Copper Is at Near-Deficit Pricing. Time to Get In? Not So Fast
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Copper is at near-deficit pricing. Time to get in? Not so fast. Click here for the inside scoop. “We can’t keep wire in the ground to save our lives!” That’s what Utah Department of Transportation roadway lighting engineer Richard Hibbard said after thieves stripped more than six miles of copper wire from a stretch of Salt Lake City highway. How did they get away with stealing six miles of copper? The best guess is that the thieves dressed up as a construction crew. Then they worked through the night, many nights in a row, to get their haul. They used sledgehammers to bust the boxes of wire running to 10 or 11 light poles, darkening one stretch of highway at a time. And nobody seemed to notice. Then the thieves hooked the runs of copper to their vehicles and dragged them out of the ground. All 30,000–35,000 feet of the stuff. This brazen robbery didn’t happen in the middle of nowhere, either. It occurred on a stretch of highway lined with billboards and warehouses. There should have been plenty of traffic, even overnight. The Department of Transportation estimated that it would cost $50,000–$60,000 to replace the wire. And while this was the biggest single copper heist in Utah’s history, it hasn’t been the only one. In fact, the Utah Department of Transportation spends $300,000–$400,000 a year replacing stolen copper. Why were those thieves stealing copper? Because it’s worth good money, of course. The thieves sell the copper to scrap yards that turn a blind eye to the fact that it’s stolen. Filched copper is not just a Utah problem, either. They’re stealing copper from moving trains in Chile. They’re stealing it from Canada’s train system, too. They’re stealing it from building sites in Australia. They’re even stealing it out of abandoned houses. They break off the plumbing, smash the drywall, and steal every bit of copper pipe they can. Yes, stolen copper is big business. And if Bob Iaccino is right, all that stolen copper is soon going to be worth a lot more. Bob is the cofounder and chief market strategist at Path Trading Partners. Bob has a lot to say about copper. When he talks, people listen. Bob has appeared on CNBC, CNBC Asia, Bloomberg Television and radio, CNN, CNN International, CNN Moneyline, Fox Business News, First Business (Canada), Phoenix TV (China), and any number of local television broadcasts throughout the country. So, what does Bob have to say about copper? Bob thinks that, thanks to increased mining costs, current copper pricing is near-deficit. In other words, it’s near the point where it costs more money to dig it out of the ground than the mining companies will get in return. But Bob thinks that’s about to change. Indeed, he says the smart play is to go long on copper. Why is Bob Iaccino so bullish on copper? Believe it or not, it has to with China. As it turns out, 50% of the world’s copper supply goes to China. But in 2018, China’s copper imports have declined by 27%. That’s why the price of copper has softened so much recently. Why have China’s imports declined? According to Bob, one reason is the escalating trade war between China and the United States. But when it comes to copper, the trade wars don’t worry Bob. As he points out, there are a couple of advantages to trading a metal like copper. One advantage is that copper trades very technically. In other words, the patterns and charts are clear. Copper Prices - 45 Year Historical Chart But the main advantage is that copper is priced solely on supply and demand. So, if we stay at near-deficit pricing, some companies will halt mining. When they do that, supply will tighten, and the price will increase. Plus, Bob thinks the softened demand from China will be short-lived too. That’s why he sees a clear path to profits in copper. If you’d like to see the details behind Bob’s analysis, along with the exact trade he recommends for profiting off of copper in the months ahead, click here to watch this video. See you next week. Nominal Income is about to surpass the Adjusted for Inflation Income estimate for the first time in over 20 years. Hmmm maybe the Fed is onto something... Last week the Federal Reserve raised interest rates for the eighth time since 2015. That move was widely expected; what raised eyebrows was the removal of one key word, accommodative. The Fed has been accommodative since 2008. The Fed’s reaction to the housing crisis and Great Recession in the US was as unprecedented as the events leading up to the central bank’s actions. But here we are in 2018, and the Fed is now going to attempt to enter a more normalized fiscal era. There will be sharp reactions, though. Mortgage rates in the US. rose last week for the fifth straight week, reaching levels not seen in more than seven years. According to Freddie Mac, the average rate for a 30-year fixed mortgage was 4.72% percent last week, up from 4.65% the previous week, the highest level since April 2011. One of the most positive economic developments in recent years has been the recovery in housing prices, buoyed by the cheapest mortgage rates in decades. Anyone who could refinanced and upgraded over the last 10 years, but that game is coming to an end. The average 30-year fixed-rate is now about 4.7%, up from 4.09 percent in 2015. That has cost the average homebuyer roughly $42,000, according to WalletHub. At the peak of the housing bubble in 2006, US houses were 67% overvalued on average. Today the figure hovers around around 33%; but with mortgage rates rising, affordability will surely worsen unless the strength in the economy that Fed Chairman Powell sees actually results in higher incomes. Most people think of the banks as an obvious casualty, but there are other players few talk about, like… More than half of all mortgages issued last year came from non-bank lenders, up from 9% in 2009 and higher than non-banks’ market share before the financial crisis, according to Inside Mortgage Finance, a publication that tracks the residential mortgage market. Companies like Quicken Loans, PennyMac, and loanDepot use lines of credit to provide FHA loans to those on the margins of being able to acquire a mortgage. Does that ring a bell?! If credit gets tighter – which it already is – these companies could see their business evaporate overnight. Not to mention the risks they already have on their books, with some of the shakiest borrowers in the housing market. Nearly half (42%) of today’s buyers are between the ages of 24 and 38, but they’ve been squeezed by affordability issues. Millennials, which the report defines as those born between 1981 and 1997, are the largest generation in American history. They now own homes at a rate that’s about 8–9 percentage points lower than Baby Boomers and Generation Xers did when they were the same age, according to a recent study by MarketWatch. And if we know anything about the younger generations, they prefer to transact business online and through apps, such as… Contrary to popular belief, bear markets in real estate often create the most opportunity. Perhaps a bear market is all we need for the reemergence of the house flipper. Zillow recently entered the flipping business by guaranteeing sellers a price. In fact, Zillow says it could potentially make offers on as many as 2.75 million homes annually, representing about 50% of all homes sold in the top 200 real estate markets. They would effectively become the premier market maker in housing! And as you astute market students know, market makers love volatility. About half of Americans (51%) now rate the national economy as excellent or good, among the most positive measures in nearly two decades. As has been the case since Donald Trump took office, Republicans are far more positive than Democrats about economic conditions: 73% of Republicans and Republican-leaning independents say economic conditions are excellent or good while just 35% of Democrats and Democratic leaners agree.-Pew Research Center. question Hello Milton, I heard Greg Weldon say in a recent interview that he thinks gold could soon climb to USD2,400 an ounce or better. That’s quite a prediction. What is he basing that on? – Real Vision subscriber who asked not to be named Yes, Greg did recently say that USD2,400-an-ounce gold is possible inanswer the near future. Of course, nobody knows for sure what will happen to gold or any other market. And I’m not Greg, but I’ll try to paraphrase as well as a dummy can. Basically, Greg is calling three strikes against the market: The first strike is what Greg calls the Venezuela/South American contagion. The second strike is the Turkey/Spain/EU/ECB policy asymmetry. And the third strike is the combination of government debt and consumer debt in the US. You can see the wealth of research behind Weldon’s three strikes by watching his “Take Me Out to the Ball Game” Think Tank special here. According to Greg, these three strikes could come together to produce a “black swan” event. Should that happen, gold could easily double to USD2,400 an ounce.