Category Archives: materials
Don Coxe’s final Basic Points. Continue reading
A subscriber asked about TCK. Continue reading
Commodity’s: Money and EM’s
One prized member inquired about ISA coal favorite CLD, noting “the possible upside in precious metals tempts me with other opportunities.” Continue reading
Materials and China
Today ISA looks extensively at potential timing in the materials space. Continue reading
Commodities and China
“We are, however, waiting to see the response of the governments in Asia regarding any type of stimulus to spur growth.” Nick Carter, NRP President on the metallurgical coal markets right in their earnings release.
“Coal used to make steel is set to drop to the lowest price in two years” Bloomberg
First signs of coking coal, iron ore rebound emerge at Mining. If so, Teck Resources (TCK) would be a favorite (chart). China’s Scary Slowdown May Have Limits at Business Week, yet July data has been coming in weak.
Decreased demand hits China’s rare earth producers at China Times. Even the Chinese “hopes that the government can stimulate domestic demand to offset the weak demand for rare earth minerals from overseas markets.”
China Seen Delaying New Stimulus: “Hope Fades for More Spurs to Growth as Beijing Waits for Effects of Its Moves” WSJ
China’s literally ground-breaking copper inventories at FT Alphaville. Yet, “China’s copper consumption is expected to grow to 10 million mt by 2020, up 36% from 2011” at Platts. Supply will not meet this projected demand with $3 handle copper. The dynamics of the next decade will be fascinating.
Copper: The Essential Metal at Visual Capitalist. Copper: Supply and Demand at Visual Capitalist.
Dr. Copper’s Head & Shoulders at Ritholtz.
Amid the European mess and weak emerging markets, the US has seen The Housing Recovery Strengthen at esoltas. Both Home Prices and Rents Rise at CNBC. Auto manufacturing and sales are a strong tailwind at the Detroit News.
The good news continues as The US private economy is growing as the government economy slows at Value Plays. Further, US Intermodal Volume Hit Record in July at JOC. This is not the data of recession.
“…we now estimate an upward revision to about 2.5% for Q2 from an original government report of 1.5%.” (First Trust) Diametrically opposed is David Rosenberg: The Coming Negative Export Shock giving pause at Pragmatic Capitalism.
Further concern: “China’s export growth collapsed and imports and new yuan loans trailed estimates in July, adding to signs the global economy is weakening…” from Bloomberg. “China’s crude steel output may fall for the first time in 31 years this year…” in the WSJ. The world’s largest miners continue to trim capex a billion dollars at a time: Globe and Mail.
“Real Wages Much Lower Than They Were Four Decades Ago” at Ritholtz. The unemployment rate for 18 to 19 year olds is 22.2%. FED
“Stockpiles of the biggest crops will decline for a third year…” at Bloomberg. U.S. Corn-Crop Estimate Cut as Midwest Drought Hurts Yields by Bloomberg. Grain markets may be on verge of final blow-off top by Peter Brandt.
The CRB Index Has Another Date With Resistance at All Star Charts. Miners to reflate? Marketwatch
Ten stocks which have payed an uninterrupted dividend more than 110 years and increased their dividend for at least the last 10 years: Dividend Growth Stocks.
Our current place in the secular bear which began in 2000: Zeal. Perhaps the market price low occurred in March of 2009, with the valuation low still years ahead.
No wonder the stock market is such a tough place! Go Comics
“The number of Chinese online was already huge, and it’s soared over the past year by more than 50 million thanks to an upsurge in mobile Internet access.” CNET “…800 million to 1 billion new consumers around the world will enter the middle class this decade…” Peter Pham.
“Cash Flow per shares over the past 5 and 10 years has grown at the rate of 5.5% per year and 24.2% per year, respectively. Book Value per share is up nicely over the past 5 and 10 years with growth at 15% and 16% per year, respectively.” SP Brunner
Increasing the inflation target could lead to a super-boom in hard assets while bonds would get crushed. WSJ
The credit bubble may have begun a blow-off top. Leadership has narrowed to US Treasury’s and German Bunds, and investment grade corporates (Bespoke). The Swiss 5-year has gone negative (Sober Look). Meanwhile, spreads are rising (Bespoke). Note “bond prices in free fall” at Reuters.
