Monday, September 26, 2011

Copper’s Waterfall Collapse

There were quite a few people in the economics and financial community hyping last week’s Federal Reserve meeting.  And they were calling for a big rally after the meeting.  Ahem.   We laid our cards on the table last week before the FOMC meeting and said the next major move was going to be down to around 1000 on the S&P. 

If any of these people had just looked at copper,  it was making a new low before the FOMC meeting even started.   Copper continued its crash on Friday.  But just as happened with equities, it is trying to hold Friday’s low.  No surprise since all liquid assets are correlated thanks to Frankenstein finance.  ie, The same firms using the same algorithms and the same factors are trading in copper and equities.   Funny how looking back that copper peaked just a matter of days after we became bearish again on the financial freak show early this year.   The world works in mysterious ways.  :)  If anyone knew anything about what really moves markets, they would have known last week was the autumnal equinox.  Haha.  Sort of. 

We have cited copper on here numerous times over the years as a pairs trade, as a source of financial manipulation and as a barometer of future economic activity.  We have also cited that copper costs about 5c a pound to mine and with copper selling at nearly $5 a pound, the disparity between cost and price was because of the extortion of financial firms inserting themselves into the supply chain. 

Every single paid professional in the finance community that I am aware of, be they bull or bear, has at one time or another been hoodwinked by this commodity supercycle propaganda message coming out of Wall Street.   It’s all one massive lie.   It’s a lie needed for Wall Street to mint its massive profits in commodities and to divert attention away from its speculation as to why commodity prices were seeing astronomical rises.  A lie people on Wall Street actually believe because it is driven by completely faulty quantitative research and fraud.  We have said consistently since starting this blog six years ago that commodities are a bubble being manipulated by Wall Street criminals.  And part of that manipulation involves convincing retirement funds, investors and traders to believe the con.   Copper at its peak reached about 1,000% price premium over any time in the last one hundred years.  Regardless of the value of the dollar or the level of inflation, copper has never risen beyond about 70c a pound. 

Remember, we have written since well before the 2008 collapse that financial markets will move well too fast for people to respond.    The investor class did not cumulatively sell on the first decline this year.  And now they are down too far for most to sell as it is psychologically hard taking a loss.  The Federal Reserve and Treasury don’t have the political cover to give  the same type of helter skelter bailouts they did in 2008.  Bailouts which spurred a monster rally in tradable assets.  That means holding tradable assets into this water fall collapse or any future price weakness may mean losses will not be recoverable.  Ever.   There will almost certainly be no more free rocket fuel or high powered money available to Wall Street to manipulate financial assets in the future.  That is consistent with one our of themes that the investor class is going to be obliterated before this cycle is finished.   And that means all of those people who rushed into the investment management and advisory bubble aren’t going to have much of anything to do.  Remember, as we wrote back in 2006, we are in an investment management and advisory bubble.

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posted by TimingLogic at 9:46 AM

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