"The best place to be is in commodities"
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Commodity Snapshot
http://www.bespokeinvest.com/thinkbig/2012/11/20/bespokes-commodity-snapshot.html
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http://www.bespokeinvest.com/thinkbig/2012/11/20/bespokes-commodity-snapshot.html
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ETF Performance
EWA(Australia) has posted a nice gain this quarter, +1.77%
http://www.bespokeinvest.com/thinkbig/2012/11/19/key-etf-performance.html
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EWA(Australia) has posted a nice gain this quarter, +1.77%
http://www.bespokeinvest.com/thinkbig/2012/11/19/key-etf-performance.html
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S&P 500: Sector Prices vs Trading Range
http://www.bespokeinvest.com/thinkbig/2012/11/21/close-but-no-cigar.html
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http://www.bespokeinvest.com/thinkbig/2012/11/21/close-but-no-cigar.html
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November 24, 2012
That Was The Week That Was … In Australia
By Our Man in Oz
Minews. Good morning Australia, a little stability seems to have returned last week to your market.
Oz. It was described by local observers as the best week of gains since October, but when you think about that it might have been said as a joke, given that we haven’t even reached the end of November.
Prices were up, thanks to better trends on most of the world’s leading markets, especially New York and Shanghai which tend to set the lead for Australian investors.
Overall, the Australian market as measured by the all ordinaries index added 1.6 per cent, a gain which is so modest that it undermines that best-since-October claim. There was a firmer trend among the mining stocks. The metals and mining index rose 2.1 per cent while the gold index did best of all with a rise of 2.3 per cent.
...
Source >> www.minesite.com
*****
That Was The Week That Was … In Australia
By Our Man in Oz
Minews. Good morning Australia, a little stability seems to have returned last week to your market.
Oz. It was described by local observers as the best week of gains since October, but when you think about that it might have been said as a joke, given that we haven’t even reached the end of November.
Prices were up, thanks to better trends on most of the world’s leading markets, especially New York and Shanghai which tend to set the lead for Australian investors.
Overall, the Australian market as measured by the all ordinaries index added 1.6 per cent, a gain which is so modest that it undermines that best-since-October claim. There was a firmer trend among the mining stocks. The metals and mining index rose 2.1 per cent while the gold index did best of all with a rise of 2.3 per cent.
...
Source >> www.minesite.com
*****
World Energy Outlook 2012
http://www.worldenergyoutlook.org/publications/weo-2012/#d.en.26099
Executive Summary >>> http://www.iea.org/publications/freepublications/publication/English.pdf
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http://www.worldenergyoutlook.org/publications/weo-2012/#d.en.26099
Executive Summary >>> http://www.iea.org/publications/freepublications/publication/English.pdf
**************
November 26, 2012
All Quiet In The Capital Markets
By Rob Davies
Despite the unusually low volatility, or perhaps because of it, there is a growing sense that many securities are trading at the wrong price.
However, it is virtually impossible to be sure if the current lack of movement reflects a market that is perfectly priced or one that is subject to so much hedging that it is artificially constrained.
The answer to the question will not be known until a sudden burst of activity hits capital markets, or until nothing much happens.
All we do know is that traders hate inactivity - partly because it conflicts with their basic instinct to “do something”, but also because you don’t make any money sitting around talking and not trading.
One thing traders can do is provoke some interest by marking prices up or down and see if it generates any subsequent activity.
If it does, such a strategy could set off a self-perpetuating change of direction as it taps into an underlying trend that was just waiting for a trigger.
If people thought prices should be higher or lower but had no excuse to trade, the mere act of seeing quotes move in the direction they want could be enough for them to take action.
This response is well documented as Bayes’s Theory, which tells us that the best guide to what happens next is what has just happened. Others will just say this is just a fancy name for momentum investing.
Whatever it is called there isn’t much of it at the moment.
Despite good rallies in equity markets, base metal price moved little over the past week, A half percent increase in the LME index to 3,305 is a pretty good indication of the lacklustre state of the market.
