@FXC/PD -- trotsky, 11:48:10 11/20/06 Mon
i saw Dennis Gartman on TV this morning, obviously p.o.'d that he was forced to cover a short position in PD at what looked like a fairly unreasonable price.
however, he made a number of good points, chiefly the one about 'where was FCX when PD traded at $7/share? why buy NOW at $125?'
as an aside, i think his case for lower copper prices (medium term) is quite solid as well. if there is one constant that can be observed in the history of copper, it's the extreme cyclicality of its price behavior. at the tops, there is always one story or another that claims to offer sound reasoning for 'why it's different this time', but it never really is.
a mid cycle correction in copper is way overdue, and rising inventories and an easing of the previous backwardation all are strong warning signs. so is this takeover and the incredibly high price it is being consummated at.
note also, copper bulls are laughing off the decline in marginal demand that is created by the US housing bust, but they're forgetting that the margin is where prices are set. otoh, speculative demand is usually supported by low costs of carry, and those costs are clearly on the rise, as CBs all over the world continue to focus on yesterday's bogeyman and keep sounding hawkish.
by way of example, the below report on a recent G 20 pow-wow is entitled "World economic leaders sound inflation alarm". this is fall-off-the-chair funny, as 1. monetary inflation has been raging for a full 36 years with nary a hicc-up (so it's a little late to worry about THAT) and 2. the data that are all-important to the inflaters (i.e. the CB's and the political elite), namely 'price inflation' data, have recently suffered sharp retreats all over the show, in many cases showing that 'aggregate prices' (such as they are 'measured') have actually begun to fall.
this is the exact opposite of the 'deflation alarm' that was sounded just as the last deflation scare found its bottom.
Gartman isn't liked by anyone (well, not here, that's for sure), but that doesn't mean that one should dismiss his arguments out of hand. they should be examined dispassionately - contrary opinions in a market were virtually everybody else is rah-rahing usually represent valuable input.
the typical late-cycle 'inflation alarm'
today.reuters.com |
