the way, today's copper price is higher than nickel's price 3 years ago!
Fundamentals for the base metals remain tight and are showing sign of doing anything other than staying that way, or getting tighter.
Who is tipping the collapse, and when?
bvbfan
11th-May-2006, 09:03 PM
God help us if they choose people like this for the future fund, mind you with the cuts in education last decade seems any one with a degree can work for the government.
Kipp
11th-May-2006, 09:47 PM
Is anyone here old enough to remember the last commodities crash (Bullmarket, for one :mexico:? What were the symptoms leading up to it... surely there must be some warning signs?
Of the commodities, isn't gold potentially the most likely to plummet? I mean, isn't most of its price rise attributable to speculation, rather than demand and functionality (as opposed to Zinc, Iron, Nickel etc which are all important components for a variety of things). ---> Please correct me if I'm wrong or you have a different opinion.
kgee
11th-May-2006, 10:12 PM
post on Kitco last week 9.5%
(US 8%)
Coyotte
Does that mean that interest rates here in Australia are under more presure to rise than at the US ... or is there more to the picture such as debt and trade deficit??
Economics aren't my strong point!!
Smurf1976
11th-May-2006, 10:22 PM
Does that mean that interest rates here in Australia are under more presure to rise than at the US ... or is there more to the picture such as debt and trade deficit??
Economics aren't my strong point!!
Both of these two countries have huge trade (including interest on debt owed to foreigners) deficits relative to GDP and both are faced with sharply increasing oil import volumes which aren't going to help in the slightest.
rederob
11th-May-2006, 10:33 PM
Both of these two countries have huge trade (including interest on debt owed to foreigners) deficits relative to GDP and both are faced with sharply increasing oil import volumes which aren't going to help in the slightest.
smurf
It's OK.
twojacks has the answer!
Maybe not - I can't tell if I am joking any more with this government.
Those that think the Budget was so good never thought about our future oil import costs, I'll bet.
Kipp
I'll be brief - you are wrong.
Take a few hours to read through several of the relevant commodity threads - be sure to ignore anything ducati says about gold coz he's done his dash on that one.
Trust me, this time it's different (until the inevitable crash, of course).
kgee
Read the Budget papers and you can become an instant economist. It's like being a lawyer - you are always right, except when you are wrong, and you weren't actually wrong; just that someone interpreted events differently and there opinion held sway.
rederob
11th-May-2006, 10:47 PM
Anyone presently awake needs to go to kitcometals and see what's happening.
http://www.kitcometals.com/
Base metals going ballistic tonight.
Silver and gold on a roll - maybe gold takes out $720 tonight and ducati rides into the wilderness with his "speculation" prognostications that need reworking.
kennas
11th-May-2006, 10:48 PM
You only have to look at the 80s gold graph to see where this is eventually headed.
Everyone, please, put on a parachute!
rederob
11th-May-2006, 10:58 PM
Message at kitcometals:
Due to technical difficulties, the prices displayed are inaccurate. We are working to solve the problem and we anticipate that it will be corrected soon. We apologize for the inconvenience and appreciate your patience
Apart from nickel, their prices seem close to the mark (nickel presently indicated cheaper than copper - lol).
Silver at $14.94 as I press to post....
Bobby
11th-May-2006, 11:18 PM
Anyone presently awake needs to go to kitcometals and see what's happening.
http://www.kitcometals.com/
Base metals going ballistic tonight.
Silver and gold on a roll - maybe gold takes out $720 tonight and ducati rides into the wilderness with his "speculation" prognostications that need reworking.
Hi Red,
But duc,s logic on the market can't be wrong :D ??????????????????
Bob.
clowboy
11th-May-2006, 11:20 PM
Gold might take out $720 tonite? Ha Ha done that already?
$750?
$800?
Will be an interesting night + day on the market tommorow that is for sure.
RichKid
12th-May-2006, 12:08 AM
Message at kitcometals:
Due to technical difficulties, the prices displayed are inaccurate. We are working to solve the problem and we anticipate that it will be corrected soon. We apologize for the inconvenience and appreciate your patience
Apart from nickel, their prices seem close to the mark (nickel presently indicated cheaper than copper - lol).
Silver at $14.94 as I press to post....
Another source for commodity prices, different units though, Kitco did that last week as well, hope they fix it pronto: http://www.bloomberg.com/markets/commodities/cfutures.html
(All metals prices are still healthy so don't panic guys! (not yet anyway))
RichKid
12th-May-2006, 12:11 AM
Gold might take out $720 tonite? Ha Ha done that already?
$750?
$800?
Will be an interesting night + day on the market tommorow that is for sure.
I've been checking open interest and it looks healthy for gold, high closes for the recent bars. I think there's some sort of method to check when OI goes to extremes. Maybe Wayne'll tell us more. I'll do some checking of COT reports fwiw and post in the gold thread if I can.
coyotte
12th-May-2006, 01:01 AM
Is anyone here old enough to remember the last commodities crash (Bullmarket, for one :mexico:? What were the symptoms leading up to it... surely there must be some warning signs?
Of the commodities, isn't gold potentially the most likely to plummet? I mean, isn't most of its price rise attributable to speculation, rather than demand and functionality (as opposed to Zinc, Iron, Nickel etc which are all important components for a variety of things). ---> Please correct me if I'm wrong or you have a different opinion.
From what I remember it was it's generally a situation very similar to now (should have kept records )
Building Boom comes off the boil
Rising interest rates -- when inflation is rising due to higher costs and NOT due to higher consumer demand
Shortage of materials --puts projects on hold --leads to rising unemployment ---onto falling property values ---hence a surplus of materials
dueing the boom & bust of the 70s you could not even buy nails @ one stage
....financed by the biggest debt bubble in history.
The Once-ler
12th-May-2006, 07:11 AM
Today will be an interesting day. I couldn't get to sleep last night looking at all the goings on. Thankfully I'm about 80% invested in resources and energy, but you wouldn't know what was going to happen today. Cheers.
Fab
12th-May-2006, 07:26 AM
What do you mean ? Are you talking about the fall on wall street. Not a bad thing it you tell me
Fantastic---The richer we become and there is ONLY 23 Million of us.
....financed by the biggest debt bubble in history.
If your talking US or any other country debt then Duc's response re % GDP calls it pretty plainly.
Talking in percentages brings it into real terms.
If it costs the US 3.2% in GDP to service debt thats like a $1000 a week PAYE
taxpayer needing $32/week to service his debt.
If your talking of houshold debt then the US is still powering and needing interest rate hikes to pull it up and they are STILL lower than ours!
Any pullbacks or slowings are a good thing.
The Once-ler
12th-May-2006, 08:29 AM
What do you mean ? Are you talking about the fall on wall street. Not a bad thing it you tell me
I'm talking about the opposing forces that will be at work today on the market. Commodities rising to ever increasing levels, verses the big drop on US due to increasing inflation [due to increasing commodities]. Cheers.
coyotte
12th-May-2006, 09:10 AM
one rarely hears mentioned the reasoning of the 70s of why POG went up
it was commonly put down to @ that time to Pres Nixon removing the the
$us from the gold standard
the Yanks simply had built up to much debt to pay for Vietnam
seems their pulling the same stunt now !
exccept for housing we haven't seen real inflation in Oz for around 15yrs I suppose
but when you start seeing retailers building up inventories 6-12 months ahead
of the time they are due to be sold, you will Know it's coming big time
we have had inflation during a recesion --- shortage of supplies -- hence higher prices -- but projects put on hold due to shortages --- so unemployment
Coyotte
Smurf1976
12th-May-2006, 10:58 AM
Everywhere I look I'm seeing more and more evidence of inflation of business input costs. With retail prices of many items having not risen greatly yet I think there could well be a lot of inflation gradually working its way through the system that hasn't hit the checkouts (yet).
Just a few things I noticed over the past week.
If filled up a company vehicle with petrol. It was virtually empty but $106 just to fill it. Nothing unusual, a Ford Falcon utility.
I don't smoke anymore but whilst waiting at the counter in the service station I noted that cigarettes are up about 170% in the past 11 years.
Household bottled gas (delivered) price is up 75% in the past 8 years.
Various pipe fittings we buy at work are up around 300% in the past 5 years. We keep getting faxes every month or two about yet another (usually about 7% at a time) increase in the cost of the pipe itself.
A letter landed on my desk saying that electrical cable prices (wholesale) just went up 13%.
Ordered some custom made plastic products from a local supplier and found that prices were up about 22% compared to the last order (January this year).
An independent inquiry into fares has recommended that bus fares in Hobart need to be incresed by 50% because the CPI increases in the past just haven't been adequate to cover costs.
House prices have more than doubled in the past few years in most cities.
So it looks to me like trying to contain inflation is becomming a bit like fixing a worn out hose. Fix one leak and a bubble appears somewhere else. That bursts, you fix it and then another one appears. The only way to win that game is to get serious and replace the hose altogether. In the context of inflation, the only way to contain it ultimately is to stop inflating.
professor_frink
12th-May-2006, 11:01 AM
post on Kitco last week 9.5%
(US 8%)
Coyotte
thank you kind sir.
That figure was alot higher than I would have guessed!
noirua
12th-May-2006, 10:47 PM
"Last person out shuts the door", more likely, "the door is shut very early on, locking most in", as "log of cash" moves out suddenly.
From what I remember it was it's generally a situation very similar to now (should have kept records )
Building Boom comes off the boil
Rising interest rates -- when inflation is rising due to higher costs and NOT due to higher consumer demand
Shortage of materials --puts projects on hold --leads to rising unemployment ---onto falling property values ---hence a surplus of materials
dueing the boom & bust of the 70s you could not even buy nails @ one stage
BUT then we didn't have CHINA
Cheers
Coyotte
Thanks Wylie. It would be good to know bullmarket's thoughts as well- he's been around a while and has a bit of a cautious streak (I think).
Banks face vast losses in copper mayhem
By Ambrose Evans-Pritchard (Filed: 13/05/2006)
The spike in copper prices over recent weeks has left a group of banks and operators on the London Metal Exchange (LME) nursing vast losses, raising concerns about the stability of the commodities market.
Simon Heale unexpectedly said that he would be stepping down by the end of the year
The banks have been caught out by a sudden widening in the gap between the price of three-month futures and that of long-term futures, for December 2010 or April 2011.
"The dramatic differential we have seen over the past six weeks has cost them a huge amount of money," said a market source. "The bigger players can absorb the losses but smaller operators have nowhere to hide."
Copper surged this week to an all-time high of $8,875 a tonne, rising almost 10pc on Thursday. Yet futures prices for April 2011 are just $3,778 a tonne.
Barclays Capital denied reports that it faced losses of £500m on copper trades, saying that it would have issued a statement if such claims were true.
Banks help to finance the LME's $3,000bn trades each year, often taking on long-term hedges from metal producers, which they cover by selling short-term futures. If the two suddenly diverge, it plays havoc with their books.
Adding to the intrigue, the LME's chief executive, Simon Heale, unexpectedly said on Thursday that he would be stepping down by the end of the year. His spokesman denied that there was any link to the metals mayhem this week, insisting that
Mr Heale wished to spend more time with his family.
Copper has doubled in price this year even though industrial demand is flat.
"This is fairyland," said Richard Elman, head of the Noble Group. "We have
never seen such a disconnect between reality and pricing
of raw materials. The long-term story is sound but the short-term froth is patently frightening."
William Adams, an analyst at BaseMetals.com, said demand for copper tubes was collapsing as producers switched to PVC plastics. The market in Germany has halved from 90,000 to 45,000 tonnes. "There's a very rapid switch from copper. When it turns, copper could easily drop $1,000 a tonne in one day," he said.
David Threlkeld, a veteran copper trader, said the market had been "out of control" for months, allowing speculators to run roughshod over industrial producers and users. "The LME has been seduced by hedge funds, [which have] pushed prices to levels unsupported by fundamentals. There's a vacuum below and the crash could set off a chain of margin calls running through the whole commodities sector. We've got a crisis on our hands and it is a lot bigger than copper," he said.
noirua
13th-May-2006, 01:48 PM
Falls on the LSE and NYSE may move the ASX into the red, mining and oil stocks were the hardest hit. Reports from China, that they require less steel and other metals than forecast, caused the falls. Reports in the London Evening Standard outlining the position of speculators, particularly in copper, added to the market wobble.
nizar
14th-May-2006, 05:27 PM
HMMmmmmm.... dont these comments sound familiar!
Andrew Bell, head of research and strategy at Rensburg Sheppards, said: "It's beginning to feel like it's five minutes to midnight, and for commodity investors there's a danger that everything turns to pumpkins and mice."
From the Telegraph
brerwallabi
14th-May-2006, 06:47 PM
Looks like the Chinese are trying to get the price down to me, its a juggernaut and it was almost out of control. Looks like they have a driver in it now but its still travalling in the outside lane at a reckless speed and its still got full tanks.
rederob
14th-May-2006, 07:27 PM
Looks like the Chinese are trying to get the price down to me, its a juggernaut and it was almost out of control. Looks like they have a driver in it now but its still travalling in the outside lane at a reckless speed and its still got full tanks.
Yep
Consumers have to buy physical, so are propping up the prices with the funds at the moment.
These same consumers will need to pass costs on finished products to retailers, who pass it on to us.
Consumer price inflation cannot now be contained as the high cost of commodities has been too enduring.
Zinc, copper and nickel are in such tight supply that irrespective of any short term retrace, there will be a rush for market offtake - so dips are highly likely to be backfilled quickly by frantic consumers.
There is no present end in sight to this market tightness: Indeed, right now the screws are tightening.
About the only thing different to a year ago is that the commodity bull is a year older and metals prices are so much higher.
The nay sayers simply can't conceive of a bull run built on such high levels of speculation: Odd, that seems to have driven gold north for 5 years now!
The nay sayers point to rising metal production: And the evidence they offer is?
Indeed, evidence is mounting that in many cases mine output in the previous year was higher than it will be this year.
Why?
Last year mines took the opportunity to optimise output by mining best grades. So even by pulling more ore from the ground this year, metal production will be less because the head grades are poorer.
How many newspapers said that?
This is a game where staying ahead is about being well informed.
If you want to be well informed on commodities, stop reading the newspapers.
Start going to the major producers' websites and review their "market presentations".
The BHP's of the world are committing billions of dollars on capacity expansion, infrastructure and exploration: Read why.
Then think about it.
Do you reckon BHP makes such huge commitments without doing an incredible amount of research into future demand?
They can't afford to get it wrong because their performance bonus payments go down the gurgler.
If they do get it wrong it will be from an event "from left field", something quite unlikely, possibly "unthinkable" (like the US economy going into melt down).
Tomorrow and the next day (possibly) represent buy opportunities and my bids are in.
noirua
15th-May-2006, 01:38 PM
After watching several views on Bloomberg TV, it is a case of "you pays your money and takes your choice". One view suggests that China may consider raising its gold reserves and another, that several countries are considering taking advantage of present high gold prices.
Other commodities are seeing swings of views, one that demand and a wall of cash will see commodities go on up for several more years and the other that speculators could become nervous and send everything crashing down.
rederob
15th-May-2006, 03:47 PM
noirua
Really does not matter when you do it as the market moves all over the place all the time.
Today is/was a buying day.
Tomorrow might be too.
If you find someone that can give you a definite answer on "tomorrow", please buy her/him and I will go you halves, OK!
Day traders that don't close out each day may have got burnt this last week.
None of my 4 buy orders were filled today - so I am happy if there is more carnage overnight.
If there is not a considerable retrace north-east in the next 6 months, my view of the markets will need a substantial revision.
Today's standout buy still is (while it lasts) OXR.
As an unhedged producer its upside potential remains barely scathed.
I find gold a great barometer of sentiment and today it has moved within a narrow range after rising immediately over $718 at open.
It's still a bit early, but the narrow range in gold's price today tells me that the DOW is likely to consolidate tonight. What is certain is that gold has "absorbed" Friday's poor bourse reactions and has every likelihood of closing this week well above $720.
Base metal prices need to see further downside to them in order to shake out the overly speculative elements in them. Unfortunately, as consumers are now fighting on the buy side at LME rings, dips in price are going to be met by some robust bidding action. So let's hope a big hedge fund wants to unwind a large position and scare the bejeebers out of the metals complex.
rederob
15th-May-2006, 05:53 PM
So let's hope a big hedge fund wants to unwind a large position and scare the bejeebers out of the metals complex.
Well, so far gold has fallen $15 from today's peak and silver is down 80cents - and both remain in current free fall.
Looking better for some bargains tomorrow already.
Keep it down boys!
wayneL
15th-May-2006, 06:12 PM
Even the bulls would have to concede we're due a correction.
....and if you're bullsih, a nice correction (of one helluva lot more than 20-50 dollars) would be healthy and would set the market up for further upside.
As luck would have it, I was itting at the 'puter when it broke lower, and trading this as a healthy correction... maybe 50 - 100 bananas with a bit of luck. But not discounting the possibility of buyers moving back in soon.
Gotta trade it though :D
Just for a bit of fun... and reference, here is the 1979-80 chart of GCM80 (COMEX June 1980 Gold)
wayneL
15th-May-2006, 06:20 PM
Here's the 15 min chart as of now:
Also Oil pleasingly tanking, which gave me a nice short setup on thursday.
Corrections all round.
However, I am overall bullish on these.
rederob
15th-May-2006, 06:43 PM
Wayne
I think the bottom (for the moment) has just been hit.