And, while the newswires may claim the storm Sandy will result in the injection of US$240 billion into the US economy few would argue that the event was a net benefit to that country.
In the short term the dollar was depressed by a stronger than expected business survey in Germany and thin trading due to Thanksgiving holidays.
That was one reason base metals edged higher and together with the news that there are now 2,605.3 tonnes in ETFs, why gold pushed higher to US$1,748 an ounce.
One piece of news epitomises the difficulty of interpreting current data. Next year Bloomberg estimates that new container ships will add 1.673 million tonnes of capacity to the global shipping fleet.
That is a substantial increase on the 1.336 million tonnes expected to be delivered this year and will put downward pressure on freight rates.
While that might be bad news for shipping companies or ship builders it will encourage world trade, which is good for economic growth and hence metal demand.
Perhaps we just have to get used to quiescence in asset prices and accept that growth will be low, albeit steady. Better that, surely, than wild swings between excessive optimism and deep pessimism, however good that is for traders.
...
Source >> www.minesite.com
*****
All Quiet In The Capital Markets
By Rob Davies
Despite the unusually low volatility, or perhaps because of it, there is a growing sense that many securities are trading at the wrong price.
However, it is virtually impossible to be sure if the current lack of movement reflects a market that is perfectly priced or one that is subject to so much hedging that it is artificially constrained.
The answer to the question will not be known until a sudden burst of activity hits capital markets, or until nothing much happens.
All we do know is that traders hate inactivity - partly because it conflicts with their basic instinct to “do something”, but also because you don’t make any money sitting around talking and not trading.
One thing traders can do is provoke some interest by marking prices up or down and see if it generates any subsequent activity.
If it does, such a strategy could set off a self-perpetuating change of direction as it taps into an underlying trend that was just waiting for a trigger.
If people thought prices should be higher or lower but had no excuse to trade, the mere act of seeing quotes move in the direction they want could be enough for them to take action.
This response is well documented as Bayes’s Theory, which tells us that the best guide to what happens next is what has just happened. Others will just say this is just a fancy name for momentum investing.
Whatever it is called there isn’t much of it at the moment.
Despite good rallies in equity markets, base metal price moved little over the past week, A half percent increase in the LME index to 3,305 is a pretty good indication of the lacklustre state of the market.
And, while the newswires may claim the storm Sandy will result in the injection of US$240 billion into the US economy few would argue that the event was a net benefit to that country.
In the short term the dollar was depressed by a stronger than expected business survey in Germany and thin trading due to Thanksgiving holidays.
That was one reason base metals edged higher and together with the news that there are now 2,605.3 tonnes in ETFs, why gold pushed higher to US$1,748 an ounce.
One piece of news epitomises the difficulty of interpreting current data. Next year Bloomberg estimates that new container ships will add 1.673 million tonnes of capacity to the global shipping fleet.
That is a substantial increase on the 1.336 million tonnes expected to be delivered this year and will put downward pressure on freight rates.
While that might be bad news for shipping companies or ship builders it will encourage world trade, which is good for economic growth and hence metal demand.
Perhaps we just have to get used to quiescence in asset prices and accept that growth will be low, albeit steady. Better that, surely, than wild swings between excessive optimism and deep pessimism, however good that is for traders.
...
Source >> www.minesite.com
*****
Please visit the blog of Jamie Ross(mining engineer) >> www.miningman.com
Blog focused on the chinese mining industry >> http://chinaminingblog.com/
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EWA(Australia) >> YTD change: +13.90%
http://www.bespokeinvest.com/thinkbig/2012/11/26/global-stocks-rebound.html
***
http://www.bespokeinvest.com/thinkbig/2012/11/26/global-stocks-rebound.html
***
December 01, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz
Minews. Good morning Australia. Your market seems to have had a better week.
Oz. It was, but it was patchy, and without a cohesive theme, apart from the weaker tone among the gold companies. These struggled with the sharp gold-price fall during the week and continued strength in the Australian dollar which is being pushed up by buyers from the oddest places. The latest country to develop an appetite for the Aussie currency is Russia, which has been loading up on dollars since it was elevated to a global reserve currency status.
