High prices lead to over supply. Low prices to cost-cutting, layoffs and mine or shop closings.
That's what business cycles and the market are supposed to do--that is, if you don't have government interference.You can spell government interference in many ways from China's building cities with zero inhabitants to global QE madness.
Copper is called the educated metal, jokingly referred to by many as having a Ph'd in economics. That just might be one of it inherent weaknesses.The world today is awash in Ph'ds and the same can be said for copper.
A bell weather for copper is Freeport McMoran, one of the globe's big miners of the metal. With China's recent revelation about its future growth prospects, Freeport's stock price, a New Orleans-based firm, turned further south.
The rout in copper is on. The important industrial metal just hit a six year low. China has been the globe's largest copper glutton, gobbling up an estimated 40% of world supply. But now it's dorsiflexing it hands and pushing itself away from the table. For many this has come as a surprise, proving once again the hard-learned lesson some call the law of impermanence. Or in popular Wall Street jargon, trees don't grow to the sky.
Down for five straight sessions, copper is off 22% for the year. Here's a chart from MarketWatch via Factset.
And here is chart for FCX. We're not recommending anything here, just pointing out some things. Last August hedge fund manager Carl Icahn revealed he owned a big share of the company and in September the CEO reportedly purchased a million shares around $9.74 a pop.The stock closed yesterday at $9.83 and this morning is trading around $9.25.
Again, we're not suggesting anything here, just ruminating on a concept we keep rolling over in our mind, capitulation.The FCX chart speaks for itself and the economy. So you might want to follow FCX not the bouncing ball.
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