POG needs a $650 to set it up for a good run again, but even if we consolidate in the present $680 - $720 range for the week or two, a bit of sting will be taken from the market.
I am hoping like heck that when the US opens we can knock off another $30 so let's see.
wayneL
15th-May-2006, 06:52 PM
Yes,
That was a big move, about 2 x ATR, and wouldn't expect much more today. If it does its a bonus. Prolly should have taken some off at 690ish.
rederob
15th-May-2006, 06:56 PM
Yes,
That was a big move, about 2 x ATR, and wouldn't expect much more today. If it does its a bonus. Prolly should have taken some off at 690ish.
gawd
POG doing a jelly-rubber bounce
bring on the bears
the New York bears
c'mon
(as me mate Layton has me doin')
tech/a
15th-May-2006, 06:57 PM
Nice charts.
Have you got one for Oil Wayne.
Whats Gold and Oil worth a pip?
Obviously dont trade futures.
wayneL
15th-May-2006, 07:40 PM
Nice charts.
Have you got one for Oil Wayne.
Whats Gold and Oil worth a pip?
Obviously dont trade futures.
Tech
Gold
ZG & GC = $10 per tick ... 1 tick = 10c
i.e. $100 per $1 move per contract
There is a mini contract but I don't trade it.
Crude Oil
CL = $10 per tick ... 1 tick = 1c
i.e. $1000 per $1 move per contract
The mini, which I do trade is half size i.e $500 per $1 move
QM = $12.50 per tick ... 1 tick = 2.5c
The colored zones on the 15 min chart are yesterdays range (hi, lo, closing price etc) which I use for swing trading.
markrmau
15th-May-2006, 10:51 PM
Just having a look at http://www.nymex.com/cop_fut_csf.aspx (expanded session overview).
It seems the big fall is in the active front months - say July06. In actual fact they are simply coming into line with (less actively traded) long dated contracts such as Dec06.
So you would have to be nuts to value your OXR and BHP on the short term July contract when Dec was always showing a fall.
So the impact on OXR and BHP is possibly being overstated (or more accurately the earlier run up was overstated).
Is this a reasonable argument?
rederob
16th-May-2006, 07:06 AM
Just having a look at http://www.nymex.com/cop_fut_csf.aspx (expanded session overview).
It seems the big fall is in the active front months - say July06. In actual fact they are simply coming into line with (less actively traded) long dated contracts such as Dec06.
So you would have to be nuts to value your OXR and BHP on the short term July contract when Dec was always showing a fall.
So the impact on OXR and BHP is possibly being overstated (or more accurately the earlier run up was overstated).
Is this a reasonable argument?
No
The contango typically rules commodities.
Nearby supply tightness will give you a backwardation and this can increase quickly and sharply when visible metal supply constraints are known, eg events that give rise to force majeur to be declared at a mine or production facility.
But lets's prove the point.
There are two ways.
One is to look at the December contract prices now, and compare them to spot prices at December.
Another is to go back to last October/November and review contracts 6 months out, and compare those to spot delivery.
You will not find any forward contracts that ever contemplated copper at $8000/tonne, yet the likes of BHP and OXR are likely to have some small amount of sales into the market at or above that price: These sales are real and will appear on the company's balance statements.
So the question of what OXR or BHP are really worth should be addressed by actual sales rather than futures contracts.
The futures contracts can be rolled over, and rolled over, and rolled over. But unhedged producers will sell at the prevailing spot price and this is the chart which should guide your forward view.
My present view is a reclamation of the recent copper highs in the medium term, and a probably high nearer $10,000 based on the fact that just is not enough metal for consumers to run their businesses on.
markrmau
16th-May-2006, 01:12 PM
Thanks rederob. If you look at nymex copper, it doesn't say PANIC to me. Close was down, but close to the highs. Gold didn't look so good though.
kennas
16th-May-2006, 02:05 PM
Can you do a gold one for us Mark?
wayneL
16th-May-2006, 02:11 PM
Mark can put the daily one up... but here's an hourly @ 12:10 AM NY time
kennas
16th-May-2006, 02:20 PM
Looks like people are happy to buy at $680.
Perhaps it's found a base. Too early to tell I suppose.
Any technical indicators showing its next level of support backward?
ducati916
16th-May-2006, 02:26 PM
Looks like people are happy to buy at $680.
Perhaps it's found a base. Too early to tell I suppose.
Kennas, you might be correct about a base at 680, but I think the little kick at the end of the day is from daytraders covering shorts so as not to have a position overnight.
wayneL
19th-May-2006, 04:39 AM
Also Oil pleasingly tanking, which gave me a nice short setup on thursday.
Corrections all round.
However, I am overall bullish on these.
Bailed from my short oil pozzie, was always just a swing trade. At a few ticks under $3.00, not bad for short countertrend swinger.
Still holding gold short...this position has caused me mucho anxiety at times.
Digitalis anyone :D
China baulks as iron ore price soars
By Barry Fitzgerald
May 22, 2006
CHINA is crying poor that its steel industry cannot afford the bumper 19 per cent price increase secured by Australian and Brazilian iron ore producers for shipments of the key steel-making raw material in 2006-07.
The Government-owned China Daily said the US dollar price rise — it follows on from last year's 71.5 per cent increase — could bust the current boom.
China has fast become the biggest market for Australian iron ore with an annual value of about $4 billion, making the health of the steel-making industry there a key consideration for the leading exporters, the Pilbara operators BHP Billiton and Rio Tinto.
"When over-capacity is looming in China's steel industry, rising ore cost that further bites in to domestic steel makers' profits could turn the current boom in to a bust and no one will benefit," according to an editorial in the China Daily.
China's Iron & Steel Association said that its steel makers and the iron ore producers that supply them, including BHP and Rio, "still differ" on price and that their price talks would continue.
An emergency meeting of 16 Chinese steel makers in Beijing on Friday was held in an effort to ensure a united front in China's opposition to the price increase — one now accepted by the rest of the global steel-making industry as the new benchmark. This was underlined by the announcement from Rio Tinto's Hamersley Iron subsidiary on the weekend that it had reached agreement with South Korea's POSCO for a 19 per cent price increase for shipments of its Pilbara lump ore.
The chief executive of Rio's iron ore operations, Sam Walsh, said the agreement with POSCO — the world's fourth biggest steel maker — confirmed the "tightness of the iron ore market and the very strong demand for Australian iron ore".
China's hopes of securing a price increase of no more than 10 per cent were dashed last week when the world's biggest producer, CVRD, effectively set the new benchmark in a 19 per cent price-increase settlement with Germany's ThyssenKrupp.
The Chinese have argued ever since that the CVRD settlement was not a global benchmark.
The Federal Government's chief commodity forecaster, the Australian Bureau of Agricultural and Resource Economics, predicts that world seaborne trade in ore ore could rise by 7.6 per cent to 706 million tonnes this year, with China's booming economy to account for about 44 per cent of the total — up from 28 per cent in 2003.
Expansions by BHP and Rio are expected to underpin a 17 per cent surge in Australian exports this year to 282 million tonnes worth about $14 billion.
Meanwhile, the Australian producers' case for China to pay up for iron ore has been strengthened by moves in India to curb its iron ore exports.
India's Steel Ministry has called on the Ministry of Commerce to curb exports to protect the interests of the domestic steel industry.
Exports from the country are not big but their removal from the global market, to feed the booming domestic industry, would add to the global tightness in iron ore supplies.
rederob
7th-June-2006, 11:00 PM
Reinvigorating this thread: The collapse is correcting.
Maybe it was only ever a correction to begin with.
Base metals will collapse when fundamentals collapse.
BHP hasn't collapsed because the Chinese have not yet signed the iron ore price hike that is in front of them: Does anyone think the Chinese can afford not to buy iron ore from BHP?
Had the fundamentals for metals been weaker, the "correction" would be written in blood-red ink cut deep into chart paper.
We know that the correction is not a collapse because in the midst of it RIO and others got their price hikes for iron, oil has hovered around $70 and nickel prices have been holding near or above $20,000/tonne throughout.
The fact that global equity markets got ahead of themselves and speculative money poured into the so called "new dot com" of commodities was as evident a recipe for disaster as one could ever hope for.
We now are seeing some traders trying to milk the swings in an insanely volatile market; and once they lose interest (or their shirts – or both) volatility will decline and a semblance of sanity will return.
Anyone who thought six months of excessive exuberance could be dissipated in a few days or the odd week should now know better: The market is telling you and you should be heeding the lesson.
I admit to buying a little too early, but having mostly added to existing long term positions, my strategy was mostly of accumulation on the dips.
My current thinking is along the lines of reviewing more deeply where we are placed some time around September – into our reporting season. There should be enough to glean by then to determine if commodity positions should be lessened into 2007 or ridden fearlessly. My suspicion is that oil prices around that time will play a key role in markets generally.
In the meantime, enjoy the rollercoaster ride for some weeks to come.
noirua
8th-June-2006, 01:45 PM
My own view is: that countries generally will slow their growth in favour of maintaining low inflation, and this is certainly the case in the USA, Canada and the UK. Europe ( excluding the UK ) has very low interest rates in the Eurozone and it is thought they will follow others and slowly increase interest rates.
Worldwide growth will drop and so will the need for all commodites and minerals, including gold and oil. My guesses are that gold will drop below US$500 per oz, oil below US$50 per barrel, and all within the next 12 months. Coal has already dropped in price and iron ore will struggle, as non-China users reduce requirements. It will take a while before producers, like BHP Billiton, reduce supplies.
Fortunately its only me forecasting, so, you can take a deep breath, afterall, " What do I know? ".
kennas
27th-June-2006, 12:18 PM
Minerals sector to soar higher
"THE minerals boom is set to get even bigger. Australia's official commodity forecaster yesterday lifted its forecast of mineral and energy export earnings in the coming year by almost $10 billion, and predicted record levels of capital investment and exploration.
In a bullish quarterly update to its forecasts, the Australian Bureau of Agricultural and Resource Economics (ABARE) predicted that minerals and energy sector export earnings will jump another 20 per cent in 2006-07, on top of rises of 30 and 33 per cent in the past two years.
ABARE says minerals and energy exports in 2006-07 will now be more than double the levels of three years earlier, rising from $53 billion in 2003-04 to $110 billion. That is $18 billion more than the $92 billion they have earned in 2005-06."
out of The Age this am.
wayneL
26th-July-2006, 03:53 AM
Just as new mines are opening up all over the place (read increased supply)
China Slowdown Affects Commodities (read reduced demand lol)
China is a developing economy that definitely punches above its weight class. It's a huge trading economy and voracious consumer of industrial commodities. And nowhere is the struggle by the Chinese government to wrestle down its high-flying economy being watched more closely than in the worldwide basic metals markets.
The July 21 move by the People's Bank of China to raise its reserve requirements by 50 basis points, to 8.5% on mainland lenders, marks the second such rate hike in two months. And it's causing turmoil in global copper, zinc, and nickel prices.
The worry: that Beijing will have to throw even more ice water on its overheating China economy, which clocked 11.3% growth in the second quarter of 2006, well above consensus forecasts [see BusinessWeek.com, 7/21/06, "Is China Growing Too Fast for Comfort?"].
FEELING DIZZY.
Asia stocks fell broadly on July 24 to factor in the risk of an economic slowdown on the mainland. Especially hard hit were mining companies such as Australia's BHP Billiton, and Korean and Japanese steelmakers with heavy sales exposure to China. Copper futures contracts for delivery in October fell 3.2% in trading at the Shanghai Futures Exchange.
Over the long haul, China's growth prospects still look dazzling, of course. It's the short-term that could cause commodity traders a bit of vertigo. "We are maintaining our positive outlook for Chinese commodity demand over the one-year horizon," Jonathan Anderson, Asia chief economist for UBS Securities in Hong Kong said in a note to clients on July 24. "However, we should warn that for the next couple of months, we are probably in for a rougher time than expected."........
dubiousinfo
27th-July-2006, 11:14 AM
By Jon Nones
25 Jul 2006 at 01:29 PM
Chile's Codelco, the world's largest copper producer, said that a July 23 rock slide at the Chuquicamata mine will likely reduce copper output by 1,000 metric tonnes a day. Also in Chile, the union at the Escondida copper mine, which produces 8.5% of the world's copper, said it will vote for a strike in a meeting on July 28 if BHP didn't agree to its wage demands
By Shapi Shacinda
LUSAKA (Reuters) - Zambia's Chinese-run Chambishi copper mine has stopped production after riots on Tuesday in which six workers were shot following a dispute over delayed wages which unions say are the lowest in the industry.
It remained unclear who fired the shots amid conflicting reports from the restive Copperbelt region in Zambia which has been the scene of labour violence in the past. A senior official said the mine planned to resume work on Thursday.
dubiousinfo
27th-July-2006, 11:24 AM
STEELMAKERS in China, the world's largest consumer of iron ore, look set to fail in their second attempt to cut annual prices of the raw material as global demand outpaces production.
Credit Suisse Group and Beijing Antaike Information Co are forecasting prices to rise in 2007 for a third straight record.
Soaring demand in China and limited mine expansion has driven spot prices as much as a fifth higher than the benchmark – $US47 a tonne – as Baosteel Group Corp, China's biggest steelmaker, prepares to lead Asian mills in initial contract talks in October with suppliers including BHP Billiton, Rio Tinto and Brazil's Companhia Vale do Rio Doce.
"There is a struggle to bring on capacity, and miners have bottlenecks at the ports, rail and mines," said Rob Clifford, an analyst at ABN Amro. "Next year is going to be at least as tight as this year."
John Garnaut Economics Correspondent
September 7, 2006
THE world's leading body for economic research has punctured claims that speculators are inflating a commodity price "bubble".
In findings that have multibillion dollar implications for Australia's miners and bear heavily on the inflation outlook, the International Monetary Fund says "there is little evidence that speculative investments have been a significant driver of non-fuel commodity price movements".
Its econometric analysis shows higher fundamental prices have created demand from investors, rather than the other way around.
"For example, in the crude oil market there has been no persistent pickup in net long non-commercial positions in recent years when oil prices have had a strong upward trend," says the IMF's World Economic Outlook.
"More strikingly, in the copper market, net positions have actually fallen steadily over the past year, during which prices have reached record highs, suggesting that contrary to common perceptions, speculation may not have played a major role in the recent price run-up."
The findings suggest commodity prices will not "burst" - an event that could throw the Australian economy into recession.
Nevertheless, the IMF modelling show non-fuel commodity prices should steadily decline through to 2010 - while remaining well above 1990s levels.
It predicts aluminium and copper consumption will grow rapidly, by 5.6 and 4.8 per cent a year respectively, but rising that demand will be met by new supply at falling prices.
It expects aluminium and copper prices to slip by 37 and 57 per cent by the end of the decade - broadly in line with pricing on the futures market.
The oil price, however, may remain lodged around present levels due to an inefficient, OPEC-dominated market and finite reserves.
"In contrast to hydrocarbons, overall reserves of base metals are practically unlimited," it says.
Commodity price predictions hinge on understandings of China's transformation from a peasant-based economy to an industrial one.
It says China's consumption patterns have roughly tracked Japan and Korea at the equivalent development stage, with real incomes at roughly $US6400 (adjusted for purchasing power parity).
But its heavy concentration of industry makes it a "somewhat special case" with higher consumption of some metals.
In 2002-05, the IMF says China accounted for almost all of the increase in world consumption of nickel and tin and exceeded global consumption growth for lead and zinc.
China accounted for about half of global consumption growth for aluminium, copper and steel.
Chinese people are also consuming more meat at lower incomes than other countries.
But farmers may not reap the benefits.
kennas
2nd-October-2006, 11:03 AM
Out of The Australian
Mining still on the up
Robin Bromby, Resources
October 02, 2006
MINING shares, far from peaking, are to soar further according to the latest reports from leading analysts. The resources team at Deutsche Bank predicts that Rio Tinto's price has still $34 to go before it reaches target.
Deutsche's Peter Rose and colleagues, with Rio last trading at $70.10, made this big call of a $104 target in the belief that the worst of the commodities price correction was over and recovery was just around the corner.
This was a view shared by Merrill Lynch's London resources guru Evy Hambro who said on Friday that mining companies were "staggeringly cheap", a sentiment echoed over the weekend by Sydney-based Fat Prophets which believed the large diversified majors such as Rio and BHP Billiton were "incredibly cheap".
Fat Prophets analyst Gavin Wendt said no sector other than resources could offer share prices only 10 times earnings, solid yields and rivers of cash flowing in. "If you sell BHP or Rio and take your money, where do your put it? In banks -- no; in retail -- no; in Telstra -- no."
Citigroup said its key resources pick was BHP while ABN Amro, reporting on that company, stated: "Enough selling, time to buy." This confluence of bullishness comes just weeks after several analysts, most notably Morgan Stanley's Stephen Roach, spooked the markets with calls that the metals boom was about to fall over, triggered by economic slowdown and a housing sector crisis in the US.
Yet the stocks at the London Metal Exchange indicate demand for metals is not far from its peak. LME nickel stocks were 5500 tonnes last week (less than two days' global use) against a 52-week high of a still modest 37,218 tonnes; zinc stocks were at 142,200 tonnes against a 52-week high of 533,325 tonnes and lead at 62,500 tonnes against a high of 117,900 tonnes.
And the two-year futures on the LME tell the story. Nickel for delivery in three months was fetching $US28,775/tonne on Friday, but the 27-month contract price ended at a very bullish $US20,700; copper was selling on Friday at $US7535/tonne, but buyers expect to be paying a still high $US6040 in 27 months time; while zinc is also expected to make only a modest retreat from $US3340/tonne to $2468.