Minews. And a high dollar hurts all of your export industries.
Oz. It does, but neither the government nor the central bank, seem to have any way of countering the rise, unless they slash interest rates - which could well be the big news of next week.
Minews. That’s next week’s news, let’s stick to last week, starting with an acknowledgement that this might be a briefer than usual rundown because you’re somewhere between Oz and London on the way to Mines and Money.
Oz. Correct, and I’ll also make a quick visit to next week’s Minesite Forum. The tight schedule means that this week’s report is being written at 30,000 feet en route to Singapore, so please forgive any bloopers caused by the turbulence or the occasional glass of the rather delicious Charles Heidsieck bubbly.
Minews. Enough of the idle chatter, let’s get those figures out of you before the bubbles do their job.
Oz. Overall, the market had its best week in a month, adding a respectable 3.6 per cent as measured by the all ordinaries. But that was mainly thanks to strength in financial and industrial stocks. Metals and mining companies delivered a rise at roughly half that rate, 1.9 per cent, while the gold index barely moved, adding just 0.2 per cent, and with most of that attributable to a small rise by Newcrest (NCM)
...
Source >> www.minesite.com (Free registration)
*****
That Was The Week That Was ... In Australia
By Our Man in Oz
Minews. Good morning Australia. Your market seems to have had a better week.
Oz. It was, but it was patchy, and without a cohesive theme, apart from the weaker tone among the gold companies. These struggled with the sharp gold-price fall during the week and continued strength in the Australian dollar which is being pushed up by buyers from the oddest places. The latest country to develop an appetite for the Aussie currency is Russia, which has been loading up on dollars since it was elevated to a global reserve currency status.
Minews. And a high dollar hurts all of your export industries.
Oz. It does, but neither the government nor the central bank, seem to have any way of countering the rise, unless they slash interest rates - which could well be the big news of next week.
Minews. That’s next week’s news, let’s stick to last week, starting with an acknowledgement that this might be a briefer than usual rundown because you’re somewhere between Oz and London on the way to Mines and Money.
Oz. Correct, and I’ll also make a quick visit to next week’s Minesite Forum. The tight schedule means that this week’s report is being written at 30,000 feet en route to Singapore, so please forgive any bloopers caused by the turbulence or the occasional glass of the rather delicious Charles Heidsieck bubbly.
Minews. Enough of the idle chatter, let’s get those figures out of you before the bubbles do their job.
Oz. Overall, the market had its best week in a month, adding a respectable 3.6 per cent as measured by the all ordinaries. But that was mainly thanks to strength in financial and industrial stocks. Metals and mining companies delivered a rise at roughly half that rate, 1.9 per cent, while the gold index barely moved, adding just 0.2 per cent, and with most of that attributable to a small rise by Newcrest (NCM)
...
Source >> www.minesite.com (Free registration)
*****
Metals & Mining Analysts' Ratings & Estimates - Juniors
By Bill Matlack
Nov 27, 2012
http://www.kitco.com/ind/Matlack/november272012B.html
By Bill Matlack
Nov 27, 2012
http://www.kitco.com/ind/Matlack/november272012B.html
December 03, 2012
The Appointment Of Mark Carney As Governor Of The Bank Of England Could Be A Game-Changer As Far As Inflation And Metals Are Concerned
By Rob Davies
Investors buy commodities to speculate on changes in prices as demand fluctuates, and to protect themselves from inflation.
Since the Global Financial Crisis of 2008 authorities around the world have played a simple game of supplying sufficient liquidity to prevent the major economies from seizing up.
This has worked by maintaining growth, which has in consequence helped keep metal prices at high levels.
It has though, come at the expense of increased inflation, which of course vindicated commodity speculators.
Two large countries, Australia and Canada, did not join in this game because they didn’t need to. They were relatively well run and benefitted from being large exporters of natural resources.
One of these countries, Canada, has just discovered that there is now an overseas appetite for its financial skills as well. There can be few better examples of how international the UK economy now is than its recruitment of Mark Carney from Canada as the next Governor of the Bank of England.
