Copper
This metal has been mined for thousands of years. Copper has a very high thermal and electrical conductivity. Pure copper is soft and has a reddish-orange color. Most copper is mined from large, open-pit mines. Chile is the top mine producer of the metal, followed by the U.S. Copper is used in electrical wires, plumbing, roofing, and various industrial uses in machines. In many instances, copper is used in place of aluminum because it is a better electrical conductor. Since it is waterproof, it has been used as roofing material. The green color of copper occurs when it is oxidized over a long period of time.
A Mirage Called the Stock Market
By Michael Lombardi, MBA for Profit Confidential
While an economic slowdown is looming over the global economy, no one seems to care, as stock markets continue to reach new record-highs—giving investors false hopes of economic growth. But how long can this mirage actually last?
The economic slowdown in the global economy I’m talking about is a worldwide pullback in growth. Take India as the first example. According to India’s Central Statistics Office, the Indian economy is growing at five percent—its slowest pace in a decade! The director general of the Confederation of Indian Industry was quoted late last week as saying, “With no visible pick-up in any key levers of the economy, the situation remains grim.” (Source: Mallet, V., “India records slowest growth in a decade,” Financial Times, May 31, 2013.)
China, the second-biggest economic hub in the global economy, is facing headwinds, as its economy is growing at its slowest pace since 2009. Japan has undergone the largest per-capita quantitative easing program in history (its debt-to-gross domestic product [GDP] is running above 200%), and that country is back in a recession.
The unemployment rate in the eurozone was reported last week at 12.2% for April. It was 12.1% in March. The unemployment rate in Spain stood at 26.8 % and in Portugal, it stood at 17.8%. (Source: Eurostat web site, May 31, 2013.)
And industrial metal prices, which are supposed to be a leading indicator, are all heading downward.
Take a look at the chart below of the Dow Jones-UBS Industrial Metals Index. This index provides an overall picture of the performance of industrial metals.
Chart courtesy of www.StockCharts.com
Since the beginning of the … Read More
How Copper Prices Suggest Stocks Are Priced Too High
By George Leong, B.Comm. for Profit Confidential
The S&P 500 traded at another record high last Thursday, and there appears to be no stopping the bullish investor sentiment that has encapsulated the stock market.
Yet, while the stock market gains are great for the bulls, I still have an issue with the rate of the stock market rally. Simply stated, it’s just a bit too fast, too quick.
I also wonder why the stock market is ignoring the continued fragile state of the global economy in spite of a deep recession in the eurozone and stalling in China.
The reality is that we need to be concerned about how the global economy is faring. The idea of focusing too much on only America doesn’t make sense due to the increased correlation between the global economies. Slowing in Asia and Europe will impact U.S. companies. (Read “Why America Will Struggle if the Eurozone Languishes.”)
Looking at China, while the Chinese economy continues to expand at rates we can only dream of, the country is stalling, as reflected in its demand for commodities.
Copper is a key commodity used in wiring, pipes, electronics, and other areas. When the economy expands, so does the demand for copper.
China imported less copper in February with imports declining to a 20-month low, according to the country’s General Administration of Customs (Source: “China Copper Imports Slump to 20-Month Low on Holidays,” Bloomberg, March 7, 2013, last accessed May 6, 2013.) China is the world’s top importer of copper, so the decline in the import number is important. (Source: “International Trade Centre,” NationMaster.com, last accessed May 6, 2013.)
The lower … Read More
Already Fragile Economy Hit with Falling Retail Sales, Rising Business Inventories
By Michael Lombardi, MBA for Profit Confidential
Gross domestic product (GDP) in the U.S. economy mainly consists of consumer spending. Hence, the more consumers spend and buy, the better our economic conditions become. In 2012, consumer spending in the U.S. economy accounted for more than $11.1 trillion. (Source: Federal Reserve Bank of St. Louis web site, last accessed April 12, 2013.)
Unfortunately, as we finish the first quarter of 2013, economic indicators are suggesting U.S. consumer spending is under severe pressure.