All those price trends are down -- but the lower ones still represent bountiful profits for debt-free majors.
ABN Amro's team said the market's confusion was understandable, with some investors saying base metals were about to fall out of bed, others not understanding what the doom and gloom was all about.
"It could be fair to say that we are contributing to the confusion with our view of equity prices heading north and base metal prices heading south."
Even if metal prices fell, the big miners were riding on a tide of handsome commodity incomes. Their share prices would rise once "ongoing growth and solid returns drown out the near-term noise". Deutsche bases its $104 share price target for Rio on global growth moderating but not imploding, upgraded iron ore price forecasts and Rio earning big money on aluminium, copper and molybdenum.
Less favoured was BHP, although the target is $32.60 against Friday's $25.63 close. Deutsche sees commodities staying strong after a mid-cycle dip resulting in BHP shares performing well over the next year.
Zinifex also gets the nod: its target has been increased to $14.59 a share based on higher zinc prices. It closed at $11.75.
swingstar
2nd-October-2006, 11:19 AM
I thought "everyone" was bearish? :)
nizar
2nd-October-2006, 11:53 AM
I thought "everyone" was bearish? :)
Isnt that the best time to buy?
michael_selway
2nd-October-2006, 02:39 PM
Isnt that the best time to buy?
only at the end of the bearish period
thx
MS
swingstar
2nd-October-2006, 03:40 PM
Isnt that the best time to buy?
My point is that not "everyone" is bearish, as indicated by that article. In fact, analysts are very bullish.
kennas
2nd-October-2006, 03:45 PM
My point is that not "everyone" is bearish, as indicated by that article. In fact, analysts are very bullish.
Hmmmm. The selected ones for the article are. Perhaps the ed is bullish and going long his own stocks?
barney
3rd-October-2006, 05:54 AM
Cocoa's down! ......Coffee's down!.........Sugar's down..........might have a cup of tea this morning!.........PS Oil's down too, but it doesn't taste too good :)
wayneL
3rd-October-2006, 06:00 AM
.....Coffee's down!.........Looks like they took me and Frinky seriously :D
Not a moment too soon either. My mercenaries were ready to go :D
:shoot:
barney
4th-October-2006, 07:55 AM
Cocoa's down! ......Coffee's down!.........Sugar's down..........might have a cup of tea this morning!.........PS Oil's down too, but it doesn't taste too good :)
Not often I get to quote myself...........Ditto to everything I said yesterday..................
You and the Professor must carry a lot of clout to get coffee dropping that easily Wayne!! :cup:
coyotte
4th-October-2006, 08:46 AM
My point is that not "everyone" is bearish, as indicated by that article. In fact, analysts are very bullish.
Interesting story in Your Trading Edge Sept/Oct 06 page 20 , by Gary Norden .
He gives a run down on the difference between --- Brokers, Analysts , Traders and TRADERS
found it was what I suspected all along
Cheers
RichKid
4th-October-2006, 08:51 AM
Not often I get to quote myself...........Ditto to everything I said yesterday..................
You and the Professor must carry a lot of clout to get coffee dropping that easily Wayne!! :cup:
LOL, geez, you guys are funny!! Glad to see the humour flowing through!!
barney
6th-October-2006, 09:29 AM
Not a moment too soon either. My mercenaries were ready to go :D
:shoot:
Hey Prof and Wayne, You guys may need to watch your backs after what you've done to coffee...........Lots of irate farmers out there ..............exerpt from publication...................
For most Americans, drinking coffee is a daily ritual. And whether you're drinking gourmet blend or freeze-dried instant, the price is about the same from one day to the next.
For coffee farmers it's a different story. A price crash in the world coffee market has pushed farmers into bankruptcy, with thousands losing their lands, and starvation looming all too close.
Reports say tens of thousands of Mexican coffee farmers have fled their fields in search of incomes to feed their families. El Salvador recently acknowledged that over 30,000 jobs have been destroyed because of the price slump. Many of the 60,000 coffee producers in Nicaragua are facing losing their land because of mass indebtedness. Farmers in all three countries have taken to the streets to demand government support for farmers on the brink of starvation.
"You two boys will be sorry!"
Site if anyone is interested............ http://www.globalexchange.org/campaigns/fairtrade/coffee/news2001/gx100001.html
wayneL
6th-October-2006, 09:19 PM
Hey Prof and Wayne, You guys may need to watch your backs after what you've done to coffee...........Lots of irate farmers out there ..............exerpt from publication...................
For most Americans, drinking coffee is a daily ritual. And whether you're drinking gourmet blend or freeze-dried instant, the price is about the same from one day to the next.
For coffee farmers it's a different story. A price crash in the world coffee market has pushed farmers into bankruptcy, with thousands losing their lands, and starvation looming all too close.
Reports say tens of thousands of Mexican coffee farmers have fled their fields in search of incomes to feed their families. El Salvador recently acknowledged that over 30,000 jobs have been destroyed because of the price slump. Many of the 60,000 coffee producers in Nicaragua are facing losing their land because of mass indebtedness. Farmers in all three countries have taken to the streets to demand government support for farmers on the brink of starvation.
"You two boys will be sorry!"
Site if anyone is interested............ http://www.globalexchange.org/campaigns/fairtrade/coffee/news2001/gx100001.html
Barney,
Did you see the date on that article? Anyway starving farmers can join our band of mercenaries :D
As a side issue, when such reports come out, it presents a sterling trading opportunity. When farmers start revolting, burning crops etc you can be sure that that commodity is at, or pretty close to, minimum value.
wayneL
6th-October-2006, 09:30 PM
A similar situation in Cocoa in late 1999.
It took a bit longer to trend upwards, but the minimum value opportunity was still valid (i.e write WTFOTM puts)
2020hindsight
6th-October-2006, 09:31 PM
When farmers start revolting, burning crops etc you can be sure that that commodity is at, or pretty close to, minimum value. :topic
As they said before the French Revolution "the farmers are revolting " - "yes and they smell too". But who had the last laugh ? lol. I sometimes try to imagine the fact that Aus was founded in 1788, and the French revolution was in 1789–1799. AND no internet to keep up to date. !! Imagine being stuck in Sydney then !! Quick - BUY Guillotines!! - Sell CASTLES!!
sorry Wayne - I keep doing this to your serious threads dont I lol. I'll try to be serious tomorrow - but right now its happy hour lol.
barney
6th-October-2006, 10:21 PM
Barney,
Did you see the date on that article? Anyway starving farmers can join our band of mercenaries :D
As a side issue, when such reports come out, it presents a sterling trading opportunity. When farmers start revolting, burning crops etc you can be sure that that commodity is at, or pretty close to, minimum value.
Hi Wayne.......Just being a bit silly... sorry!.......didn't even look at the date............I don't even entertain the thought of trading Comm's.....I have enough trouble with regular stocks :D ...........It is interesting how they move up/down just the same..............and coffee has been "roasting" of late..............as for 20/20 and his French Revolution........if they'd drunk more coffee instead of that French wine, they probably wouldn't have had a Revolution :cup: :bier: Cheers Barney.
barney
6th-October-2006, 10:33 PM
Barney,
Did you see the date on that article? Anyway starving farmers can join our band of mercenaries :D
As a side issue, when such reports come out, it presents a sterling trading opportunity. When farmers start revolting, burning crops etc you can be sure that that commodity is at, or pretty close to, minimum value.
Hey Wayne, Just as a serious follow up to that coffee slump, I see it took about 10 months for it to fully re establish its uptrend..........What was the catylist for the recovery??..............PS You are right how the "doom and gloom" articles were a pre-curser to the recovery...........I guess when things are really bad, they often can't get much worse?!...............What would be your slant on Sugar atm just out of curiousity, cause it has been "suffering" for a while as well?? Cheers Barney.
noirua
6th-October-2006, 11:36 PM
Dr Marc Faber's view on commodities is always worth adding as he has called the markets correctly in the last 5 years.
This is an interview on 15th September 2006: http://inhome.rediff.com/money/2006/sep/15faber.htm
wayneL
7th-October-2006, 03:30 AM
Hey Wayne, Just as a serious follow up to that coffee slump, I see it took about 10 months for it to fully re establish its uptrend..........What was the catylist for the recovery??..............PS You are right how the "doom and gloom" articles were a pre-curser to the recovery...........I guess when things are really bad, they often can't get much worse?!...............What would be your slant on Sugar atm just out of curiousity, cause it has been "suffering" for a while as well?? Cheers Barney.
Barney,
I suppose that farmers walking away started creating tightness in supply... just a guess though.
Re sugar: Looking at the long term chart below, I would have to say minimum value is around about $5. The current spot price is ~$11 so it could go much lower. Whether it will, is another matter.
Cheers
kennas
7th-October-2006, 07:34 AM
Looks like there could be some support between the green lines too. So it could steady. Could we have another 1980 spike still?? Must have been some strange stuff going on then....
barney
7th-October-2006, 06:17 PM
Looks like there could be some support between the green lines too. So it could steady. Could we have another 1980 spike still?? Must have been some strange stuff going on then....
Yeah that was a major spike Kennas....I'd be interested as well on any info re that.............(any ideas Wayne?) Always curious as to the catalyst for things like that....Cheers, Barney.
wayneL
12th-October-2006, 05:59 AM
Here's a very good PDF on the coming commodities crunch.
http://bloomberg.com/news/marketsmag/traders.pdf
rederob
12th-October-2006, 07:02 AM
Here's a very good PDF on the coming commodities crunch.
http://bloomberg.com/news/marketsmag/traders.pdf
Wayne
Bloomberg might be right within the next decade.
I have now seen doomsayers rampant for the past 2 years, and continue to be badly wrong.
There will be an exceptionally strong rally into year's end, led by zinc and nickel, and the laggard lead.
I don't expect people to "take my advice", but my record on commodities has lined my pockets nicely, thank you. And I have continued to buy when many have been selling.
The Amaranth fiasco just shows that the funds think they are immune from failures, but are really little different to you or me - we cannot always be right.
wayneL
12th-October-2006, 03:01 PM
Wayne
Bloomberg might be right within the next decade.
I have now seen doomsayers rampant for the past 2 years, and continue to be badly wrong.
There will be an exceptionally strong rally into year's end, led by zinc and nickel, and the laggard lead.
I don't expect people to "take my advice", but my record on commodities has lined my pockets nicely, thank you. And I have continued to buy when many have been selling.
The Amaranth fiasco just shows that the funds think they are immune from failures, but are really little different to you or me - we cannot always be right.
Well bully for you.
BTW, have you been following grains? I have had an interesting time in that department.... wheat in particular. :D
Ken
13th-October-2006, 01:50 PM
who thinks Rio will get to 100?
kennas
13th-October-2006, 02:01 PM
who thinks Rio will get to 100?
Absolutely...but in one year, or 10????
Ken
13th-October-2006, 03:15 PM
well whats your prediction.
its in a bit of a rally at the moment. where will the resistance come from on its latest push. it has blitz from $70 to $73. i suspect it will take a breather around $74. Same with BHP now. Some profit taking may go on.
thats just a gut feeling.
they have risen almost 10% in last month
nizar
13th-October-2006, 04:06 PM
well whats your prediction.
its in a bit of a rally at the moment. where will the resistance come from on its latest push. it has blitz from $70 to $73. i suspect it will take a breather around $74. Same with BHP now. Some profit taking may go on.
thats just a gut feeling.
they have risen almost 10% in last month
I would buy BHP many many many times over before even looking at RIO.
The future outlook is much better for copper (Wats the name of that mine in south america that produces 8% of the worlds output?), uranium (Olympic dam will be much much bigger than ERA even with Jabiluka) and oil (RIO lacks an oil division; BHPs is bigger than WPL) than it is for iron ore (the world is made up of 5% iron ore, hence there will NEVER be a shortage) and diamonds!
Give me BHP any day of the week
Ken
13th-October-2006, 05:00 PM
i have both which is hopefully going to be my first property in 15 years.
nizar
13th-October-2006, 05:03 PM
i have both which is hopefully going to be my first property in 15 years.
ur first property in 15years?
Thats what i used to aim for.... when i was 5!
lol but now just past 20 and still no house... but im confident EVE and OMC will do it for me... OMC a nice car, but EVE, EVE is for my house!
professor_frink
13th-October-2006, 05:04 PM
Well bully for you.
BTW, have you been following grains? I have had an interesting time in that department.... wheat in particular. :D
Wheat's been going limit up the last few days hasn't it?
It's 30 cents isn't it?
wayneL
13th-October-2006, 05:16 PM
Wheat's been going limit up the last few days hasn't it?
It's 30 cents isn't it?
Yep,
I'll post a chart later... corn went limit up last nite as well = 20c
professor_frink
13th-October-2006, 05:22 PM
Yep,
I'll post a chart later... corn went limit up last nite as well = 20c
that would be good.
:xyxthumbs
Slightly off topic question-
How do you find the grains to trade? Do you spend much time looking at fundamentals for them, or is it straight out astrology, sorry charting?
rederob
13th-October-2006, 05:25 PM
Well bully for you.
BTW, have you been following grains? I have had an interesting time in that department.... wheat in particular. :D
Wayne
I have not followed grains at all, ever.
My real job means I barely have time to follow the market, let alone base metals (which I devote 90% of my research time to).
On the base metal front, my views on the title of this thread are probably now well known.
What so many fail to understand is that this last 2 years has not only led to high prices, it has led also to consumer destocking. That is, the high prices have caused consumers to increasingly draw from their own stockpiles, so as to avoid high spot prices.
A consequence of this is seen in copper inventories which have hardly moved, but rates of backwardation have fluctuated markedly because consumers (in particular) "know" when actual supply is tight "on the street" and when it is less tight.
The fact that copper has been in backwardation all year shows that "tightness" remains an important determinant of its price resilience.
So before commodities start to collapse, we will see significant consumer restocking - a process likely to take many months for copper, and many weeks for nickel.
On the other hand, we have zinc and lead experiencing significant weekly warehouse declines. Plus, we have a majority on non-traded metals concurrently experiencing continued robust demand.
All this towards the end of a year that was supposed to see metals return to surplus.
And to top off everything we have the DOW hitting record highs, and our own allords almost there too.
If these are the ingredients for a collapse, they are very poorly timed.
Maybe in 2007 it will come, or the next year.
Right now Blind Freddy is probably raiding his money box and finding every spare penny to put on ZFX.
And why wouldn't anyone?
wayneL
13th-October-2006, 05:26 PM
that would be good.
:xyxthumbs
Slightly off topic question-
How do you find the grains to trade? Do you spend much time looking at fundamentals for them, or is it straight out astrology, sorry charting?
Prof,
You know you can chart them yourself with IB?
I'll post the symbology later :)
professor_frink
13th-October-2006, 05:36 PM
Prof,
You know you can chart them yourself with IB?
I'll post the symbology later :)
I looked at them, but I thought that would cost me to get the data. The market data for the CBOT is $55 USD a month, and I thought it would be a slight waste to do it when I'm not seriously thinking about trading them(well, not for awhile anyway)
wayneL
13th-October-2006, 05:45 PM
I looked at them, but I thought that would cost me to get the data. The market data for the CBOT is $55 USD a month, and I thought it would be a slight waste to do it when I'm not seriously thinking about trading them(well, not for awhile anyway)
You can trade them now through ECBOT.... and it's LIQUID.
$55 is only for the PIT data
Try these (Going off memory as I don't have AMI up ATM)
Really should go through and read more on their site, shouldn't I?
Thank you for answering a question I should have answered myself :)
YOUNG_TRADER
13th-October-2006, 09:34 PM
ur first property in 15years?
Thats what i used to aim for.... when i was 5!
lol but now just past 20 and still no house... but im confident EVE and OMC will do it for me... OMC a nice car, but EVE, EVE is for my house!
Funnily enough I'm gonna need all of my EVE for the deposit requriments on my house that I'm building, settlement on land is in mid Dec, so run or not my EVE money is gonna have to come off the table
nizar
13th-October-2006, 10:18 PM
i reckon if it doubles to say 20c by then, maybe take the $125k and free-ride the rest?
just my opinion, obviously i dont know ur situation, etc.
kennas
30th-October-2006, 12:16 PM
Looks to me like the resource bears have been put into hybernation.
1130 [Dow Jones]JPMorgan moves to overweight on resources from underweight on Chinese growth, slow supply response and rising iron ore prices. Says BHP Billiton (BHP.AU) and Rio Tinto (RIO.AU) have underperformed the recent surge in base metal prices and are now looking attractive. JPMorgan expects Chinese growth of 10.6% in 2006 and 9.5% in 2007. (APW)
michael_selway
30th-October-2006, 10:20 PM
Looks to me like the resource bears have been put into hybernation.
1130 [Dow Jones]JPMorgan moves to overweight on resources from underweight on Chinese growth, slow supply response and rising iron ore prices. Says BHP Billiton (BHP.AU) and Rio Tinto (RIO.AU) have underperformed the recent surge in base metal prices and are now looking attractive. JPMorgan expects Chinese growth of 10.6% in 2006 and 9.5% in 2007. (APW)
true but eventually i think it will crash
thx
MS
thestorm
30th-October-2006, 10:22 PM
Commodities are sure to crash shortly. Every expert around is predicting their downfall.
I wouldn't want to be holding any commodities by the end of the year otherwise I wouldn't be able to afford any Christmas presents! :sly:
michael_selway
30th-October-2006, 10:40 PM
Commodities are sure to crash shortly. Every expert around is predicting their downfall.