There is no doubt that the UK is not the financial powerhouse it was 100 years ago. Nevertheless, the occupant of Threadneedle Street is still one of the four most powerful central bankers in the world.
He, and his peers, can have a major influence on inflation, and expectations of inflation, in a significant part of the world.
The appointment of a foreigner to such a key position tells us two things. One is that British politicians are not very impressed by the cohort of suspects that have followed safe career paths to be within shouting distance of the top job.
Instead, the Chancellor was prepared to take the dramatic step of looking outside the domestic gene pool in a way few other countries would, to signal a sharp change in tone and approach.
Secondly, and more importantly for commodity investors, it sends a message that the old approach of fudge and muddle through probably won’t be used by the new man.
If Carney is serious about this role, and there is no reason to believe he isn’t, then the implications for inflation, interest rates and exchange rates could be profound. If his approach works it will undoubtedly have ramifications for other central banks and economies as well.
There is of course no guarantee that his solutions will work. For a start he hasn’t got the following wind he had in Canada - specifically a large domestic resource industry. Moreover, he has to factor in how his decisions will impact the financial world of the City of London which is still the home of metal trading.
His biggest challenge, like a number of new leaders in recent years, is to meet the exalted expectations now placed in him.
However, if does succeed, even with his short tenure of only five years, it could radically change expectations of future inflation in the UK and possibly elsewhere.
Were that to happen it is possible to envisage an appreciation of sterling, a reduction in the value of overseas earnings from commodity related businesses and maybe even a sharp, step change, in commodity prices.
Overriding these impacts will still be the long-term fundamentals of demand and supply for all commodities, especially metals.
But what Carney may succeed in doing is reducing some of the speculative interest in metal prices.
Whether that is a good thing or not is for others to judge. It certainly seems though that this appointment has changed the rules of the game. A central banker who actually cares about inflation - that’s a novelty.
Source >> www.minesite.com
*****
The Appointment Of Mark Carney As Governor Of The Bank Of England Could Be A Game-Changer As Far As Inflation And Metals Are Concerned
By Rob Davies
Investors buy commodities to speculate on changes in prices as demand fluctuates, and to protect themselves from inflation.
Since the Global Financial Crisis of 2008 authorities around the world have played a simple game of supplying sufficient liquidity to prevent the major economies from seizing up.
This has worked by maintaining growth, which has in consequence helped keep metal prices at high levels.
It has though, come at the expense of increased inflation, which of course vindicated commodity speculators.
Two large countries, Australia and Canada, did not join in this game because they didn’t need to. They were relatively well run and benefitted from being large exporters of natural resources.
One of these countries, Canada, has just discovered that there is now an overseas appetite for its financial skills as well. There can be few better examples of how international the UK economy now is than its recruitment of Mark Carney from Canada as the next Governor of the Bank of England.
There is no doubt that the UK is not the financial powerhouse it was 100 years ago. Nevertheless, the occupant of Threadneedle Street is still one of the four most powerful central bankers in the world.
He, and his peers, can have a major influence on inflation, and expectations of inflation, in a significant part of the world.
The appointment of a foreigner to such a key position tells us two things. One is that British politicians are not very impressed by the cohort of suspects that have followed safe career paths to be within shouting distance of the top job.
Instead, the Chancellor was prepared to take the dramatic step of looking outside the domestic gene pool in a way few other countries would, to signal a sharp change in tone and approach.
Secondly, and more importantly for commodity investors, it sends a message that the old approach of fudge and muddle through probably won’t be used by the new man.
If Carney is serious about this role, and there is no reason to believe he isn’t, then the implications for inflation, interest rates and exchange rates could be profound. If his approach works it will undoubtedly have ramifications for other central banks and economies as well.
There is of course no guarantee that his solutions will work. For a start he hasn’t got the following wind he had in Canada - specifically a large domestic resource industry. Moreover, he has to factor in how his decisions will impact the financial world of the City of London which is still the home of metal trading.
His biggest challenge, like a number of new leaders in recent years, is to meet the exalted expectations now placed in him.
