41.2 Copper Prices Signal Inflation (or something else?)
[Emil’s Summary] Mary Toft had delivered a litter of rabbits – that was the news that reached the court of King George I in 1726. Obstetrician John Howard arrived at Toft’s bedside in September where he was presented with several animal parts, ostensibly from the supernatural womb. In October, she delivered nine dead baby rabbits, prompting Howard to write a letter to England’s greatest doctors and scientists, as well as the King’s secretary. Nathaniel St. André, the King’s Swiss surgeon-anatomist, was sent to investigate. Toft greeted his arrival in November by delivering her 15th dead rabbit in his presence. St. André bought the story and “took some of the rabbit specimens back to London to show the King.”
Despite a chorus of doubt from other physicians and indisputable physical evidence from dissection of the rabbits, both Howard and St. André continued to support Toft’s story. It seems Howard, taken in by the scam at first, was doubling-down as the stakes were raised hoping his bluff would be saved by a real miracle. St. André on the other hand seems to have made his stand on, “‘maternal impression’, an idea popular at the time. The theory proposed that an emotional stimulus experienced by a pregnant woman” – Toft had dreamt of rabbits – “could influence the development of the foetus.”
Howard and St. André damaged the reputation of physicians. But there have been worse, Dr. Pepper for example – disgusting. Plenty of good docs of course, and not necessarily physicians: Dr. Manhattan, the smurfy-blue god; Dr. Disrespect, the gaming personality; “The Dock of the Bay”, by Otis Redding. So, where on the spectrum lies copper with its doctorate of philosophy in economics?
In part 2 of Episode 41, Jeff Snider weighs the calm supply-and-demand fundamentals, versus the Howard and St. André-like narrative that the good ship #Copper-Pop – fueled by Fed #QE-finity inflation – has achieved escape velocity, entered the #Tesla-osphere, and is on its way to the #Bitcoin-star! But first, the late-1990s Japanese government bond rout and its lessons for today.
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Is the nine-month copper price blastoff due to monetary reasons (central bank printing, government budget deficits) or fundamental reasons (supply and demand)? Jeff Snider explains the fundamental backdrop (along with speculative fever) but dismisses monetary motives.
Jeff Snider, Head of Global Investment Research for Alhambra Investments with Emil Kalinowski, a metal man. Artwork by the Asimov of copper robots, David Parkins. Podcast intro/outro is “Occurrence” by Martin Gauffin at Epidemic Sound.
00:05 Why do we care about the copper price above all other metals (with the exception of gold)?
02:01 How strong has the copper rally been? Why did it start – was it fundamental or monetary?
06:21 Copper mine supply is expected to fall in 2020 by 2.4%, or thereabouts.
09:19 China’s State Reserve Bureau is believed to be stockpiling material amounts of copper
12:07 What does data out of the US Bureau of Labor Statistics suggest about the copper rally?
The Doctor Is In?: https://alhambrapartners.com/
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7