I wouldn't want to be holding any commodities by the end of the year otherwise I wouldn't be able to afford any Christmas presents! :sly:
i wouldnt say shortly, atleast another 6 months, but likely 12 months, then it might get dangerous
thx
MS
canaussieuck
31st-October-2006, 12:39 AM
i wouldnt say shortly, atleast another 6 months, but likely 12 months, then it might get dangerous
thx
MS
I agree...its bound to happen. Remember what causes a crash though...fear. Vertical increases create the nervous tension....then the slightest ruffle and whooooosh, down they go. Demand has and will intervene to push things along again...but as demand weakens, so will the rate of recovery from these little mini corrections. As long as the BRIC continues to pressure supply, the trend will continue.
I think we will see various metals and resources go through various extreme levels of sup/demand cycles leading up to the Olympics (as a milestone for example). Other factors that should create some nervousness are the amount of investment in Chinese banks, fixed assets and other "bubbles" in China and the other BRIC nations (and the US to some extent, although it seems to be a resilent BULL)
I would say that an overall picture of the global geo-political climate, as well as the economic cycles in the BRIC nations should be kept as up to date as possible for any trader or investor in a day to day manner. Its the difference between being in cash, fully invested in the equities booming, or starting to get defensive in your portfolio.
I soak up every bit of information i can every day while skimming over the rubbish that can distract you from your goals.
For a trader or an investor, the only decent bit of news to pay attention to is the broader picture.
:2twocents
kennas
31st-October-2006, 09:12 AM
I think we will see various metals and resources go through various extreme levels of sup/demand cycles leading up to the Olympics (as a milestone for example).
Yep, China will probably keep growing at it's lazy 10% until the Olympics and then what? Perhaps the middle class will have grown to a level that they start consuming their own trinkets and don't need to export every last mobile phone to the US....A self sustaining China is an Australian economic dream. Well, a WA and QLD dream....
nizar
31st-October-2006, 02:40 PM
I think we will see various metals and resources go through various extreme levels of sup/demand cycles leading up to the Olympics (as a milestone for example).
Really?
I think the olympics has NOTHING to do with it
But i guess u being based in China, would know better...
Can u please elaborate on how 1.3billion people + india would be dragging themselves out of poverty because of the Olympics??
After 27 years of growth, it will all come down because of the olympics?? or after the olympics??
So they will decide: No more houses, cars, fridges, appliances, because of the Olympics??
I beg to differ i must say...
Please elaborate....
canaussieuck
31st-October-2006, 03:27 PM
Really?
I think the olympics has NOTHING to do with it
But i guess u being based in China, would know better...
Can u please elaborate on how 1.3billion people + india would be dragging themselves out of poverty because of the Olympics??
After 27 years of growth, it will all come down because of the olympics?? or after the olympics??
So they will decide: No more houses, cars, fridges, appliances, because of the Olympics??
I beg to differ i must say...
Please elaborate....
Sure Nizar. The Olympics are just a time frame. By 2008 Beijing's massive infrastructure upgrades will be completed, the airport, the subway, the new ring roads, the new bus system, and all of the new apartments. There will be a slowdown in demand for materials, this could cause some nervous selling pressure in the markets (not too mention the panic that hits over investment in fixed assets here, this could drag down some big banks, there not exactly built on a history of strict lending practices)
Do you think a boom cycle will continue without this happening? Do you think China is different than other countries when it comes to normal cycles? I'm picking 2008 as the time when the cycle will correct itself most dramatically in China. Could it take the other Asian markets with it...quite possibly. In the meantime we'll still see the little mini corrections happen too, but in my opinion demand will cause quicker recovery, until the a larger more significant correction in 2008/2009.
Only my opinion. I'm very interested in your take on it too.
Cheers,
nizar
31st-October-2006, 03:42 PM
Sure Nizar. The Olympics are just a time frame. By 2008 Beijing's massive infrastructure upgrades will be completed, the airport, the subway, the new ring roads, the new bus system, and all of the new apartments. There will be a slowdown in demand for materials, this could cause some nervous selling pressure in the markets (not too mention the panic that hits over investment in fixed assets here, this could drag down some big banks, there not exactly built on a history of strict lending practices)
Do you think a boom cycle will continue without this happening? Do you think China is different than other countries when it comes to normal cycles? I'm picking 2008 as the time when the cycle will correct itself most dramatically in China. Could it take the other Asian markets with it...quite possibly. In the meantime we'll still see the little mini corrections happen too, but in my opinion demand will cause quicker recovery, until the a larger more significant correction in 2008/2009.
Only my opinion. I'm very interested in your take on it too.
Cheers,
Did u hear about ICBC float?
The retail portion closed 78times oversubscribed and the insto 30times oversubscribed! A good effort!
And they were raising, us$19billion OH MY!!
(its not like one of our uranium floats raising 5mil and closes 3x oversubsribed big woop)
Yeh u make good points about the OLympics i suppose, but remember, China was growing at 8-10% for 27 years, long before the olympics of any of this was even known.
While back in the 80s and 90s, it wasnt really a major force, now, China is of scale (biggest consumer of copper, zinc globally) and a major player that it doesnt need to grow at 10% a year to make a big difference and push up commodity prices. The problem i see is not the demand slowing (it will possibly in %terms but in actual absolute figures, it will still grow) but the supply response. The supply response for copper is supposed to come in 2006-2007 but because of labour and equipment shortages and high oil prices causing cost blow outs, they will not come until 2007. Zinc i suspect 2008, maybe even 2009.
Every commodities cycles in the past, and they last minumum 15 years, have had mini corrections. I suspect that will happen after the olympics perhaps, and maybe u are correct. The drop in demand, or rate of growth of the demand, coupled with the (huge) supply response, should cause at least some sort of correction/crash.
canaussieuck
31st-October-2006, 03:53 PM
Good points Nizar...also, one thing i forgot to mention that is positive for the cycle too is the rate of savings by the Chinese people, something like 60% of their earnings....where as if they were similar to Western countries they would have all of this expansion plus consumer debt, which has yet to take root.
I hope the boom lasts much longer as you say. Certainly good to see the people prosper too.
Cheers,
YOUNG_TRADER
31st-October-2006, 04:42 PM
Really?
I think the olympics has NOTHING to do with it
But i guess u being based in China, would know better...
Can u please elaborate on how 1.3billion people + india would be dragging themselves out of poverty because of the Olympics??
After 27 years of growth, it will all come down because of the olympics?? or after the olympics??
So they will decide: No more houses, cars, fridges, appliances, because of the Olympics??
I beg to differ i must say...
Please elaborate....
Nizar, I agree with Cana
I was in China last year and was blown away at the rapid level of development, a large portion of which was being done for the Olympic games, I'm not saying that this is the only factor, but it is a big one,
I have been told by many top level Exec's that they have been amazed at how determined China is to shrug off the 'peasant farmer' status it has had for the last few centuries and cement the 21st Century as the 'New Economic Super Power' and that the 2008 Olympics will act as their Stage for the world,
As such they will buy up every commodity they need to get all of their buildings completed pre-olympics, post olympics they won't need to work on a deadline and so can afford to wait,
While the Commonwealth Games in India will also help a little, I think that 2008 Post Olympics will see a commodities slowdown,
Long Term Stronger for Longer driven by the Industrialisation of 3Billion People
michael_selway
31st-October-2006, 05:23 PM
As such they will buy up every commodity they need to get all of their buildings completed pre-olympics, post olympics they won't need to work on a deadline and so can afford to wait,
While the Commonwealth Games in India will also help a little, I think that 2008 Post Olympics will see a commodities slowdown,
Long Term Stronger for Longer driven by the Industrialisation of 3Billion People
I agree and ive said this a long time ago ;)
Late 2007 to 2008
Thanks
MS
nizar
31st-October-2006, 05:31 PM
Long Term Stronger for Longer driven by the Industrialisation of 3Billion People
When a dopey, oft-lying lawyer backed by the most consistently wrong group of forecasters in the country (Treasury) call the end of anything, it is time to buy.
Perhaps this is to be the shortest commodities boom in the last 100 years; despite being fuelled by the largest demographic demand effect and untold supply shortage from 10 years of no exploration?
Why can a property boom last for 15 years and nobody thinks properties are returning to 1992 prices?
What are 'normal prices' anyway? If copper is above $2.50 in 2008 are we in a bust, a boom or normal?
Jawboning the RBA in my opinion. - when you have no record or respect to defend, being outrageously wrong on calls like this dont mean much for a spiv like Costello.
Politicians are the worst form of commentator. Guaranteed pensions and not having to invest your own money means you have no skin in the game and your opinion is worth little.
When a dopey, oft-lying lawyer backed by the most consistently wrong group of forecasters in the country (Treasury) call the end of anything, it is time to buy.
Perhaps this is to be the shortest commodities boom in the last 100 years; despite being fuelled by the largest demographic demand effect and untold supply shortage from 10 years of no exploration?
Why can a property boom last for 15 years and nobody thinks properties are returning to 1992 prices?
What are 'normal prices' anyway? If copper is above $2.50 in 2008 are we in a bust, a boom or normal?
Jawboning the RBA in my opinion. - when you have no record or respect to defend, being outrageously wrong on calls like this dont mean much for a spiv like Costello.
Politicians are the worst form of commentator. Guaranteed pensions and not having to invest your own money means you have no skin in the game and your opinion is worth little.
3.50 now and 2.50 in 2008 is quite a drop, so likely shares will fall by then?
When a dopey, oft-lying lawyer backed by the most consistently wrong group of forecasters in the country (Treasury) call the end of anything, it is time to buy.
Perhaps this is to be the shortest commodities boom in the last 100 years; despite being fuelled by the largest demographic demand effect and untold supply shortage from 10 years of no exploration?
Why can a property boom last for 15 years and nobody thinks properties are returning to 1992 prices?
What are 'normal prices' anyway? If copper is above $2.50 in 2008 are we in a bust, a boom or normal?
Jawboning the RBA in my opinion. - when you have no record or respect to defend, being outrageously wrong on calls like this dont mean much for a spiv like Costello.
Politicians are the worst form of commentator. Guaranteed pensions and not having to invest your own money means you have no skin in the game and your opinion is worth little.
I was thinking along the same lines myself, though I don't see the link between property trends and commodities. :2twocents
BSD
1st-November-2006, 08:25 PM
I was thinking along the same lines myself, though I don't see the link between property trends and commodities. :2twocents
More a reference to this continual assertion that there is a 'normal' value for commodities.
The mentality prevails (worse in the US) that commodity prices cannot have a bull market for more than 5 minutes but homes can easily double every couple of years and the rental property is always 'cheap' despite a 2% yield.
3.50 now and 2.50 in 2008 is quite a drop, so likely shares will fall by then?
Probably - on momentum but maybe not on valuation.
Most analysts are getting values for BHP and RIO far in excess of current levels based on expected 2008 Cu prices around $2.50 (most have risen recently though)
This gives an approximate 2008 average of $2.98 from the futures players.
Many analysts are still below the forward curve and nobody has a sell on BHP or RIO.
___________________________________
Grades are falling, capital costs are rising by multiples and ongoing costs are up by a huge factor as a result.
Copper is not going back to $1.20 and the long term numbers in analyst models are rising slowly.
$1.40 + long term is now common and most laugh when they use such numbers in their models.
The Olympics has very little to do with commodities demand in my view.
"Of the 36 Olympic venues, 31 are in Beijing and of these, 11 are new, 11 are being renovated and nine will be temporary sites. The cost is estimated at $38 billion (£21.7 billion). Of that, about $2.4 billion will be spent on the Olympic venues alone and possibly as much as $40 billion will be spent on urban renewal and on infrastructure improvements."
"That compares with the $16 billion expected to be spent on London’s infrastructure." -
$70bn USD is a lot of money in anyone's book - but not enough to generate 10% GDP growth for an economy with a GDP in of US$2.50 trillion in 2006. Let alone a commodities spike.
MiningGuru
1st-November-2006, 08:29 PM
There has been a bit of a history of cities experiening post Olympic blues. Usually the boom lasts to just after the games, and then there is slowdown.
There is usally an optomistic frenzy up to the games.
Look at Sydney, where there has been a property bust pretty much since the games were over.
Barcelona, Seol, and Athens all experienced it, and Beijing proabaly will as well.
Boom to 2008, then a mini-correction
YChromozome
1st-November-2006, 08:30 PM
Howard said so, so it must be correct . . . . LOL
Howard backs Costello on mining downturn (http://www.theaustralian.news.com.au/story/0,20867,20682142-31037,00.html) - 1st November - The Australian.
The resources sector should continue to make a very big contribution to Australia's wealth but the reality was that there had been a dip in the sector, Mr Howard said today.
Stop_the_clock
1st-November-2006, 08:41 PM
They are calling it tops so interest rates can then take a breather and that way they can secure another election win...either that or its a side stepping issue to avoid other pressing issues such as infrastructure problems on our ports, roads and railways etc.
...or maybe its because of the skills shortage crisis...who knows
BSD
1st-November-2006, 09:06 PM
Look at Sydney, where there has been a property bust pretty much since the games were over.
Barcelona, Seol, and Athens all experienced it, and Beijing proabaly will as well.
Boom to 2008, then a mini-correction
I dont buy it. Coincidences perhaps?
The US economy didn't miss a beat post Atlanta and like Atlanta and the US, Beijing is a small component of overall Chinese economy.
Beijing is what % of Chinese GDP/Population?
I dont even think that Beijing is the driver of the 'China Story" it is the political city - not the manufacturing power house.
That said, I think plenty of small corrections (10% - 20%) will occur in the two years to 2008, as they have this year.
wayneL
1st-November-2006, 10:13 PM
More a reference to this continual assertion that there is a 'normal' value for commodities.
The mentality prevails (worse in the US) that commodity prices cannot have a bull market for more than 5 minutes but homes can easily double every couple of years and the rental property is always 'cheap' despite a 2% yield.
Well..... yes!
The epitome of "irrational exuberance" there and bull markets running well past where they *should.
Now that Johnny Rotten has joined the fray, I'm buying with my ears pinned back. LOL
Smurf1976
1st-November-2006, 10:38 PM
Why can a property boom last for 15 years and nobody thinks properties are returning to 1992 prices?
The normal change of sentiment during a bull market.
At the beginning, hardly anybody expects prices to rise. You would have encountered that if this thread had been running a few years ago. Few would have believed that oil would go over $20 or zinc over $1000 simply because they had been so low for so long.
At the end of a bull market, it's the reverse. Hardly anybody expects prices to fall. Just look at how many were piling into the NASDAQ in early 2000 right at the end. Or how many still don't believe house prices can fall when, relative to practically any measure (especially those other than cash), they have fallen quite a lot at least in Sydney.
If people think you're doing the "right" thing with your investments then it's likely you're too late. :2twocents
wayneL
11th-November-2006, 06:16 AM
Howard said so, so it must be correct . . . . LOL
Howard backs Costello on mining downturn (http://www.theaustralian.news.com.au/story/0,20867,20682142-31037,00.html) - 1st November - The Australian.
The resources sector should continue to make a very big contribution to Australia's wealth but the reality was that there had been a dip in the sector, Mr Howard said today.
Hmmm
Maybe Johnny Rotten and Kid Costello were right. Copper has been swatted, breaking some support levels, and I believe the other base metals as well.
The chart is now looking more like a distribution top than a consolidation in the trend IMO.
Reports of slowing growth coming out of China as well
:2twocents
kennas
11th-November-2006, 08:23 AM
Hmmm
Maybe Johnny Rotten and Kid Costello were right. Copper has been swatted, breaking some support levels, and I believe the other base metals as well.
The chart is now looking more like a distribution top than a consolidation in the trend IMO.
Reports of slowing growth coming out of China as well
:2twocents
Not sure about the 'slowing growth', all I see is confirmation of around 10-11%.
Thart chart looks bearish to me as well. What is it of?
professor_frink
11th-November-2006, 09:01 AM
Not sure about the 'slowing growth', all I see is confirmation of around 10-11%.
Thart chart looks bearish to me as well. What is it of?
that's copper my good man :)
kennas
11th-November-2006, 09:04 AM
that's copper my good man :)
HG Z6 is copper? Falling through $320 looks ordinary.
professor_frink
11th-November-2006, 09:12 AM
HG Z6 is copper? Falling through $320 looks ordinary.
Yeah it does look a little ordinary, doesn't it?
considering the falls in metals o/n, and not much of a move in the U.S, I was a bit surprised to see the spi only off 12 points from yesterday's close. Maybe it won't be as bad on Monday as it looks :confused:
But I'm quite hungover, so not much is really making sense right now :eek7:
wayneL
11th-November-2006, 06:46 PM
HG Z6 is copper? Falling through $320 looks ordinary.
HG = the symbol for High Grade Copper futures
Z = the contract expiry month i.e. December
6 = the expiry year i.e. 2006
Expiry month symbols:
Jan = F
Feb = G
Mar = H
Apr = J
May = K
Jun = M
Jul = N
Aug = Q
Sep = U
Oct = V
Nov = X
Dec = Z
So for e.g. the symbol for March 2007 expiry copper is HG H7
Cheers
kennas
12th-November-2006, 08:54 AM
HG = the symbol for High Grade Copper futures
Z = the contract expiry month i.e. December
6 = the expiry year i.e. 2006
Expiry month symbols:
Jan = F
Feb = G
Mar = H
Apr = J
May = K
Jun = M
Jul = N
Aug = Q
Sep = U
Oct = V
Nov = X
Dec = Z
So for e.g. the symbol for March 2007 expiry copper is HG H7
Cheers
Thanks Wayne. I'm putting my copper bear suit on tomorrow.