However, if does succeed, even with his short tenure of only five years, it could radically change expectations of future inflation in the UK and possibly elsewhere.
Were that to happen it is possible to envisage an appreciation of sterling, a reduction in the value of overseas earnings from commodity related businesses and maybe even a sharp, step change, in commodity prices.
Overriding these impacts will still be the long-term fundamentals of demand and supply for all commodities, especially metals.
But what Carney may succeed in doing is reducing some of the speculative interest in metal prices.
Whether that is a good thing or not is for others to judge. It certainly seems though that this appointment has changed the rules of the game. A central banker who actually cares about inflation - that’s a novelty.
Source >> www.minesite.com
*****
December 15, 2012
That Was The Week That Was ... In Australia
By Our Man in Oz
Minews. Good morning Australia. Your market seems to have had a solid week.
Oz. There was certainly a more buoyant mood, with a pleasing return to favour of iron ore companies after a further increase in the iron ore price. At around US$126 a tonne, iron ore is at a three-month high, thanks largely to confirmation that the Chinese economy continues to recover from its slowdown.
Mining stocks led the rest of the ASX up, with the metals and mining index adding a healthy 3.5 per cent, comfortably outperforming the all ordinaries, which managed a gain of 0.8 per cent, and the gold index, which underperformed with a rise of 0.7 per cent.
Minews. As with the past few weeks we’ll keep this report short, as you’re about to start the long haul back to Australia.
Oz. Right you are. But before calling the card, it’s worth making a few comments on the bigger picture. The Australian market ended the week at an 18-month high, and the Australian dollar continues to rise, much to the annoyance of exporters. Last week saw the dollar add another US1 cent, though very much because of continued weakness in the US currency, which is being deliberately driven lower by the US Government.
The Australian currency is now being referred to as a “Bradbury”, in honour of Stephen Bradbury, Australia’s first winter Olympics gold medallist, who won a skating sprint in 2002 at Salt Lake City after the rest of the field crashed, leaving him as the last man standing, literally. Today, the Australian dollar is standing while everyone else falls.
Minews. Time for prices, starting this week with iron ore, please.
Oz. Fortescue Metals (FMG) led the way thanks to the announcement of an expanded resource at its Iron Bridge project. The shares rose by A35 cents to A$4.31. Atlas Iron (AGO), which secured a big capital injection to fund development plans, wasn’t far behind with a rise of A26 cents to A$1.56. BC Iron (BCI) added A30 cents to A$3.27, also after raising fresh capital to buy back part of a mining deal it has with FMG. And IronClad (IFE) put on A9 cents to A27.5 cents after reporting the discovery of additional material at its Wilcherry Hill project.
Other iron ore moves, mainly up, included: Gindalbie (GBG), up A1.5 cents to A24 cents, Grange (GRR), up A5 cents to A26.5 cents, Mt Gibson (MGX), up A7 cents to A70 cents, Iron Ore Holdings (IOH), down A3 cents to A75 cents, Northern Iron (NFE), up A6 cents to A48 cents, and Aquila (AQA), up A25 cents to A$2.65.
...
Source >> www.minesite.com
*****
That Was The Week That Was ... In Australia
By Our Man in Oz
Minews. Good morning Australia. Your market seems to have had a solid week.
Oz. There was certainly a more buoyant mood, with a pleasing return to favour of iron ore companies after a further increase in the iron ore price. At around US$126 a tonne, iron ore is at a three-month high, thanks largely to confirmation that the Chinese economy continues to recover from its slowdown.
Mining stocks led the rest of the ASX up, with the metals and mining index adding a healthy 3.5 per cent, comfortably outperforming the all ordinaries, which managed a gain of 0.8 per cent, and the gold index, which underperformed with a rise of 0.7 per cent.
Minews. As with the past few weeks we’ll keep this report short, as you’re about to start the long haul back to Australia.
Oz. Right you are. But before calling the card, it’s worth making a few comments on the bigger picture. The Australian market ended the week at an 18-month high, and the Australian dollar continues to rise, much to the annoyance of exporters. Last week saw the dollar add another US1 cent, though very much because of continued weakness in the US currency, which is being deliberately driven lower by the US Government.
