I mentioned long ago that copper prices are one of the “pet proxies” around here for the odds of war.
The reason is simple: Copper is the main ingredient in Brass (copper and zinc with sometimes 2% lead to improve machining characteristics) and brass is used to make shell casings. Unless, of course, you happen to be firing polymer-coasted steel casings from the USSR because they’re cheap for your AK-47 and SKS collection, but that’s a side point.
So with the price of copper down under $2-bucks, we are able (at least for this morning) ruling out a nuclear war firing off this week in the Middle East.
It also tells us that later this month we should look for softening in Housing Starts because another big use of copper is housing wiring.
See how useful the study of markets can be?
OK, let’s move on to some of the more “doomly” reports making the rounds over the weekend.
Here’s a story, for example, about how there were “no ships” moving in the Atlantic because trade is collapsing.
True – but only in part.
In fact, if you zoom-in on the map over here, you’ll find that there is plenty of coast-wise traffic. And let’s think about what’s going on:
If you were a ship owner, would you pay crews to work over New Years? I would try to scale down operations, that’s for sure. And since people didn’t come back to work on the first, many came in on the fourth. And when a ship has been shut down, there’s loading time for cargo, and you don’t just put the hammer down and go like an airplane.
“What about the collapse in the Baltic Dry Index?”
Well, what about it?
I mean sure, it’s at 429 and that’s pretty damn low, but look at the biggest cost in ocean shipping: fuel. And then go back to the commodities this morning where you will find oil is making at least a double-low and could drop into the 20’s.
When energy is dirt cheap and when cargo is slowing, there’s no end of ship operators who would rather operate at break-even and keep in motion, or even at a small operating loss in order to avoid bigger losses…
I will tell you what is concerning: That is the Harpex Index *(Harper-Petersen container shipping index) which is at 363 when I looked this morning and which bottomed in 2009 down at 275.
But does the world end today?
Not a chance. (You can safely go back to bed, read a book, or screw around because you won’t miss anything…)
For one, we have both the Dallas Fed and Atlanta Few presidents out on the rubber chicken circuit. They can be expected to say things are good and only getting better.
What we don’t know is whether anyone will pay any attention to them, but for now it’s too early for them to talk rates – so I would expect a word like “robust” “firming” or maybe “solid” to dominate headlines.
Later in the week, the Fed will launch additional talking heads to jaw-bone up the market.
Not that they need to, however. Let’s be practical here, for a moment. There are plenty of “End of Worlders” who will buy put options (and no did last Tuesday) about when our Trading Model went to the short or cash side.
But think about this: There is no trading next Monday and we have an options expiration this week. Do you really think the owners of stocks who pad their returns with a dose of put-option writing really want to have their stock called away from them?
Why, hell no, they don’t. But since the market is down from the last third Friday in December when the S&P was at 2,005 and change, do you really think the put option-writers want to pay off on 1925 puts? Or 1950’s? Or even 1975’s?
Of course not.
So what we have this week is oil setting up to touch the twenties. Fed-Heads saying how marvelous this is, and a bunch of option-writing capitalists not wanting to lose their money.
In those charts I showed you last week, we can see what should happen next according to our work (rally) but we shall see what we shall see.
This morning we notice that Shanghai was down another 5% and then some last night…but Europe is starting a small rally and it looks like that will carry over into the US. One of the great really short-term trades today might be to buy the oversold Shanghai with the happy-talk around the world is setting up for a huge recovery.
What people tend to forget is that a year and a half ago, the Shanghai index was a third lower than it is now. So does that mean anything to us?
Sure: China is having a slow-down. But we can also see by looking at the Shanghai stock market, that they have just been through one hell of a stock bubble bursting and reality could be 30-40% lower from here, still.
You’ll have to pardon me if I don’t get excited about the world ending just yet: Shanghai is going back to 18-month-ago prices, the Fed-heads will speak (*you may not even see the strings) and the put-option crowd really doesn’t want the 1,975 puts “in the money.”
Can I be wrong? Sure. But how often is Big Money wrong? So this will be a fine dance to watch this week.
Passings: David Bowie (corrected – coffee sinks in)
Those Changes are coming for all of us…and I’m not sure which hurts more: The loss of his great music or the realization of ch-ch-ch-changes come for us all.
“…and these children that you spit upon,
As they try to change their worlds…
Are immune to your consultations,
They’re quite aware what they’re going through…”
“I said that time may change me, but I can’t trace time…”
But we keep working on it…
A Serious Question Being Asked…
A quote this morning from an article in The Week gets to a very poignant point we’ve been riding herd on:
Not only is is the Michael Brendan Dougherty article worth a read, while we wait for someone in the MSM to ask the follow-on question here for Americans: Does the Obama posse secretly want to destroy America?
Obama the Idiot (II)
Maybe someone besides me should be asking “WTF are we ending the Iran sanctions for?”
OK, I mean besides a dim-witted president, screwing the Saudis, and so forth…Oh, and should we mention the Iranians aren’t follow the “deal” PLUS they still hold four American’s hostage?
Quick. Someone send Barrack Hussein a copy of the “Art of the Deal.”
And we’re bringing in all these military aged Muslim men to America on cargo planes for what reason exactly?
And that brings us to this from our oak-leafer and military affairs expert “warhammer”
Good Monday to you and Ures, George.
It seems the Saudi’s can play a deft, real-life game of Stratego, throwing up a deliberate domestic smoke screen with the execution of Shiite cleric Nimr al-Nimr and 46 others to hide the kingdom’s mounting economic woes. Iran reacts as expected, becoming the kingdom’s new designated regional nemesis (as Israel breathes a collective sigh of relief).
If any of Ure readers are of the opinion that democracies, particular the U.S. version, are immune to such sleight of hand, they’d be wise to withhold those opinions for the foreseeable future. As that old saying goes, “desperate times call for desperate measures.” Economic times are becoming considerably more desperate. The Saudis have chosen Iran as their boogey monster. Putin hand-picked America. China’s shadow boxing adversary is not yet fully apparent, but the U.S. led ANZUS alliance (Australia, New Zealand and the U.S.), with Japan and S. Korea attached via umbilical treaties, is shaping up as a prime candidate.
Who will American politicians and economic leaders designate as their chief security rival? The current administration, led by Nobel Peace Prize winning Barack Obama, is unlikely to join the finger-pointing fray until the election is in the books this coming November. But the dominoes are beginning to fall into place. One would be advised to use a pencil with an eraser when trying to keep score.
As we all recall from “Iron Mountain” the whole point of war is either a) territorial or b) economic. And since we don’t have a line to move anywhere outside of The Great Nation, I guess that does sort of distill wars down their economic essences.