Smurf1976
12th-November-2006, 01:09 PM
Thanks Wayne. I'm putting my copper bear suit on tomorrow.
All be on the lookout for kennas the bright and shiny copper bear wondering the streets. Growl... :p: :p: :p:
Fab
15th-November-2006, 08:43 AM
again Kitco is giving me some conflicting information compare to Commsec Commodities which shows big drops in commodities overnight like 11% drop in lead. Who to believe ?
On the other side the Dow jump by 90 points today
Freeballinginawetsuit
15th-November-2006, 08:54 AM
Kitco.
canaussieuck
15th-November-2006, 09:10 AM
Lead looks a bit weak but overall zinc looks like it back on its way up. Although trading in a range on the 24 hour chart, the 30 day chart looks good.
Big sell off today in the Materials index, and the spots for metals looking shaky. Interesting to see whether they stay negative ore not in tonights trading.
Fab
16th-November-2006, 02:52 PM
Looks to me that in the last few days we had a good correction of some of the commodity stocks such as zfx,cbh,mre ...
Maybe an opportunity to buy back as it looks like inflation pressure are easing in OZ and US . The only question mark is a possible slowdown in the us .
:)
YOUNG_TRADER
16th-November-2006, 03:23 PM
According to this article Copper is sitting on its 200 day EMA and if it falls through it will cause a huge sell-off in commodities,
I don't believe that, surely the fundamentals of Zinc outweigh a technical chart on copper enough to support the Zinc price, that being said, I'd be happy to see Zinc pull back to $1.80/$1.85 to confirm this support level
Aren't the individual prices of each metal governed by there demand in the market.
With metals such as copper, lead and aluminum primarily used in construction.
Copper used in the energy industry
and Zinc, nickle etc used for high tech devices and alloys.
wouldn't there need to be a global decline is basically all these industries to force there prices down.
Even if construction is low in the US and australia, China is people cities for the 12 million people every year that migrate from rural areas. If everybodys getting serious about global warming wouldn't there need to be massive investment in infrastructure across the globe? I mean solar power generators, water recycling plants and energy efficient buildings all require these basic resources. Even the technology we use is goin to have to be re-designed.
I wouldn't be surprised if waste/recycling became a big industry in years to come.
As for Gold and oil, my basic understanding is that oil can only be bought in US dollars and gold, oil and the US dollar are all very closly related. So as if oil goes up so does gold, and if the US dollar goes down oil and gold go up. If the US economy is weakening and oil prices are rising couldn't we see a big effect as most countries in the world have vast stokepiles of US dollars which would become worth less and less.
China has a trillion dollars of foriegn currency stockpiled for trade with a big proportion of that is US dollars. Can anyone shead more light on how any of these factors could influence comodity prices in the future?
Base Metal Price Correction
Chart of the Week 11 Nov, 2006
Base metal prices appear to have commenced a corrective phase in the last few days, under the influence of significant fund selling pressure. The primary driver of the change in sentiment is the downturn in economic growth potential of the major markets, including the US and China. Recent Chinese data shows a deceleration in the rate of growth in construction activity as a result of the bank lending restrictions to the construction sector. However, this deceleration is likely to be temporary with lending controls being eased.
In the copper market weaker orders have led to a rise in refined metal exchange stocks of close to 50,000t since their low-point at the end of July and falling physical market premiums. Recent trends in copper pricing are illustrated below:
Source: LME, BA, SR
While we recognise the risk of a significant correction in the near term, we remain optimistic over the outlook for base metal prices over the next few years due to the combination of ongoing constraints to supply growth and further strong Chinese demand.
Kauri
20th-November-2006, 01:24 PM
Sorry Chook .. :hide: Todays West Aussie...
Mining giants forecast slump
20th November 2006, 7:00 WST
Major mining companies have warned the world’s powerful central bankers and finance ministers that the price of key minerals such as gold and iron ore are set to fall, potentially stalling WA’s commodities boom as early as next year.
The G20 meeting of nations — including Australia, the US, China, the European Union and Indonesia — also warned in an official communique yesterday of a real risk central banks would have to continue lifting interest rates to contain inflation from soaring commodity prices.
Treasurer Peter Costello cautioned that general economic euphoria might end in tears because of the inflationary risks facing the world.
In a report to the high-powered meeting in Melbourne, the chiefs of big unnamed international mining companies said the prices of some commodities had peaked and others would fall as extra supplies came on stream.
Some commodities that have propelled the WA economy, such as iron ore, aluminium and gold, are likely to be hit hardest.
The surge in prices for commodities has been led by China, helping fuel the WA economy, the State’s record wages and the property boom.
But mining companies have started preparing for a downturn in prices from next year.
By 2009, copper prices are tipped to return to the levels of 1990. Though iron ore prices are also tipped to fall, they are expected to come back by only a third from their current record highs. Even gold, now well above the $US600 an ounce mark, is expected to fall to about $US450 an ounce.
Mr Costello said mining companies had sunk enormous amounts of cash into investments aimed at boosting supply. When this supply eventually kicked in there would be an impact. “The general view is that we’ve got to the peak and the peak is going to be dealt with by increased supply,” he said.
But Mr Costello said while prices would come down, there would be a time lag due to the difficulties of bringing extra supply online. And prices would, in most cases, not plummet to past lows.
“I don’t want you to get the view that they’re going into a trough,” he said.
International Monetary Fund managing director Rodrigo de Rato also warned that while Australia and other mineral exporting nations had benefited from the commodities boom, those particularly hard hit would be nations like Australia that imported big amounts of oil.
Alan Carpenter said the State Government had been investing in projects to take the WA economy well beyond the boom.
“These projects are part of an $18 billion capital works program including new schools, hospitals and police stations as well as vital water and energy infrastructure,” the Premier said.
WA Chamber of Minerals and Energy policy director David Parker said commodity prices were impossible to predict but the prediction of a downturn was a timely reminder that WA’s resources industry should not be complacent.
He said the chamber believed the industry still had an “upside”, with figures released last week showing $35 billion was committed to minerals and energy projects in Australia.
SHANE WRIGHT and AMANDA BANKS
wayneL
21st-November-2006, 03:34 AM
Sorry Chook .. :hide: Todays West Aussie...
Mining giants forecast slump
20th November 2006, 7:00 WST
Major mining companies have warned the world’s powerful central bankers and finance ministers that the price of key minerals such as gold and iron ore are set to fall, potentially stalling WA’s commodities boom as early as next year.
The G20 meeting of nations — including Australia, the US, China, the European Union and Indonesia — also warned in an official communique yesterday of a real risk central banks would have to continue lifting interest rates to contain inflation from soaring commodity prices.
Treasurer Peter Costello cautioned that general economic euphoria might end in tears because of the inflationary risks facing the world.
In a report to the high-powered meeting in Melbourne, the chiefs of big unnamed international mining companies said the prices of some commodities had peaked and others would fall as extra supplies came on stream.
Some commodities that have propelled the WA economy, such as iron ore, aluminium and gold, are likely to be hit hardest.
The surge in prices for commodities has been led by China, helping fuel the WA economy, the State’s record wages and the property boom.
But mining companies have started preparing for a downturn in prices from next year.
By 2009, copper prices are tipped to return to the levels of 1990. Though iron ore prices are also tipped to fall, they are expected to come back by only a third from their current record highs. Even gold, now well above the $US600 an ounce mark, is expected to fall to about $US450 an ounce.
Mr Costello said mining companies had sunk enormous amounts of cash into investments aimed at boosting supply. When this supply eventually kicked in there would be an impact. “The general view is that we’ve got to the peak and the peak is going to be dealt with by increased supply,” he said.
But Mr Costello said while prices would come down, there would be a time lag due to the difficulties of bringing extra supply online. And prices would, in most cases, not plummet to past lows.
“I don’t want you to get the view that they’re going into a trough,” he said.
International Monetary Fund managing director Rodrigo de Rato also warned that while Australia and other mineral exporting nations had benefited from the commodities boom, those particularly hard hit would be nations like Australia that imported big amounts of oil.
Alan Carpenter said the State Government had been investing in projects to take the WA economy well beyond the boom.
“These projects are part of an $18 billion capital works program including new schools, hospitals and police stations as well as vital water and energy infrastructure,” the Premier said.
WA Chamber of Minerals and Energy policy director David Parker said commodity prices were impossible to predict but the prediction of a downturn was a timely reminder that WA’s resources industry should not be complacent.
He said the chamber believed the industry still had an “upside”, with figures released last week showing $35 billion was committed to minerals and energy projects in Australia.
SHANE WRIGHT and AMANDA BANKS
Hmmmm My inside info seems to be panning out (was told by a mining big knob that the boom had 12 months at the most)
Found this on kitco metals
The Coming Nuclear Winter Base Metals
http://www.kitco.com/ind/veneroso/nov062006.pdf
Read it and weep.
kennas
21st-November-2006, 08:25 AM
Hmmmm My inside info seems to be panning out (was told by a mining big knob that the boom had 12 months at the most)
Found this on kitco metals
The Coming Nuclear Winter Base Metals
http://www.kitco.com/ind/veneroso/nov062006.pdf
Read it and weep.
Do we buy banks Wayne? Or put the cash under the pillow?
wayneL
21st-November-2006, 08:39 AM
Do we buy banks Wayne? Or put the cash under the pillow?Far be it for to offer advise, even if I had a definate scenario (which I don't)
But there is a reason I have migrated out of equities to futures.
* a range of non-correlated instruments... grains, metals, livestock, coffee, interest rates, etc etc etc
* shorting a no-fuss and integral option
* still able to play the broad stock market via index futures
* more commonsense margin rules (especially for options) than equities.
amongst others.
Cheers
BSD
21st-November-2006, 08:02 PM
Hmmmm My inside info seems to be panning out (was told by a mining big knob that the boom had 12 months at the most)
Found this on kitco metals
The Coming Nuclear Winter Base Metals
http://www.kitco.com/ind/veneroso/nov062006.pdf
Read it and weep.
The 'inside info' coming from the 'big knobs' who run Freeport would be the opposite I would imagine.
They have decided to pay US$26bn to buy Phelps Dodge at a 20% premium to the market.
The metals bears who will call this as another 'sign of the top' are the same metals bears who were selling/shorting the stock at prices 50% lower when Cu 'broke down' in May.
What other boom have we been able to buy the best stocks in the world at 9 times earnings?
What other boom has led to the best companies being debt free?
1. I freely disregard any relevance of 200 day moving averages
2. I do not think "it went up so far" as a reason for a fall
3. I do not believe in reversion to mean as grounds for a change in the price of a scarce resource
4. I do not agree there has been a rapid growth in supply - copper supply has been forecast to grow at 1.7% in 2006 and 2007 by the Copper Study Group
5. The comment on free capacity in the supply chain is extremely wrong. Utilisation is at maximum (why wouldn't it be with such good prices) and this is another reason for the continued plant failures, delays, dissapointments on the supply side.
6. The Hedge Fund speculation story is difficult to fathom too. Are these guys saying that the short term momentum addicted hedge funds are still long and getting longer in the copper market? A market that has now fallen 25% since May? A fascinating argument. Surely there would be blood on the streets if this were true.
From my experience, the momentum players have been shorting both the physical and the companys. The BHP and RIO shorts have been so arrogant to short into a buy back. They got squeezed again last month, but will be back in there again now.
The hedge funds are short and not long. They are not manipulating the market. CHINA is the only party in town and they have far more ammo than the hedge funds.
7. The market is not in massive oversupply. How could it be? Supply has hardly moved and demand continues (and will continue) to rise. One month of negativity and the bears call a surplus. Noise would be a better description.
8. Contangos have not been present in copper at any time in the last year. Massive backwardisation has been the norm. In reality, the backwardisation has recently been reduced with spot approachng the forward months and the forwards not dropping much at all in comparison to spot. Nobody trading the forwards is getting too agressive in their selling.
9. Copper and alumina (let alone paladium) are vastly different. I struggle with the relevence. The trading in the US natural gas market also remains vastly different from the global metals complex. China dont trade in the US gas market.
10. The most major disagreement I have with Frank is in his absolute disregard for the contribution of the developing world for demand for copper. He doesnt believe the demand figures from the last three years!!!
From my research, China has been drawing down their State Reserves and delivering into the LME to take advantage of the higher prices in Europe and to mark down the price of Cu before they are buyers again.
While Frank claims unreported stockpiles of metals -many believe the biggest private stockpile (that run by the Chinese) has been drawn down by 500,000tn this year.
China talks down their economy every year the iron ore negotiations start and they are at it again.
In September China imported 528,000tn of scrap Cu (the highest ever) and 380,000tn of concentrate (third highest ever) and in October they imported 75tn of refined copper (second highet this year).
The Chinese are buying again and anyone with a view beyond a couple of trading sessions would be more interested in the 400m Chinese moving to cities in the next decade than the noise that floods the markets hourly.
wayneL
21st-November-2006, 09:21 PM
BSD,
Just the messenger, and as usual, you have valid arguments for the bull case. Thanks for those.
I have a few comments about your comments _
Re Big Knobs and the Freeport/Phelps deal: The guys in charge of that deal aren't actually big knobs, they are huge/enormous/humungus/(insert your own adjective) knobs.
In this deal they are not concerned as much much for shareholder value in the short/medium term as are shareholders/big knobs (ie a nice trending chart) It is more about power, market share, control and high falutin concepts like that. In no way can that deal be seen as an endorsement of higher and hihger prices in the near/medium future. There is a totally different imperative at work.
Why did they not buy PD 3 years ago? ....think about that one, you have already answered this question.
Re 200MA's and the "break down": Firstly the 200 MA. It is a simple map of the longer term trend. If price action is below the 200 MA, mathematically it is trending down. A simple, but blunt measure looked at by most participants in the market.
Now to the "break down". What break down? There is no break down yet. Evidence of your ignorance of technicals. Sorry, but if you don't subscribe to technical theory, it does no good to your credibility to comment. We all know your illogical disdain for technicals, but enough already.
Ditto regression to the mean. BTW, to describe base metals as scarce is taking a great journalistic liberty with the truth. "Undersupplied" would be closer to the mark. Oversupply will inevitably follow, as with all booms.
All other points (even those I disagree on) are taken in the spirit of discussion.
The ultimate arbiter will of course be price and we each have different ways of dealing with its continuous revelation. If you are a bull, you should be thankful for sellers/shorters as they ensure supply for your demand. I don't understand the thinly veiled antagonism. :sly:
rederob
21st-November-2006, 11:32 PM
Wayne
Since you began this thread precious metals, oil and copper are lower.
Nickel and zinc are substantially higher.
Copper has been the barometer for base metals, but in my view broad-based market tightness is now allowing discrete metals to run their own races: Zinc being a winner in the sprint to middle distances and nickel doing the marathon.
While oil remains low, it will be interesting to see if precious metals remain similar, and range-bound.
The Veneroso link is an interesting mix of facts, charts and anecdote. It is substantially flawed because he has not done the numbers longer term.
A supply side response is inevitable within 2 years - perhaps much less now.
Once the cycle turns prices down, many players will leave the game because their margins were narrow on entry.
However, the size of the new metals market is increasing so rapidly that the next game of catch-up will be played out for longer than the present bull run.
That's simply because the shift of wealth from West to East will have pent up a demand that will remain difficult to satisfy.
The past has seen boom times dependent on a burgeoning Europe, then USA, then Japan.
The future will see global populations 10 times this size wanting what we have, while we at the same time want more.
Once Veneroso's nuclear winter sets in, I will be an early vulture picking out the eyes of those blindsided to opportunity.
BSD
22nd-November-2006, 12:00 AM
Why did they not buy PD 3 years ago? ....think about that one, you have already answered this question.
PD wasnt as grossly overvalued as it was recently.
BHP and RIO are also cheaper now on cashflow and earnings multiples than I can ever remember. Even using bearish assumptions for metals.
Ditto regression to the mean. BTW, to describe base metals as scarce is taking a great journalistic liberty with the truth.
The most common argument for metals falling is "it has gone so far" it must fall.
In an economic and physical sense, metals are scarce - they are neither unlimited or renewable without expense. Their supply is limited by way of a cost curve that continues to push out.
Frank's marginal cost of production would be $0.50c higher now than in 1998. Grades are falling - capex is rising.
Imagine if bears started squealing for $20 barrels of oil, on a reversion to mean argument. They would be laughed at.
While I can only quote Bloomberg and other talking head chartists on confirming/denying 'breakouts/downs' - I have studied stats enough to build a firm understanding of the meaning of mean reversion.
The ultimate arbiter will of course be price and we each have different ways of dealing with its continuous revelation. If you are a bull, you should be thankful for sellers/shorters as they ensure supply for your demand. I don't understand the thinly veiled antagonism.
All true
But antagonism? Not meant to be any - thinly veiled or otherwise. My response is not in reaction/conflict to you.
Just a completely different view and timeframe of investment. It appears to be extremely different to most on this site, so it may appear divisive.
noirua
22nd-November-2006, 12:16 AM
The following link gives the position on all types of coal in the United States by the US Government. It gives a good idea of the projections for coal prices, even though Asian prices may vary a great deal. We are still led by the US and demand there for coal gives a lead as to iron ore, pig iron and steel prices for the future; and of course all associated metals used in its manufacture.
In an economic and physical sense, metals are scarce - they are neither unlimited or renewable without expense. Their supply is limited by way of a cost curve that continues to push out.
