Saturday, February 6, 2010

How to Play the Coming Copper Plunge

They say Copper is the metal with the Phd since it seems to be an excellent economic indicator. (They also say Joe Shareholder is the investor with the Phd since he's an excellent economic predictor) Since mid March Copper has more than doubled in price (Joe Toyota, stuck accelerator pedal) as investors geared up for what they were misled to believe would be a robust economic recovery. Well this is a warning to anyone who's invested in FCX and JJC for copper prices. SELL NOW (Joe Toyota, stuck brake pedal). Not only sell, short it like it's going out of style. Not only short it like it's going out of style, leverage short it 2X, 3X, 4X, or whatever you can. Not only that, borrow money from your mom, dad, grandmother, grandfather, brother, sister, in-laws (then give them advice so they can make money shorting copper too), neighbors, child's piggy bank, kids college fund, your dad's 401K, etc. Sell your car, house (if you're not underwater), have a garage sale, list crap on ebay, etc. Whatever you can do to SHORT COPPER. I looked for a triple short copper ETF, but there's nothing in the US. Ticker symbols FCX and JJC should be a good start, however. See the attached article from purchasing magazine predicting copper will crash down to $1 from where it stands now at about $3.

Buyers' Alert: Copper price could collapse
Traders sees "catastrophe" for copper suppliers
Tom Stundza -- Purchasing, 2/3/2010 12:13:20 PM

World copper prices, which more than doubled last year from $1.46/lb in January to $3.17 in December, are set to plunge as speculators unwind positions and global inventories expand, according to David Threlkeld, president of metals trader Resolved Inc. in Scottsdale, Ariz.
In an interview with Bloomberg, the veteran copper trader, says producers "are going to see a catastrophe in the market," and drop to less than $1/lb. That's about 67% less than this week's London Metal Exchange (LME) average of $3.07/lb.

Some 90% of copper buying in recent months "has been from speculators," says Threlkeld, who has traded the market for more than 40 years. "Whether they are exchange-traded fund speculators or China pig farmer speculators it doesn't really matter, because that buying is going to come back to the market."

Three-month copper futures on the London Metal Exchange, which surged 140% last year after several governments spent billions of dollars to lift their economies out of recession, traded yesterday at $3.12/lb-as compared with spot at $3.11.

China, the world's largest user, imported a record 3.2 million metric tons of the refined metal in 2009, up 119% from the previous year, and says it consumed about 5 million metric tons. However, there are about 3 million metric tons of unreported inventories in China, says Threlkeld, which has kept the price inflated.

"The way the figures are being reported (by the government) is anything that's shipped to China is assumed to be consumed, which is clearly ridiculous," Threlkeld says, noting that stockpiles monitored by the Shanghai Futures Exchange this week are more than three times the level a year ago.

4 comments:

  1. I have been considering this move myself it does look a strong short opportunity.
    I dont like leverage but etfs has one in the uk and I may have a small dabbs nice blog.
    If greece gets bailed out is the shorterm risk regarding shorting for me.

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  2. Greece bailout is a valid short term risk because Germany lurks nearby with some money to play with. After four down weeks it's about time for an up week also here in the US. However, I am going to use any up swings as a good entry point to go in short. I was going to mention SCOP in the UK as a leveraged short etf in this blog post. Is that the one you're referring to?

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  3. Hi Joe It looks like greece is on the bail out gravy train and the bounce is on its way thats the markets a bit like the wheather lol.
    After reading your blog I mulled over ETFS and couldnt find a short copper maybe its just me offbase anyway the scop looks something to look at.
    Regarding timing Chinas roaring big time in January and may be a price driver for sometime for copper I will hang on a little and maybe if copper cranks up a bit hopefully near $4.00 very possible thats a very safe short entry position.
    I wont be long over $3 and the high comex supply levels thats for sure.
    As Warren says the first rule with investing is dont lose money and the 2nd rule dont forget the first rule.
    Platinum looks a strong short its shot up and has good support around $1500 but looking at the 20 year price chart its way overkill at the moment a bounce to $2000 is possible not worth shorting now but its something to keep an eye on.
    Just me waffling, keep well and I like your style.

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  4. what a bad idea your Copper Short was. WOW.

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