<Russ may want to chime in on this. Of course Russ is as sharp as they come.>
I've been cautious on using what I call emerging mid tier producers, but there is no way I foresaw a washout and crash of this magnitude, that's why I've been accumulating what I thought were already bargains. For instance, I thought copper would trade off below 1.30 after Grasberg came back, but $1.15 with 153,450 MT in inventory at the LME, and 178,000 at Comex? Much lower prices than that and you'll quickly see production expansion shut back down, making the deficit bigger , not smaller. If the Chinese are trying to do a manipulative raid (*) here to obtain bargain metals, it will backfire, because of these supply price sensitivity issues.
I'm rather stunned by all this in fact, but can only step back, and consider this a great gift. And fortunately I have a large short position in stocks and had a Eurodollar short hedge to off set this metals damage. And as you know I've repeatedly suggested that people not just speculate on precious metals, get short some things. But metals sure look very compelling now.
I think we have several powerful forces that will renew them quickly: 1. Escalating shortages, and quickly now. 2. The USD is going to reverse back down as the last of strong economic news ratchets down. I now suspect another good jobs number on May 7, but after that, things will slide fast, and this market is very reactive (not forward thinking) to day to day news.
(*) Somebody's playing games, in copper while the focus is on the LME adds, Comex is being drawn-down. I think the Chinese are hurting.
Message 20070276 |