Frank's marginal cost of production would be $0.50c higher now than in 1998. Grades are falling - capex is rising.
OK by that definition, they are scarce. I don't really agree 100%, but can see the point.
It would seem then that there is a criminal wastage of these "scarce " commodities, but that is another discussion.
Imagine if bears started squealing for $20 barrels of oil, on a reversion to mean argument. They would be laughed at.
While I can only quote Bloomberg and other talking head chartists on confirming/denying 'breakouts/downs' - I have studied stats enough to build a firm understanding of the meaning of mean reversion.
1/ Bloomberg et al are bobbleheads, absolute %$#*ing imbeciles! I refuse to even watch that crap. They are just filling in airtime with garbage.
2/ If you had studies stats, you would know that the "mean" is actually a moving target and must be viewed as in the same family of statistical functions as an average. Indeed it can be an average:
# Mathematics.
1. A number that typifies a set of numbers, such as a geometric mean or an arithmetic mean.
2. The average value of a set of numbers.
Therefore, the mean value of oil (to use your example) is nowhere even close to $20, unless you want to use an irrelevant time frame. In fact oil is an excellent example of reversion to the mean.
But antagonism? Not meant to be any - thinly veiled or otherwise. My response is not in reaction/conflict to you.
Just a completely different view and timeframe of investment. It appears to be extremely different to most on this site, so it may appear divisive.I don't find your opinion divisive at all in the context of your obvious time frame and investing style.
But your comments with regard to technicians and shorter time frames are condescending and derisive. Your posts are otherwise of high quality and I fail to see the necessity of same. It is this I take issue with.
Cheers
noirua
22nd-November-2006, 12:52 AM
The following link gives the position on all types of coal in the United States by the US Government. It gives a good idea of the projections for coal prices, even though Asian prices may vary a great deal. We are still led by the US and demand there for coal gives a lead as to iron ore, pig iron and steel prices for the future; and of course all associated metals used in its manufacture.
Just maybe, this call, for collapses in commodity prices is basically a wrong call and markets are going through a phase of consolidation after sharp rises.
From memory the bears were sharpening their claws and eyeing the succulent salmon swimming upstream in May 2004 as well. Copper, which seems to be leading the pack, has in my opinion, a ways to go yet before it can called anything major. Not for one moment implying it wont fall further, but so far its still healthy for mine. :bounce:
wayneL
22nd-November-2006, 04:22 AM
From memory the bears were sharpening their claws and eyeing the succulent salmon swimming upstream in May 2004 as well. Copper, which seems to be leading the pack, has in my opinion, a ways to go yet before it can called anything major. Not for one moment implying it wont fall further, but so far its still healthy for mine. :bounce:
Well some bear somewhere would have made a nice trade out of that.
I traded the volatility which peaked at that time... too chicken to play straight out price.
Copper is off > $1.00 from the highs so some bears must be happy.
Sometimes a chart of one commodity alone ignores the bigger picture. A chart of sugar prices, in soft commodities, could be used to show that the whole sector has collapsed, it's just not so.
No doubt, some commodities will fall in price as more production comes onstream. This however, does not point to a collapse, as total expenditure on the product may rise despite a drop in the price per defined traded weight of product
wayneL
22nd-November-2006, 04:47 AM
Sometimes a chart of one commodity alone ignores the bigger picture. A chart of sugar prices, in soft commodities, could be used to show that the whole sector has collapsed, it's just not so.
Quite so.
This is one thing I like about trading physical commodities as opposed to the companies that deal in them; non-correlation.
No doubt, some commodities will fall in price as more production comes onstream. This however, does not point to a collapse, as total expenditure on the product may rise despite a drop in the price per defined traded weight of product
...highlighting the differences again between trading the actual commodity as opposed to shares.
I suppose we all need to be aware of the context in which people comment on these things.
However, I would defy the the SPs of these businesses to stay resilient in the face of declining prices in the commodity of their choice... hypothetically speaking.
noirua
22nd-November-2006, 05:19 AM
However, I would defy the the SPs of these businesses to stay resilient in the face of declining prices in the commodity of their choice... hypothetically speaking.
Yes, that's fair enough, as so often in the past I've heard the comment "all the future bad news is priced into the sector", then when the bad news duly arrives, all the stocks plunge.
ducati916
22nd-November-2006, 05:45 AM
BSD
They have decided to pay US$26bn to buy Phelps Dodge at a 20% premium to the market.
I'll have to crunch the numbers on this one and see if your 20% premium was an intelligent purchase price for those involved.
3. I do not believe in reversion to mean as grounds for a change in the price of a scarce resource
Well I would disagree with you here.
The reason[s] that I disagree would be the following;
*The Law of Diminishing Returns
*The US is a far larger market in % terms than China et al, and the US GDP has been slowing, this accounts additionally for the fall in oil prices.
Will the US head into recession? Who knows, but, while GDP growth falls, so will the prices commodities. Further, European growth is again falling, with Germany in particular being anaemic.
*The high price, reduces demand, and increases supply, thus, reversion to the mean becomes a very powerful statistical tool.
6. The Hedge Fund speculation story is difficult to fathom too. Are these guys saying that the short term momentum addicted hedge funds are still long and getting longer in the copper market? A market that has now fallen 25% since May? A fascinating argument. Surely there would be blood on the streets if this were true.
Hedge Funds will undoubtably have contributed to a component of the price rises, and in most commodities. How much, is slightly difficult to calculate, as there are no reliable proxies by which to estimate the cash asset inflows.
Therefore, an open question.
The hedge funds are short and not long. They are not manipulating the market. CHINA is the only party in town and they have far more ammo than the hedge funds.
You state that the Hedge Funds are short.
Based on what evidence?
China, the only party in town.
Based on what evidence?
The economic data would suggest that the largest player, by a country mile to be the US.
7. The market is not in massive oversupply. How could it be? Supply has hardly moved and demand continues (and will continue) to rise. One month of negativity and the bears call a surplus. Noise would be a better description.
Assume for a moment that this is true [highlighted section]
*What happens to price when supply equals demand?
*What happens to price when supply exceeds demand?
*What if your assertion is incorrect?
Demand will continue to rise. This seems an outright prediction.
Predictions tend to be dangerous as;
*They can be wrong
*They tie you psychologically to a bias
From my research, China has been drawing down their State Reserves and delivering into the LME to take advantage of the higher prices in Europe and to mark down the price of Cu before they are buyers again.
While Frank claims unreported stockpiles of metals -many believe the biggest private stockpile (that run by the Chinese) has been drawn down by 500,000tn this year.
China talks down their economy every year the iron ore negotiations start and they are at it again.
In September China imported 528,000tn of scrap Cu (the highest ever) and 380,000tn of concentrate (third highest ever) and in October they imported 75tn of refined copper (second highet this year).
The Chinese are buying again and anyone with a view beyond a couple of trading sessions would be more interested in the 400m Chinese moving to cities in the next decade than the noise that floods the markets hourly.In point of fact, the whole argument that has been presented, is based upon the thesis of China and it's emerging hegemony. This argument is flawed in so many ways, and thus the argument for continued price rises in commodities carries inherent flaws.
jog on
d998
ducati916
22nd-November-2006, 06:51 AM
An article regarding the takeover offer.
Is Freeport-McMoRan's Offer Enough?
Some analysts think a higher price is in order for the mining company's purchase of Phelps Dodge
by Aaron Pressman and Sonja Ryst
The rapidly consolidating global mining industry now has two more major players planning a trip to the altar. On Nov. 20, Freeport-McMoRan Copper & Gold (FCX) announced that it is buying Phelps Dodge (PD) for $25.9 billion, in an effort to grow its copper production. Worth about $126 a share, the offer represents a 33% premium for Phelps Dodge shareholders but still may be a bargain for Freeport, analysts said.
The two are creating the largest M&A deal in the mining sector's history, according to Thomson Financial. The new company, to be called Freeport-McMoRan Copper & Gold, will become the biggest copper producer in the world, passing Australia-based BHP Billiton (BHP). The deal, subject to shareholder and regulatory approval, is expected to close at the end of the first quarter of 2007.
Phelps Dodge has taken its shareholders on a wild ride this year, hitting an all-time high along with the price of copper in a spring rally and then subsequently selling off as the metal cooled. In June, Phelps tried to acquire Canadian nickel producer Inco in a $41 billion three-way merger that also included Falconbridge. But the deal fell apart in September after Brazil's Companhia Vale do Rio Doce (RIO) swooped in with a more appealing all-cash bid. Phelps shares started rising again in October after Atticus Capital, a New York-based money manager with a 10% stake in the company, said it was searching for someone to buy Phelps.
Better Offer Out There?
Analysts say the combination of Phelps Dodge's current operations, which brought in revenue of $8.7 billion and net income of $1.7 billion for the first nine months of the year, along with its untapped holdings around the world are worth far more than $126 a share. Prudential Equity Group analyst John Tumazos estimates Phelps Dodge is worth $182 a share, even as copper prices decline from more than $3.00 a pound to $2.00 in the next few years.
Tumazos expects major shareholders may balk at Freeport's offer in the hopes another buyer like Norilsk Nickel, Rusal, or even metal trading firm Glencore will enter the bidding. There's a "very large likelihood" that more than half of Phelps Dodge shareholders "reject any bid under $150 per share as inadequate or ridiculous," he says.
Standard & Poor's ratings analyst Thomas Watters said in a note issued Nov. 20 that given the current M&A activity in the sector, "it is quite possible further, more aggressive competing bids could emerge." S&P Ratings thinks a successful acquisition of Phelps Dodge would "markedly" enhance Freeport's position in the mining industry. "However, we are concerned about the combined entity's aggressive debt levels," said Watters.
Mining's M&A Explosion
If Freeport-McMoRan closes the deal with its current offer of $88.00 in cash plus 0.67 of a common share of the company for each Phelps Dodge share, the deal will immediately add to its earnings per share (EPS), the mining outfit said. Combined, the two companies expect almost $8 billion of earnings before depreciation, depletion, and amortization and $6.5 billion of operating cash flow in 2006.
Mining companies are gobbling one another up this year as commodities prices soar. Freeport-McMoRan's recent megadeal brings the total dollar amount of M&A in the industry so far in 2006 to $35.7 billion on 162 deals, according to Thomson Financial. During 2005, 118 deals only amounted to $1.6 billion.
Freeport-McMoRan is paying a 33% premium to Phelps Dodge's closing price on Nov. 17. Phelps Dodge shares surged 27% to $120.47 per share on Nov. 20. Freeport-McMoRan's share price fell 3.1% to $55.63 per share.
Giant Capacity
Demand for copper has been rising recently, and there aren't that many large copper development projects in supply. Freeport-McMoRan currently operates the copper and gold Grasberg mine in Papua, Indonesia. Phelps Dodge has mines in North America, South America, and Africa, including the Tenke Fungurume development project in the Democratic Republic of the Congo.
As a combined company, Freeport-McMoRan and Phelps Dodge think they can deliver nearly 1 billion pounds of additional copper production capacity in the next three years. Their projects include the expansion of Phelps Dodge's Cerro Verde mine in Peru, the development of the Safford mine in Arizona, a potential project to extend the life of the El Abra mine in Chile, the expected 2009 production from the Tenke Fungurume copper and cobalt project in the Democratic Republic of the Congo, and the expansion of Freeport-McMoRan's underground mine in Indonesia.
rederob
22nd-November-2006, 08:15 AM
In point of fact, the whole argument that has been presented, is based upon the thesis of China and it's emerging hegemony. This argument is flawed in so many ways, and thus the argument for continued price rises in commodities carries inherent flaws.
jog on
d998
Well, I have seen folk trot out similar lines for 3 years now.
And for 3 years China has indulged in a commodity feast that has fed higher prices across th board.
Its a bit like in the morning being told the sun won't rise where you are pointing, because you weren't quite pointing in the right direction: And the sun rose....... again!
Now we discover China also has the world's largest US dollar reserves, overtaking Japan. I guess some economist will point out that on a per capita basis this is not such a big deal. Of course I would then point out to the economist that each person does NOT have an equal share.
There is nonsense, fabrication, calculation, mischief and stupidity in the markets, interspersed with very big money that always drives direction.
Much of that big money is joining the big party in town, in China.
Be there or be square!
wayneL
22nd-November-2006, 08:29 AM
There is nonsense, fabrication, calculation, mischief and stupidity in the markets,
Lets not forget rhetoric, hyperbole and misinformation. ;)
ducati916
22nd-November-2006, 08:39 AM
enzo
Well, I have seen folk trot out similar lines for 3 years now.
And for 3 years China has indulged in a commodity feast that has fed higher prices across th board.
Its a bit like in the morning being told the sun won't rise where you are pointing, because you weren't quite pointing in the right direction: And the sun rose....... again!
Therefore if you calculate the relative values as of GDP, and the associated increases/decreases, you will gain an insight into the change on the margin [100%] and thus potential changes in price.
jog on
d998
dhukka
22nd-November-2006, 09:59 AM
Found this on kitco metals
The Coming Nuclear Winter Base Metals
http://www.kitco.com/ind/veneroso/nov062006.pdf
Read it and weep.
Thanks for the article wayneL, very interesting reading. I posted elsewhere on this forum recently about the similarities between this current resource boom and the tech boom. However I had to acknowledge that current high commodity prices where supported by the fundamentals. This report tears a hole right through that and for me is the final piece of evidence I need to prove that we are experiencing a period of seriously over inflated resource stock prices. Funny how times change, I remember the late 90's when noone would touch resource stocks with a barge pole, most gold producers couldn't cover the costs of extracting it from the ground. The cycle started to turn when I was still in the market in 2001 and now it looks as though it's ready to turn again.
The demand statistics were particularly telling, we've actually undergone a period of lower than the historical average level of demand for base metals yet prices continued to rise on the pretense of a glut. The further it goes the more unhappy the ending will be. The revelation of huge stock piles will send prices tumbling and hedge funds tumbling after them unable to unwind their positions, then the mass exodus as all the punters try to clamber through the mouse hole at the same time.
I'd be interested to see Veneroso's views on Oil and Uranium where there does seem to be a genuine supply shortage. Interesting times
Therefore if you calculate the relative values as of GDP, and the associated increases/decreases, you will gain an insight into the change on the margin [100%] and thus potential changes in price.
jog on
d998
WOW
It's that easy!
I wonder what "price" that would be:
Bread?
Petrol?
Oil?
Zinc?
Silver?
BSD
22nd-November-2006, 07:54 PM
China, the only party in town.
Based on what evidence?
The economic data would suggest that the largest player, by a country mile to be the US.
Demand will continue to rise. This seems an outright prediction.
Predictions tend to be dangerous as;
*They can be wrong
*They tie you psychologically to a bias
In point of fact, the whole argument that has been presented, is based upon the thesis of China and it's emerging hegemony. This argument is flawed in so many ways, and thus the argument for continued price rises in commodities carries inherent flaws.
jog on
d998
US GDP is greater than China's - but their effect on the copper market is not.
China have a centralised State that operate directly in the market to create outcomes for their industry. The Chinese government jawbone and participate directly in the market, the US government do not. The Yanks dont have a copper stockpile.
US industrial production is not growing at 10%+ per annum.
The hedge funds can leverage-up all they like, they cannot take on the Chinese government.
US demand is steady - their demand for copper is not the swing factor. The copper intensity per capita is not growing in the US - it is growing at an exponential rate in China.
In supporting my 'predictions' (essential if one is to have a view) some of the following points from a dealer note from the last couple of days have been important.
They make some decent points that you should account-for when getting worried about the effect of a US slowdown compared to the effect of Chindia in the medium to long term on global markets
By 2020 almost 400 million people in China and India will move to cities. A multiple of the entire US population
China and India will represent 37% of the entire world population and they will be growing wealth at a faster rate than the US population
Chindia GDP will be double the Japanese economy and 60% of the US economy
Chindia will represent 30-50% of global commodity demand
There will be bumps - but demand growth looks stunning. Regardless of a US slowdown or recession.
As for your valuation of Phelps, you may have difficulties extracting value if you use the same methodology that created your $9 BHP valuation.
I am of the view we are three years into a 20 year cycle being fuelled by demand from China.
As for supply, name one new Australian copper project of any scale to be brought to market beyond Prominent Hill that will have any effect on the global supply in the next three years.
wayneL
22nd-November-2006, 08:43 PM
BSD,
I am a strong advocate of minimum prices in commodities. I.E when Ivory Coast Cocoa farmers started burning there crop in the streets in protest at prices, you can be pretty sure that that is pretty much the bottom.
Miners will close their mines, grain farmers will run sheep instead.. whatever. In other words when commodities become too cheap for producers to turn a profit, they'll cease production or do something else.
Basic stuff here. But I don't think anyone could disagree with this premise, therefore, we are all subscribers to the "minimum value theory", whether overtly aware of it or not.
Surely then, by default, we would have to recognise that there must be a maximum value for commodities. This is the point where producers increase supply and/or end users will try to find an economic alternative.
Where this is I do not know, but the signs will reveal themselves at the time it happens.
The commodities charts are littered with evidence of the above.
The thing is, the Chinese gu'mint being proactive as you say, I doubt will stand for perpetually increasing commodities prices. Maximum value will be reached at some point and the whole bull argument comes to an abrupt end.