The Australian currency is now being referred to as a “Bradbury”, in honour of Stephen Bradbury, Australia’s first winter Olympics gold medallist, who won a skating sprint in 2002 at Salt Lake City after the rest of the field crashed, leaving him as the last man standing, literally. Today, the Australian dollar is standing while everyone else falls.
Minews. Time for prices, starting this week with iron ore, please.
Oz. Fortescue Metals (FMG) led the way thanks to the announcement of an expanded resource at its Iron Bridge project. The shares rose by A35 cents to A$4.31. Atlas Iron (AGO), which secured a big capital injection to fund development plans, wasn’t far behind with a rise of A26 cents to A$1.56. BC Iron (BCI) added A30 cents to A$3.27, also after raising fresh capital to buy back part of a mining deal it has with FMG. And IronClad (IFE) put on A9 cents to A27.5 cents after reporting the discovery of additional material at its Wilcherry Hill project.
Other iron ore moves, mainly up, included: Gindalbie (GBG), up A1.5 cents to A24 cents, Grange (GRR), up A5 cents to A26.5 cents, Mt Gibson (MGX), up A7 cents to A70 cents, Iron Ore Holdings (IOH), down A3 cents to A75 cents, Northern Iron (NFE), up A6 cents to A48 cents, and Aquila (AQA), up A25 cents to A$2.65.
...
Source >> www.minesite.com
*****
December 10, 2012
Why Metals Are Now Contra-Cyclical
By Rob Davies
Among the many tales of investing folklore that have been passed down from seasoned old lags to eager young tyros in wine bars and pubs across the world there is always one relationship that is venerated as the most basic.
Commodities, especially industrial metals, are cyclical. Their price is dictated more by the vagaries of changes in GDP than by any other factor.
Unfortunately for old lags, but fortunately for miners, this relationship has not held true in this great recession.
The rupture of this correlation was demonstrated again this week when the Bundesbank revised down its estimates of growth for the German economy next year from 1.6 per cent to 0.4 per cent.
As Germany is the biggest metal basher in Europe that implies metal demand will be lower than previously expect. Did that worry metal markets?
Not really. Copper gained 2.2 per cent to US$8,020 a tonne, though overall metal prices, as measured by the LME Index, slipped 0.4 per cent to 3,456.7.
One reason for this disconnect is that this apparently is not a normal recession.
This is a balance sheet recession and that means, we are told, that recoveries take eight to ten years instead of the more common two or three.
The West is now in its fourth year of this recession and there is little, indeed there are no signs of recovery.
And while this recession grinds on it is having a demonstrable impact on the stock of goods held by the public.
According to Bloomberg the average age of a US consumer durable good, like a car or a washing machine, has increased to 4.6 years.
This is the highest since 1962, and has been rising for four years in a row which makes it the longest period of rising longevity since the Great Depression.
Events like the superstorm Sandy are a godsend to those lucky enough to survive it as insurers allow affected residents to replace old goods with brand new ones.
But even that one-off blip is not enough to revive moribund demand in the developed world.
The problem is that the public still has too much debt and the process of deleveraging is eroding the ability of consumers to spend.
Even though US household debt has fallen to 81.5 per cent of GDP from 97.5 per cent in June 2009 few want to go back the old days of being in hock to the bank.
The other problem is that many banks in the developed world are still pretending that many of the loans they have extended will be repaid.
Some analysts feel that about 10 per cent f these outstanding loans will eventually be written off, further damaging the balance sheets of banks and their ability to lend.
This means is that it is still China and the developing world that is driving metal consumption and they are dancing to a different beat from the West.
They are not members of the OECD and this distorts the usual cyclical relationship of GDP growth and metal prices for the world’s richest countries.
The best hope is that when they have their crisis, as they inevitably will, the Western countries will have got their balance sheets in sufficient order to take over again as the engine of world growth.
It looks like they have plenty of time.
