“Dr. Copper is telling us that while the U.S. equity markets are being priced by such frivolous things as U.S. holiday retail sales, the global economy is experiencing a deceleration in growth [that will become evident] in the first half of next year.”
-Jason Schenker, chief economist at Prestige Economics.
Those of you who believe that markets provide more insights than economists, strategists and pundits — and there is lots of just cause for holding those views — may want to take a closer look at what is coming out of copper market.
For the most part, it is negative economic expectations:
“Despite a raft of good news—rising employment in the U.S., stronger growth in the euro zone and monetary easing in China—”Dr. Copper” believes the global economy is in poorer health than many think.
Among hedge funds and other money managers, bets that copper prices will fall have outpaced positions that would profit from a rise for 11 consecutive weeks. That is known as a “net short” position, and traders said its persistence in the futures market is reminiscent of a similar move that occurred in August 2008 ahead of the financial crisis.
The belief that prices will continue to fall—futures are down 4.6% since late September and have lost 20% year to date—points to expectations for lower demand for copper. The metal’s widespread applications in manufacturing and construction have earned it the moniker Dr. Copper because changes in price tend to augur changes in the economic cycle.”
Note that S&P500 is up since October, while Copper (December delivery)is down 0.6% over the same period . . .
Copper Bets Flash a Warning
WSJ, DECEMBER 8, 2011