Are we anywhere close to that? Buggered if I know, we could be a long way off that yet, but I doubt it. Already I am hearing of viable alternatives to both zinc and copper at current prices and it is indisputable that the froth has come out of the copper market. (whether it is a top or a consolidation remains to be seen)
The trick is how to react to these supply demand equations. It doesn't really affect me too much with my short/medium term swing/trend volatility style trading.
An overzealous conviction in a bull trend can be a good thing, but it can be a very bad thing. Those with deep pockets such as fund/instos are big enough and ugly enough to look after themselves. But at the NASDAQ bubble taught many people that there is a time bomb under every bubble waiting to blow up.
Already I know someone that leveraged themselves into the boom near the high earlier this year and blew up their life savings in the correction... nearly lost their house. I even warned him at the time (an exercise in futility :rolleyes: )
The bears offer a necessary counterpoint of caution. I personally would not recommend anyone short commodities (unless for a swing trade with risk management in place etc etc) But I would try to make people aware of the nature and risks of commodity markets, particularly when overleveraged as newbs tend to do.
$0.02
BSD
22nd-November-2006, 09:00 PM
An overzealous conviction in a bull trend can be a good thing, but it can be a very bad thing. Those with deep pockets such as fund/instos are big enough and ugly enough to look after themselves. But at the NASDAQ bubble taught many people that there is a time bomb under every bubble waiting to blow up.
Already I know someone that leveraged themselves into the boom near the high earlier this year and blew up their life savings in the correction... nearly lost their house. I even warned him at the time
The bears offer a necessary counterpoint of caution. I personally would not recommend anyone short commodities (unless for a swing trade with risk management in place etc etc) But I would try to make people aware of the nature and risks of commodity markets, particularly when overleveraged as newbs tend to do.
$0.02
A very valuable $0.02 too
Risk management is a place we are on the same sheet.
I do not think commodities will continue to move up in a steady line - just maintain stunning prices that continue to amaze; despite short term noise.
I certainly dont use $4 Cu (let alone $3) in my models - as much as I dont use $1.20 as a long term number.
But I maintain we have never had a China before - it makes the industrialisation of Japan look minor.
rederob
22nd-November-2006, 10:09 PM
BSD,
Are we anywhere close to that? Buggered if I know, we could be a long way off that yet, but I doubt it. Already I am hearing of viable alternatives to both zinc and copper at current prices and it is indisputable that the froth has come out of the copper market. (whether it is a top or a consolidation remains to be seen)
The bears offer a necessary counterpoint of caution. I personally would not recommend anyone short commodities (unless for a swing trade with risk management in place etc etc) But I would try to make people aware of the nature and risks of commodity markets, particularly when overleveraged as newbs tend to do.
$0.02
Wayne
Although the future elusive, an interesting aspect of the "substitution" argument for the likes of copper etc is that the prices of substitutes have increased as substitution increased: In other words, demand for substitutes has pushed up their prices! The cost advantages of substitution are therefore short term, and the quality of the original metal product reverts. This was well shown with nickel and chrome in Chinese manufacturing production, where ultimately quality arguments won the day. And we know where nickel prices have gone this year.
Your point on copper is moot. Currently there is only one reason that copper prices remain subdued - the US housing market has slumped. we all know these slumps are temporary. Moreover, whether or not the US likes it, it remains THE preferred destination of most emigrants, so the cycle will swing back soon enough.
More importantly, if the "destocking" consensus is correct, China will have reduced demand to the point that copper prices have become acceptable to them again. Should this be the case, then we will have seen a substantial consolidation phase that is ready to turn into a new-born bull market. If i were a betting person, my money would be stacked heavily on the latter prospect.
I have no sympathy for newbies or others that chase a quick buck, and do not understand the risks of derivatives, or other leveraged products: They can equally burn themselves on the banks as commodities, although present risk suggests commodities will expose one to the third degree.
Reversion to the mean will occur, at some point, and this actually means prices will fall below that number, whatever it is, at the time. My strong present view is that we will have ample warning to quit the commodity bull before being trampled by it. That said, whatever indicators one wants to use, the present cycle is moving firmly ahead (overall).
clowboy
22nd-November-2006, 10:12 PM
BSD,
I am a strong advocate of minimum prices in commodities. I.E when Ivory Coast Cocoa farmers started burning there crop in the streets in protest at prices, you can be pretty sure that that is pretty much the bottom.
Miners will close their mines, grain farmers will run sheep instead.. whatever. In other words when commodities become too cheap for producers to turn a profit, they'll cease production or do something else.
Basic stuff here. But I don't think anyone could disagree with this premise, therefore, we are all subscribers to the "minimum value theory", whether overtly aware of it or not.
Surely then, by default, we would have to recognise that there must be a maximum value for commodities. This is the point where producers increase supply and/or end users will try to find an economic alternative.
Where this is I do not know, but the signs will reveal themselves at the time it happens.
The commodities charts are littered with evidence of the above.
The thing is, the Chinese gu'mint being proactive as you say, I doubt will stand for perpetually increasing commodities prices. Maximum value will be reached at some point and the whole bull argument comes to an abrupt end.
Are we anywhere close to that? Buggered if I know, we could be a long way off that yet, but I doubt it. Already I am hearing of viable alternatives to both zinc and copper at current prices and it is indisputable that the froth has come out of the copper market. (whether it is a top or a consolidation remains to be seen)
The trick is how to react to these supply demand equations. It doesn't really affect me too much with my short/medium term swing/trend volatility style trading.
An overzealous conviction in a bull trend can be a good thing, but it can be a very bad thing. Those with deep pockets such as fund/instos are big enough and ugly enough to look after themselves. But at the NASDAQ bubble taught many people that there is a time bomb under every bubble waiting to blow up.
Already I know someone that leveraged themselves into the boom near the high earlier this year and blew up their life savings in the correction... nearly lost their house. I even warned him at the time (an exercise in futility :rolleyes: )
The bears offer a necessary counterpoint of caution. I personally would not recommend anyone short commodities (unless for a swing trade with risk management in place etc etc) But I would try to make people aware of the nature and risks of commodity markets, particularly when overleveraged as newbs tend to do.
$0.02
WayneL
Excellent post
I would dispute that anything has a absolute bottom (besides 0) or a maximum top but agree fully that farmers burning crops is an indication that a bottom is reached, now if only when a top is reached there was some kind of smoke signal :)
Once again, great post.
nizar
22nd-November-2006, 10:28 PM
now if only when a top is reached there was some kind of smoke signal :)
There is.
When the masses are buying.
specman
23rd-November-2006, 12:28 AM
BSD,
Already I am hearing of viable alternatives to both zinc and copper at current prices and it is indisputable that the froth has come out of the copper market.
$0.02
wayneL,I am under the impression after exhaustive research that there are no viable alternatives for zinc as far as galvanizing is concerned http://www.bbosch.cl/src1/?seccion_id=622193a5f4fc16e77923fb0b741349dc&unidad=8
If I am wrong,I certainly want to know about it as soon as possible.Can you elaborate on what the viable alternatives are?
2020hindsight
23rd-November-2006, 01:49 AM
wayneL,I am under the impression after exhaustive research that there are no viable alternatives for zinc as far as galvanizing is concerned http://www.bbosch.cl/src1/?seccion_id=622193a5f4fc16e77923fb0b741349dc&unidad=8
If I am wrong,I certainly want to know about it as soon as possible.Can you elaborate on what the viable alternatives are?
Not so much an alternative to zinc as a lesser amount required with painting i.e. an alternative to galvanising:-
There are some very efficient paints that are labelled "zinc rich epoxies" - I guess 10 or 20% of the zinc is used compared to galvanising (bit of a guess). :2twocents Many even outperform pure zinc for long term protection.
But hek, don't get me wrong- I'm still buying zinc stocks ;)
wayneL
23rd-November-2006, 02:02 AM
Spec,
Been trying to find the article where I read that... no luck so far, still looking.
specman
23rd-November-2006, 02:24 AM
Not so much an alternative to zinc as a lesser amount required with painting i.e. an alternative to galvanising:-
There are some very efficient paints that are labelled "zinc rich epoxies" - I guess 10 or 20% of the zinc is used compared to galvanising (bit of a guess). :2twocents Many even outperform pure zinc for long term protection.
But hek, don't get me wrong- I'm still buying zinc stocks ;)
Yes,painting is an alternative but being viable is questionable.Painting is very labour intensive and does not offer the all round protection of zinc.http://www.asia.indgalv.com.au/indonesia/benefits.htm http://www.gaa.com.au/benefits_10rbgs.html
In any case,zinc is the product of choice by the steel companies and their manufacturing process is built around it.I have yet to read about steel companies considering alternatives.I believe some have added a surcharge to recover the cost of higher zinc prices.
ducati916
23rd-November-2006, 05:20 AM
BSD
I'll quickly restate the principals that will limit price appreciation;
*The Law of Diminishing Returns
*The US is a far larger market in % terms than China et al, and the US GDP has been slowing, this accounts additionally for the fall in oil prices.
Will the US head into recession? Who knows, but, while GDP growth falls, so will the prices commodities. Further, European growth is again falling, with Germany in particular being anaemic.
*The high price, reduces demand, and increases supply, thus, reversion to the mean becomes a very powerful statistical tool.
Returning to some of your points raised in counter-argument.
US GDP is greater than China's - but their effect on the copper market is not.
That is the equivalent of saying, an Institutional buyer of stocks [Mutual Fund] has less effect on stock prices than a retail buyer of stocks.
I have exaggerated the difference to illustrate the point.
A larger economy, will always have a greater effect on prices than a smaller one.
China have a centralised State that operate directly in the market to create outcomes for their industry. The Chinese government jawbone and participate directly in the market, the US government do not. The Yanks dont have a copper stockpile.
Yes the Chinese have an economy that is controlled in part [greater, or lesser] by the government. You are incorrect in stating that the US government does not intervene in markets, as obviously tarriffs are one simple example.
However, you are referring in a general sense to price floors and price ceilings.
Again, your statement regarding the US is incorrect. [US agriculture]
Taking price floors as our first example.
Price floors have the effect of creating surpluses, as the price is higher than the equilibrium clearing price.
Price ceilings on the other hand create shortages.
Steel is an excellent example of the Chinese government failing in the market intervention strategy. China was a net importer of steel up until some 18mths/2yrs ago. Heavily subsidised, the steel industry is inefficient, and produces at a net loss. China is now a net exporter of steel, but, at a loss.
This is an example of a price floor.
US industrial production is not growing at 10%+ per annum.
No, it is not.
I therefore invoke the Law of Diminishing Returns.
We have already seen one example in Steel.
US demand is steady - their demand for copper is not the swing factor. The copper intensity per capita is not growing in the US - it is growing at an exponential rate in China.
Nonsense.
The plotting of a basic supply & demand curve invalidates such a shallow analysis. Add in the complexities of elasticities to both curves based on non-linearity and the fundamental error of your premise can be illustrated.
It is at the margins, we as traders/investors try to operate, thus we are very exposed to the risks inherent at the margins.
In supporting my 'predictions' (essential if one is to have a view) some of the following points from a dealer note from the last couple of days have been important.
They make some decent points that you should account-for when getting worried about the effect of a US slowdown compared to the effect of Chindia in the medium to long term on global markets
By 2020 almost 400 million people in China and India will move to cities. A multiple of the entire US population
China and India will represent 37% of the entire world population and they will be growing wealth at a faster rate than the US population
Chindia GDP will be double the Japanese economy and 60% of the US economy
Chindia will represent 30-50% of global commodity demand
Interesting.
Let me address your [dealers] points;
On, or around October 17 2006, the US population hit 300 million.
This is an increase of 100 million from 1967
At this growth rate, the US population will hit 400 million circa 2047
How calculated?
Through fertility rates;
US = 2.1
Spain = 1.28
EU = 1.47
Hong Kong = 0.98
China = 1.7
I am of the view we are three years into a 20 year cycle being fuelled by demand from China.
Based on the replacement rate, the population of China will reduce by almost half [50%] over the next 42yrs.
Immigration, is an alternative to *growing* your population, so, what are the figures for immigration into China?
Unsurprisingly, they are so low as to be almost insignificant.
The US has a number of migration issues, and very long waiting lists for legal immigration.
Therefore, contrary to the general opinion, the numbers do not support currently the premise put forward by your dealer.
The hedge funds can leverage-up all they like, they cannot take on the Chinese government.
This type of generalised statement, that makes a sweeping claim, without any substance can be dismissed. However, there is a strong case to be made in regards to the *speculators* currently operating in the commodity markets that can be made in a follow on post.
jog on
d998
rederob
23rd-November-2006, 07:00 AM
ducati
Of the people that post on this site, you take the cake for misconstruction and distortion.
The very simple reality is that China continues to have a predominant effect on the price of many hard and soft commoditities.
Distort that reality as much as you like, but don't expect reality to change.
Your use of arcane economic jargon and its application to to unfolding market events, particualry your comments about copper, reflect a significant lack of understanding of recent market fundamentals.
Please keep posting, however, as I get great joy from your creative elaboration of misrepresentations and untruths.
BSD
I have subscribed to much that you post on for many years now.
Wayne rightly points out that a contrary view is useful.
But so too is following a clearly defined long term trend that has barely faltered.
BSD
23rd-November-2006, 07:02 AM
Duc
I will address some more of your comments later.
But would like to note the growth figures (400m people) are not based on population growth they are based on numbers forecast to move to cities to join the developed world.
People who will move from a subsistance lifestyle to buying a TV and Air Conditioner for an apartment.
20 million per annum have been making the shift in China alone, in recent years. Increasing their copper consumption at multiple of before.
Here is an interesting article that goes a little way to backing some of my claims concerning investors being short and consumers being long, as well as the broad US based disbelief in the cycle and the removal of the backwardisation in the copper market
ducati
Of the people that post on this site, you take the cake for misconstruction and distortion.
The very simple reality is that China continues to have a predominant effect on the price of many hard and soft commoditities.
Distort that reality as much as you like, but don't expect reality to change.
Your use of arcane economic jargon and its application to to unfolding market events, particualry your comments about copper, reflect a significant lack of understanding of recent market fundamentals.
Please keep posting, however, as I get great joy from your creative elaboration of misrepresentations and untruths.
The economic theory that I relate, is hardly obscure, I am only utilizing basic supply/demand theory & introducing the Law of Diminishing Returns, which explains the rationale for falling prices.
That you posts contain a vacuum of information, but a plethora of opinion somehow suggests a verisimilitude to the topic under discussion; however, we have been down this road before with your bullish stance on gold.
Originally Posted by rederob
Not asking you to buy gold as I am happy to do that.
But would you like to do another of your detailed analysis so that we can see what range prices for gold we can look forward to over the next year or so?
Or would you prefer a brief history lesson: Recall my challenge to you -
And one of your multitude of sweeping conclusions:
In the light of the fact that gold has breached your preferred upper range of $720 I think it only fair to give you another opportunity to prove yourself. On the other hand, I will concede utter defeat if gold’s “parabola” collapses and by year’s end POG is trading under $800 (which I believe is generous in that my expectation was for gold to be near that level by year’s end, rather than be as “support”).
For the moment, I am hoping for another $50 or greater retrace in gold near term, but will not hold my breath: Corrections in the metals complex as a whole are running to about 3 days instead of 3 weeks or more.
Wayne
I will put you into ducati’s camp. Do you recall an earlier post where you mooted a $500 correction and I replied:
My concluding remark for now is that playing the markets means taking a forward view, and that view can be based on your decision to trade a safe “yield” equity, or a highly speculative futures contract. You enter the trade with a “view”, never a “knowledge”. Posting that “view” can mean a loss or gain of “reputation”, but in the case of ducati, he has my respect for at least trying to work out gold: A little knowledge can be a dangerous thing.
So forgive me that I shall just dismiss your opinion, as just so much nonsense.
jog on
d998
ducati916
23rd-November-2006, 08:38 AM
BSD
But would like to note the growth figures (400m people) are not based on population growth they are based on numbers forecast to move to cities to join the developed world.
People who will move from a subsistance lifestyle to buying a TV and Air Conditioner for an apartment.
20 million per annum have been making the shift in China alone, in recent years. Increasing their copper consumption at multiple of before.
Noted.
However, there resides in this analysis a rather dangerous assumption.
This is, that the transition from subsistance to the consumption that you assume
This does not just happen, overnight, or otherwise.
Jobs that pay enough to raise consumption to those levels is required.
This is a function of wealth, measured by PPP
China
GDP - per capita (PPP):
$6,800 (2005 est.)
Net migration rate:
-0.39 migrant(s)/1,000 population (2006 est.)
US
Net migration rate:
3.18 migrant(s)/1,000 population (2006 est.)
GDP - per capita (PPP):
$41,600 (2005 est.)
So, the figures while on the surface are impressive, under the figures, the PPP tells a rather different story, one of still great poverty, building wealth takes time.
China is a growth story.
China does have an impact.
It is just that the impact has been taken to the extremes as a valuation.
Here is an interesting article that goes a little way to backing some of my claims concerning investors being short and consumers being long, as well as the broad US based disbelief in the cycle and the removal of the backwardisation in the copper market
I have read the article, and, it is bullish in its conclusions & implications.
It is only one side of the story.
Speculation, or investment in Commodities was advocated as a rational diversification away from Equity & Bond markets, as the argument went, they were uncorrelated, viz. a low coefficient
Then something went wrong.
The GSCI index shows losses.
Part of the reason is due to the inability to trade a positive roll yield.
The more important reason however resides in the fact that the negative correlation with Equities & Bonds has turned positive.
Commodities in the "90's were pretty neglected by retail investors.
Now they are the hot topic and mainstream via numerous funds.