Retail sales in the U.S. economy just took a wrong turn and dropped 0.4% in March from February’s sales. Consumer spending at electronics and appliance stores, health and personal care stores, and general merchandise stores posted a negative growth compared to the same period in 2012. (Source: U.S. Census Bureau, April 12, 2013.)
Similarly, a key indicator of future consumer spending, the Thomson Reuters/University of Michigan’s preliminary consumer sentiment index declined to the lowest point in nine months in April. The preliminary consumer sentiment index registered at 72.3 in April, down from 78.6 in March. (Source: Reuters, April 12, 2013.) Remember: consumers turning pessimistic means a pullback in consumer spending.
At the other end of the equation, we see businesses in the U.S. economy increasing their inventories. According to the U.S. Census Bureau, manufacturing and trade inventories in February of this year edged up almost five percent from a year ago. (Source: U.S. Census Bureau, April 12, 2013.)
Businesses often build up inventories in anticipation of demand, but looking at consumer sentiment and retail sales, I highly doubt that’s the case. It’s actually the opposite; business inventories are increasing because of a lack of demand…. Read More
Base Metal Demand Turning Bleak; Not a Good Sign for Global Economy
By Michael Lombardi, MBA for Profit Confidential
The threat of an economic slowdown in the global economy is increasing each day, but thanks to the optimistic stock markets flaring due to easy money, the threat goes unnoticed.
Copper stockpiles in the London Mercantile Exchange warehouses have reached a 10-year high. Since the beginning of this year, copper inventories have surged 84%. (Source: Wall Street Journal, April 11, 2013.)
According to the World Steel Association, steel demand in Japan is expected to decline (for the second year in a row) by 2.2% in 2013 and a further 0.6% in 2014. Similarly, the use of steel in the U.S. is expected to slow this year compared to 2012. (Source: World Steel Association, April 11, 2013.)
Other base metals, often referred to as “industrial metals,” are witnessing their demise as well. Consider the chart below of the Dow Jones-UBS Industrial Metals Index.
Chart courtesy of www.StockCharts.com
This index, comprising different base metal prices, has been declining since February and has shed more than 11% of its price. Base metals are used in many different industries, and if their demand slows and prices decline, then that’s not a great sign for the global economy.
Dear reader, it’s not a hidden fact: major economic hubs in the global economy are slowing down. In the U.S., we have high unemployment. Once-strong nations like Germany and France are being suppressed by an economic slowdown in the eurozone. Japan is in an outright recession. China’s economy is slowing, too.
After the economic slowdown of 2009, central banks in the global economy were able to inject significant amounts of money into their countries. Looking … Read More
What Will It Take for Silver to Snap out of Its Coma?
By George Leong, B.Comm. for Profit Confidential
Silver is in a coma at this time, stuck below $30.00 and both its 50- and 200-day moving averages (MAs). Yet for traders, prices can easily spike on any firm sign of a sustained global economic recovery, since the white metal is used in numerous industrial applications, including in the pharmaceutical, technology, jewelry, and industrial areas. Traders can also watch for buying from India and China. (Read “China: This is Your Time!”)
With signs of a sustained economic renewal in the United States, don’t be surprised to see the demand for silver ratchet higher. The uncertainty is the timing of the move.
Yet with silver currently doing very little, sitting below $30.00, it may be time to begin looking at the white metal as a possible upcoming trade back above $30.00.
Silver has been declining, caught in a sideways trading channel since September 2011, based on my technical analysis. Over the past year, the metal has made a new high only nine times, but in that same timeframe, it managed to make 15 new lows. Shortening the time to six months shows an even worse scenario, with 19 new lows and only two new highs.
As you can see in the chart below, spot silver has absolutely no support at this time; but this will be tested, as it heads toward a key support line, as indicated by the lower horizontal blue line in the chart.
As it has appeared numerous times in the past few years, silver looks set for a bounce back up past $30.00 to the $35.00 level, as it did in 2011 and … Read More
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