Source >> www.minesite.com
*****
Why Metals Are Now Contra-Cyclical
By Rob Davies
Among the many tales of investing folklore that have been passed down from seasoned old lags to eager young tyros in wine bars and pubs across the world there is always one relationship that is venerated as the most basic.
Commodities, especially industrial metals, are cyclical. Their price is dictated more by the vagaries of changes in GDP than by any other factor.
Unfortunately for old lags, but fortunately for miners, this relationship has not held true in this great recession.
The rupture of this correlation was demonstrated again this week when the Bundesbank revised down its estimates of growth for the German economy next year from 1.6 per cent to 0.4 per cent.
As Germany is the biggest metal basher in Europe that implies metal demand will be lower than previously expect. Did that worry metal markets?
Not really. Copper gained 2.2 per cent to US$8,020 a tonne, though overall metal prices, as measured by the LME Index, slipped 0.4 per cent to 3,456.7.
One reason for this disconnect is that this apparently is not a normal recession.
This is a balance sheet recession and that means, we are told, that recoveries take eight to ten years instead of the more common two or three.
The West is now in its fourth year of this recession and there is little, indeed there are no signs of recovery.
And while this recession grinds on it is having a demonstrable impact on the stock of goods held by the public.
According to Bloomberg the average age of a US consumer durable good, like a car or a washing machine, has increased to 4.6 years.
This is the highest since 1962, and has been rising for four years in a row which makes it the longest period of rising longevity since the Great Depression.
Events like the superstorm Sandy are a godsend to those lucky enough to survive it as insurers allow affected residents to replace old goods with brand new ones.
But even that one-off blip is not enough to revive moribund demand in the developed world.
The problem is that the public still has too much debt and the process of deleveraging is eroding the ability of consumers to spend.
Even though US household debt has fallen to 81.5 per cent of GDP from 97.5 per cent in June 2009 few want to go back the old days of being in hock to the bank.
The other problem is that many banks in the developed world are still pretending that many of the loans they have extended will be repaid.
Some analysts feel that about 10 per cent f these outstanding loans will eventually be written off, further damaging the balance sheets of banks and their ability to lend.
This means is that it is still China and the developing world that is driving metal consumption and they are dancing to a different beat from the West.
They are not members of the OECD and this distorts the usual cyclical relationship of GDP growth and metal prices for the world’s richest countries.
The best hope is that when they have their crisis, as they inevitably will, the Western countries will have got their balance sheets in sufficient order to take over again as the engine of world growth.
It looks like they have plenty of time.
Source >> www.minesite.com
*****
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Copper and nickel have done well in the last 30 days -- augers well for an eventual across the board recovery, me thinks.
December 17, 2012
Recovery Ahoy? Aluminium Goes Into Backwardation
By Rob Davies
Everyone knows bad news sells papers, and that the same applies to radio, TV and the internet. There is therefore an understandable concentration on negative stories in the old and new media.
But it is the job of the investor to break through this crust of negativity on the news crème bruleé and to discover the moist and creamy delights below.
Last week was a good example.
While the pundits chattered away about the “fiscal cliff” of impending tax rises and spending cuts in the US, it turns out that industrial production there rose by 1.1 per cent in November.
Many believe that the US is living in the la-la land of pretending it doesn’t need to make big adjustments to taxation and spending to bring the two into line.
Either the gap is closed or the debt is eroded by inflation. Americans just need to accept the idea and move on.
It certainly seems the bond market senses which way the wind is blowing judging by the five per cent sell-off in the 10 year US Treasury, taking its yield back above 1.7 per cent. It senses growth is in the air.
But developed equity markets have not really priced this in, even though they are making slow upward progress.
More interesting perhaps was the exuberant five per cent leap in the Chinese stock markets on Friday, driven by a jump in a purchasing managers’ index to a 14 month high.
And another demonstration of the way the world is changing was the news that Brazilian exports are falling - its main market is Europe - as demonstrated by a 3.8 per cent drop in freight rates for Capesize vessels.
Since China is now a bigger market for metals than Europe metal prices responded well and gained 1.7 per cent over the week, taking the LME index to 3,514.7.