For example;
Over 5yrs to 2005, the correlation between oil and gold was 0.13It now sits at 0.64
The herd psychology of markets explains in part the attraction of retail several years into a bullmarket.
A measure of this speculative excess is the [B]spread between prices of listed commodities and unlisted commodities
It currently sits at an all time record of 60%+
Therefore, although there is a case for commodities, the current climate suggests caution rather than outright plunging.
jog on
d998
rederob
23rd-November-2006, 08:44 AM
rederob
The economic theory that I relate, is hardly obscure, I am only utilizing basic supply/demand theory & introducing the Law of Diminishing Returns, which explains the rationale for falling prices.
That you posts contain a vacuum of information, but a plethora of opinion somehow suggests a verisimilitude to the topic under discussion; however, we have been down this road before with your bullish stance on gold.
So forgive me that I shall just dismiss your opinion, as just so much nonsense.
jog on
d998
You are forgiven.
I don't worry too much about the impact of economy theory if the markets are telling a definitive story.
I also am reluctant to count golden chickens before they hatch.
So remind me again in January about the gold price: I regret that my gold equities have only given me an 80% return in the last few years, but i guess we can't win them all!
ducati916
23rd-November-2006, 10:52 AM
For those interested, the analysis of PD is now posted here;
http://grantmacdonald.blog.co.nz/
jog on
d998
chops_a_must
23rd-November-2006, 01:32 PM
BSD
Noted.
However, there resides in this analysis a rather dangerous assumption.
This is, that the transition from subsistance to the consumption that you assume
This does not just happen, overnight, or otherwise.
Jobs that pay enough to raise consumption to those levels is required.
This is a function of wealth, measured by PPP
So, the figures while on the surface are impressive, under the figures, the PPP tells a rather different story, one of still great poverty, building wealth takes time.
Therefore, although there is a case for commodities, the current climate suggests caution rather than outright plunging.
jog on
d998
I don't know dood. All the town planning stuff I've done seems to say otherwise. I am dead set against you here. Your opinions seem to fly in the face of all the data that I have.
ducati916
23rd-November-2006, 01:38 PM
I don't know dood. All the town planning stuff I've done seems to say otherwise. I am dead set against you here. Your opinions seem to fly in the face of all the data that I have.
And the data is.................?
Town planning. Go on, knock me out.
jog on
d998
chops_a_must
23rd-November-2006, 01:47 PM
And the data is.................?
Town planning. Go on, knock me out.
jog on
d998
Irrespective of GDP and overall demand, rapid industrialisation creates huge demand pressures on resources. An already industrialised nation like the US will have a relatively low impact on prices, because either way in demand, it is mostly steady in comparison to one that is becoming rapidly modernised.
Take testosterone levels in males. One can have a huge amount of testosterone, but if the levels are steady, then testosterone linked behaviours are limited. Compared to someone who has them swinging all over the place.
The point is, it is not about overall demand, it is about the rate of movement within the demand. Already industrialised nations have relatively low swings, developing nations do not.
China aims to have 50% of all the world's manufacturing capacity by 2020, or 2030, I forget, but regardless, this is going to create massive demand shifts on resources.
ducati916
23rd-November-2006, 02:15 PM
chops
So where is the data that supports the gaggle of opinion that suddenly appeared?
The short answer, is that you have none, you have read some experts commentary, and adopted it as fact. So be it. I shall comment on your opinion.
Irrespective of GDP and overall demand, rapid industrialisation creates huge demand pressures on resources.
Incorrect.
If my quantity demanded is backed by $1M
And your quantity demanded is backed by $100
The resultant Demand/Supply curves will look very different.
Therefore the size of GDP is very relevant.
If Madagasca decided to go industrial, how much impact would it have?
I accept that China is large, and growing its GDP, but, China is not yet large enough that it can invalidate demand dynamics of the US & EU.
An already industrialised nation like the US will have a relatively low impact on prices, because either way in demand, it is mostly steady in comparison to one that is becoming rapidly modernised.
Nonsense.
Back to economics 101 for you.
Take testosterone levels in males. One can have a huge amount of testosterone, but if the levels are steady, then testosterone linked behaviours are limited. Compared to someone who has them swinging all over the place.
Firstly, testosterone is subject to a physiological negative feedback loop.
Therefore, only in pathological states, will concentration levels fluctuate, possibly effecting emotional fluctuations.
Supply/Demand dynamics follow very similar negative/positive feedback loops.
Are you suggesting that there is a pathology present in the global markets currently effecting a breakdown, or suspension of these basic economic laws?
The point is, it is not about overall demand, it is about the rate of movement within the demand. Already industrialised nations have relatively low swings, developing nations do not.
No, it is about overall demand.
How that overall demand interacts with overall supply at the various price levels. Developed nations are not static. The Law of Entropy.
China aims to have 50% of all the world's manufacturing capacity by 2020, or 2030, I forget, but regardless, this is going to create massive demand shifts on resources.
Aiming & Achieving, two different concepts.
The figures [already posted] suggest that this is far from a given.
jog on
d998
Kauri
23rd-November-2006, 02:33 PM
Wonderfull intellectual argy bargy but, in short, what conclusions can we in Economics 001 draw from it in relation to the threads subject.. "Commodities tipped to collapse"... :)
chops_a_must
23rd-November-2006, 02:43 PM
chops
So where is the data that supports the gaggle of opinion that suddenly appeared?
The short answer, is that you have none, you have read some experts commentary, and adopted it as fact. So be it. I shall comment on your opinion.
Incorrect.
If my quantity demanded is backed by $1M
And your quantity demanded is backed by $100
The resultant Demand/Supply curves will look very different.
Therefore the size of GDP is very relevant.
If Madagasca decided to go industrial, how much impact would it have?
I accept that China is large, and growing its GDP, but, China is not yet large enough that it can invalidate demand dynamics of the US & EU.
Nonsense.
Back to economics 101 for you.
Firstly, testosterone is subject to a physiological negative feedback loop.
Therefore, only in pathological states, will concentration levels fluctuate, possibly effecting emotional fluctuations.
Supply/Demand dynamics follow very similar negative/positive feedback loops.
Are you suggesting that there is a pathology present in the global markets currently effecting a breakdown, or suspension of these basic economic laws?
No, it is about overall demand.
How that overall demand interacts with overall supply at the various price levels. Developed nations are not static. The Law of Entropy.
Aiming & Achieving, two different concepts.
The figures [already posted] suggest that this is far from a given.
jog on
d998
Wonderful straw-man arguments you keep pulling out in this thread. You keep doing that. ;)
ducati916
23rd-November-2006, 04:31 PM
Wonderfull intellectual argy bargy but, in short, what conclusions can we in Economics 001 draw from it in relation to the threads subject.. "Commodities tipped to collapse"... :)
Well I would have thought quite obvious.
If you reject my arguments as irrelevant etc, you will no doubt feel that the bulls are correct, and thus accrue, maintain, or increase exposure to commodities via Futures, Options, Funds, or Equities.
If however you feel the Bear case has some validity, you will decrease, avoid, or accrue short postions to commodities.
Failing either of those options, you may simply wish to partake of the discussion via an analysis and interpretation of the data............... or just vent your opinion.
There is something for everyone.
jog on
d998
chops_a_must
23rd-November-2006, 04:34 PM
If however you feel the Bear case has some validity, you will decrease, avoid, or accrue short postions to commodities.
Who would? Had a look at the ZFX share price in the last two days?
ducati916
23rd-November-2006, 04:40 PM
Who would? Had a look at the ZFX share price in the last two days?
Here is the chart of ZFX.
You can talk me through your analysis if you choose and I presume the case for the Bulls.
chops_a_must
23rd-November-2006, 04:49 PM
Here is the chart of ZFX.
You can talk me through your analysis if you choose and I presume the case for the Bulls.
Ahhh, it's going up.
But seriously, it's just following the zinc price. A weeks worth of losses recovered in two days. Zinc inventories running low, with no viable alternative leads to the price of zinc going up.
I don't think this is a case of bulls, it's just a case of market reality.
canaussieuck
23rd-November-2006, 04:59 PM
ZINC CHART for you guys.
ducati916
23rd-November-2006, 05:22 PM
Ahhh, it's going up.
But seriously, it's just following the zinc price. A weeks worth of losses recovered in two days. Zinc inventories running low, with no viable alternative leads to the price of zinc going up.
I don't think this is a case of bulls, it's just a case of market reality.
chops, I have highlighted the relevant section, as it beautifully illustrates a previous point, and that is;
The more important reason however resides in the fact that the negative correlation with Equities & Bonds has turned positive.
Commodities in the "90's were pretty neglected by retail investors.
Now they are the hot topic and mainstream via numerous funds.
Lets examine some further figures;
The US accounted for 19% of world GDP growth since 2001
Asia [China + India + Japan + Aus + NZ + Taiwan + Korea + etc] = 21%
The US is huge.
If the US goes into a slowdown [which currently is the case] or into a recession, the demand for commodities will fall.
There will be excess supply.
Price will fall.
Asia, currently runs a $400 Billion current-account surplus with the US.
If US demand falls, that surplus will shrink, stunting GDP growth in Asia.
Falling GDP, increasing supply = falling demand for commodities = falling price.
Exports account for over 40% of China's GDP.
Falling exports = increased supply = falling price.
China's domestic spending = 42% [this is very small]
Capital spending has been increasing at 10%.
However, much of this spending has been inefficiently allocated, viz. Steel.
jog on
d998
chops_a_must
23rd-November-2006, 05:47 PM
The US is huge.
If the US goes into a slowdown [which currently is the case] or into a recession, the demand for commodities will fall.
There will be excess supply.
Price will fall.
Well, why hasn't the price fallen already? Why has corn skyrocketed despite the downturn for instance?
Kauri
23rd-November-2006, 05:52 PM
Well I would have thought quite obvious.
If you reject my arguments as irrelevant etc, you will no doubt feel that the bulls are correct, and thus accrue, maintain, or increase exposure to commodities via Futures, Options, Funds, or Equities.
If however you feel the Bear case has some validity, you will decrease, avoid, or accrue short postions to commodities.
Failing either of those options, you may simply wish to partake of the discussion via an analysis and interpretation of the data............... or just vent your opinion.
There is something for everyone.
jog on
d998
Failing any of those options, I simply do not have an opinion. If you read/quote opinions of enough experts you will find compelling reasons that validate almost any future scenario you may come up with. Eventually (time frame??) someone is going to be right, but is being right really so important, apart from bragging rights?
If you look back through the last couple of weeks postings on the Gold thread you will see several bearish calls, yet I posted a live gold trade that returned 2.5R on the long side. Must have been lucky. Gold has lifted about 5% since then and now the calls are bullish!! I still have no opinion on the direction of gold, but am watching for what I would consider a trade, I'm not concerned if it is a long or short, so long as I consider that the odds (not probability :) ) are with me.
Who put their overalls in Mrs Murphys chowder?
ducati916
23rd-November-2006, 05:52 PM
Well, why hasn't the price fallen already? Why has corn skyrocketed despite the downturn for instance?
Let's examine the scenario for corn.
Corn can of course be consumed as an agricultural commodity.
Also, corn & sugar cane can be processed into bio-fuels, [ethanol]
Therefore with increasing financial viability of ethanol as a fuel source due to high oil prices, we have a bullmarket in sugar & corn.
The economic slowdown is in this quarters figures.
You will note that many commodities are off their highs.
What should that tell you?
jog on
d998
ducati916
23rd-November-2006, 05:56 PM
Failing any of those options, I simply do not have an opinion. If you read/quote opinions of enough experts you will find compelling reasons that validate almost any future scenario you may come up with. Eventually (time frame??) someone is going to be right, but is being right really so important, apart from bragging rights?
If you look back through the last couple of weeks postings on the Gold thread you will see several bearish calls, yet I posted a live gold trade that returned 2.5R on the long side. Must have been lucky. Gold has lifted about 5% since then and now the calls are bullish!! I still have no opinion on the direction of gold, but am watching for what I would consider a trade, I'm not concerned if it is a long or short, so long as I consider that the odds (not probability ) are with me.
Who put their overalls in Mrs Murphys chowder?
Good grief!
The volatility of gold has been tremendous.
One winning trade to the long side says absolutely nothing about anything.
Odds are derivatives of probability.
Thus total nonsense.
jog on
d998
chops_a_must
23rd-November-2006, 06:00 PM
You will note that many commodities are off their highs.
What should that tell you?
jog on
d998
Well, if many commodities are off their highs, logically, some are setting new ones. It cannot be any other way. What should that tell you?
wayneL
23rd-November-2006, 06:01 PM
Let's examine the scenario for corn.
Corn can of course be consumed as an agricultural commodity.
Also, corn & sugar cane can be processed into bio-fuels, [ethanol]
Therefore with increasing financial viability of ethanol as a fuel source due to high oil prices, we have a bullmarket in sugar & corn.
Yes,
The dynamics in the grain markets are totally different, and cannot be used as a barometer for general economic activity. You have factors such as ethanol, drought, too much rain, not enough or too much acreage planted, disease, pestilence etc etc
Kauri
23rd-November-2006, 06:19 PM
Good grief!
The volatility of gold has been tremendous.
One winning trade to the long side says absolutely nothing about anything.
Odds are derivatives of probability.
Thus total nonsense.
jog on
d998
Most foreign governments have a large stake in maintaining the US trade deficit, and thus, a strong dollar. Thus Central banks keep accumulating dollars.
The practice of buying dollars for this purpose is reinforced by a further very important consideration, and that is the ever increasing needs of the worlds markets to transact in a single currency.
That currency is the US$.
Once a currency achieves this status, it is very difficult to unseat the King.
Currently, the US$ accounts for 88.7% of all transactions. This drives the requirement for an ever expanding supply of dollars [read increased demand] thus maintaining the dollar strength.
Thus in this context, what does that say about Gold?
jog on
d998
If however you feel the Bear case has some validity, you will decrease, avoid, or accrue short postions to commodities .
One long trade of course means nothing, the point is that had I held one of your many opinions ( volatile, bearish?? maybe just bearishly volatile??) there would have been no trade, but hey, I could have talked up a storm justifying why taking a trade was unwise.
ducati916
23rd-November-2006, 06:19 PM
Well, if many commodities are off their highs, logically, some are setting new ones. It cannot be any other way. What should that tell you?
Logic, is a component of philosophy, that adheres to erudite argument.
The highlighted section illustrates a logical fallacy.
This is the case, as, should one commodity be off a high, it is not a 100% correlation that another is setting a new high.
It tells me that you are extremely confused, and confused young men lose money in the financial markets.
jog on
d998
chops_a_must
23rd-November-2006, 06:21 PM
Logic, is a component of philosophy, that adheres to erudite argument.
The highlighted section illustrates a logical fallacy.
This is the case, as, should one commodity be off a high, it is not a 100% correlation that another is setting a new high.
It tells me that you are extremely confused, and confused young men lose money in the financial markets.
jog on
d998
No, I was exploiting a gap in your language.
ducati916
23rd-November-2006, 06:22 PM
One long trade of course means nothing, the point is that had I held one of your many opinions ( volatile, bearish?? maybe just bearishly volatile??) there would have been no trade, but hey, I could have talked up a storm justifying why taking a trade was unwise.
Possibly you are long red wine?
Really get a grip of the context if you wish to quote posts.
jog on
d998
ducati916
23rd-November-2006, 06:25 PM
No, I was exploiting a gap in your language.
Same rejoinder, if you wish to quote, leave the entire quote for context;
The economic slowdown is in this quarters figures.
You will note that many commodities are off their highs.
What should that tell you?
Better learn to read first son.
jog on
d998
Kauri
23rd-November-2006, 06:27 PM
Possibly you are long red wine?
Really get a grip of the context if you wish to quote posts.
jog on
d998
Please explain in your inimitable style without resorting to childish comments. Or not, but do try to stay on the subject.
chops_a_must
23rd-November-2006, 06:37 PM
Same rejoinder, if you wish to quote, leave the entire quote for context;
Better learn to read first son.
jog on
d998
"Many" does not equal "all".
fleathedog
23rd-November-2006, 06:56 PM
I am personally undecided in commodities for 2007. Of course it will depend on China and the US. But I have 2 ideas about where they could go (a bull and a bear case) and was wondering if anyone had any thoughts:
Bear case - pretty straightforward. The US goes into recession or at least slow growth (depending on how hard Mr Bernanke wants to run the presses) dragging Chinese growth down, commodities demand falls etc.
Bull case - US goes into a recession (it couldn't keep going could it!!!), BUT, the Chinese allow their currency to appreciate, allowing them to buy a lot more oil, copper, zinc etc at a relatively cheaper price.
I'd love to get stuck into the vast amounts of data on these matter but don't have the time so some more informed opionions would be appreciated.
Given my indecision i'm staying out of base metals, but there are some ripper bargains out there in base metals even on some modest base metal corrections so I'd love to buy in... I have a feeling though if my bear thesis is right that the correction will be pretty savage. And it seems choosing which commodities to go for is going to be the key.
Good luck all!
rederob
23rd-November-2006, 07:12 PM
"Many" does not equal "all".
Chops
Ducati may not understand what you mean.
I suggest at least 3 paragraphs, ideally including the word nonsense a few times, and economics 101 as well.
I generally will avoid a thread that ducati is posting in unless I want a good laugh.
People who use latin, philosophy, economics and other erudite material in posts are clearly superior beings and I think we should appreciate them for what they bring to us.
I learned a long time ago about what should be cut, and paste.