One metal that responded particularly positively to the week’s news was aluminium. Its cash price increased 7.1 per cent to US$2,121 a tonne, ten times the gain recorded by the three month price. The rise has now put the quotes into backwardation.
When that happens it means prices for immediate delivery are higher than for metal in three months time, and is usually a sign of vigorous demand.
But even the most rampant of bulls would be hard pressed to argue that case right now. The alternative explanation is that stockpiled metal is not actually available for delivery. Certainly, that is what seems to be the case for aluminium.
Which is rather odd, because there are currently 5.1 million tonnes in LME warehouses and probably a lot more in China. It seems someone is taking a pretty optimistic stance on the metal despite the gloom in the press.
What is rather strange is that it is only aluminium in backwardation and not the other metals.
That may be because aluminium is the largest base metal by volume and is one of the few that can accommodate large amounts of money being invested in it without distorting the market.
Alternatively it might be because it is probably the most cyclical of all the industrial metals with use spread across transport, construction and consumer spending.
If recovery really is round the corner, and you have a lot of funds to invest, going long on aluminium does make a lot of sense.
Source >> www.minesite.com
*****
Recovery Ahoy? Aluminium Goes Into Backwardation
By Rob Davies
Everyone knows bad news sells papers, and that the same applies to radio, TV and the internet. There is therefore an understandable concentration on negative stories in the old and new media.
But it is the job of the investor to break through this crust of negativity on the news crème bruleé and to discover the moist and creamy delights below.
Last week was a good example.
While the pundits chattered away about the “fiscal cliff” of impending tax rises and spending cuts in the US, it turns out that industrial production there rose by 1.1 per cent in November.
Many believe that the US is living in the la-la land of pretending it doesn’t need to make big adjustments to taxation and spending to bring the two into line.
Either the gap is closed or the debt is eroded by inflation. Americans just need to accept the idea and move on.
It certainly seems the bond market senses which way the wind is blowing judging by the five per cent sell-off in the 10 year US Treasury, taking its yield back above 1.7 per cent. It senses growth is in the air.
But developed equity markets have not really priced this in, even though they are making slow upward progress.
More interesting perhaps was the exuberant five per cent leap in the Chinese stock markets on Friday, driven by a jump in a purchasing managers’ index to a 14 month high.
And another demonstration of the way the world is changing was the news that Brazilian exports are falling - its main market is Europe - as demonstrated by a 3.8 per cent drop in freight rates for Capesize vessels.
Since China is now a bigger market for metals than Europe metal prices responded well and gained 1.7 per cent over the week, taking the LME index to 3,514.7.
One metal that responded particularly positively to the week’s news was aluminium. Its cash price increased 7.1 per cent to US$2,121 a tonne, ten times the gain recorded by the three month price. The rise has now put the quotes into backwardation.
When that happens it means prices for immediate delivery are higher than for metal in three months time, and is usually a sign of vigorous demand.
But even the most rampant of bulls would be hard pressed to argue that case right now. The alternative explanation is that stockpiled metal is not actually available for delivery. Certainly, that is what seems to be the case for aluminium.
Which is rather odd, because there are currently 5.1 million tonnes in LME warehouses and probably a lot more in China. It seems someone is taking a pretty optimistic stance on the metal despite the gloom in the press.
What is rather strange is that it is only aluminium in backwardation and not the other metals.
That may be because aluminium is the largest base metal by volume and is one of the few that can accommodate large amounts of money being invested in it without distorting the market.
Alternatively it might be because it is probably the most cyclical of all the industrial metals with use spread across transport, construction and consumer spending.
If recovery really is round the corner, and you have a lot of funds to invest, going long on aluminium does make a lot of sense.
Source >> www.minesite.com
*****
Recent performance of emerging markets ETF
http://www.bespokeinvest.com/thinkbig/2012/12/13/emerging-markets-stage-a-late-year-comeback.html
http://www.bespokeinvest.com/thinkbig/2012/12/13/emerging-markets-stage-a-late-year-comeback.html
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