The financial crisis was entered with government and corporate balance sheets in good shape, while the consumer was a wreck. The next crisis will occur with business and the improved consumer (Housing Views) much better off than governments.
Highlights of Ray Dalio’s Q2 Bridgewater letter: Business Insider. Essential facts about the Federal budget: WSJ. Richard Russell bullish on housing at Financial Sense. Chart-fest by Peter Brandt.
Home CRB Bull Market
“The U.S. economy is downshifting, even as the housing sector is finally showing signs of life.” WSJ Optimism from the Economist. Housing supply is tight with with inventory is down 24.4% year over year (Calculated Risk). More color: Marketwatch.
Builder confidence has rebounded (Carp Diem) and the stocks have had a party (Bespoke). Thoughts from some fellows at the New York Fed. Shadow inventory improvement from Economic Musings. The anecdotal stories never end: Sacramento, Michigan and Chicago are strong. San Antonio prices are at new all-time highs.
Housing picking up would help Dr. Copper, which has been hanging around $3.50 a pound (Mining). These prices are not enough to spur supply (FT). Yet they’ve made balance sheets strong (SA). Copper chartology.
Jeff Saut at KWN: “I expect notional world GDP growth going forward to be somewhere around the 4% level.” If he’s even close, think commodities as represented by the CRB at Ritholtz. Commodity Prices Will Continue to Ratchet Up by Greg Harmon. Corn at $12.50 is possible by Peter Brandt.
A Euro rebound is bullish as are these black candlesticks. The S&P 500 is right at resistance.
China Economic Growth Slows to 7.6% at Iacono Research.
On and on they rant about China’s over investment. “China’s capital stock per capita is still only about a tenth of the United States” at the New York Times.
The commodity complex is lagging today, something which has been going on for some time now. Sector charts from Bespoke.
Grains, Soybeans Extend Rallies on Expanding U.S. Dry Weather at Bloomberg.
One ginormous chartfest: Business Insider
‘Financial Expressionism’ by Jeff Gundlach
China Industrialization Meme
The Barron’s Falling Star piece (google the title to read the whole thing) generated excited commentary from mainstream bloggers including Josh Brown and FT Alphaville.
We at ISA are goldbugs and regularly note crazy imbalances. Where you sit is a function of where you stand. Some points of interest:
- Growth going from a three decade trend of 10% to 8% is said to be ‘slowing markedly’, not withstanding 8% is in aggregate larger than 10% growth only two years ago because of the size of the base.
- As for the whole housing bust idea, unmentioned was the hundreds of millions of Chinese peasants in the countryside who only dream of better housing. Meanwhile, in China 17% of home purchases are done with cash, and “Buyers who use mortgages have a lot of skin in the game: the minimum down payment for owner-occupiers is 30% and 60% for investors.” CLSA I’m just glad the tired 60 million housing units are empty’ line was not trotted out! (60 million? That’s everything stateside on one side of the Mississippi!)
- China’s $3.2 trillion in foreign reserves is almost equal to the Chinese national debt; that’s the great over-leverage? Yet as I dug further, Barron’s wrote “U.S. debt-to-GDP ratio of more than 80%.” Yea, like three years ago! Today it’s near 105% and rising by like 700 basis points a year (with the explicit purpose of keeping US GDP from collapsing). Now we don’t know which numbers Barron’s is making up!
- This was supposed to sound all fancy: “First, when one tallies up all the liabilities direct and contingent of the Chinese central government, indebtedness of the state-controlled banking system, various government entities like the Ministry of Railroads, state-owned enterprises, local government loan investment vehicles, and considerable cross-holdings of bond debt by SOEs, China’s government debt-to-GDP triples to about 150% and is rapidly rising.” Was the intent to compare this to a US debt to GDP of 500-1000% ratio when the social programs are considered?
- My personal favorite China complaint is the over saving meme. As if productive investments comes from somewhere else. But I give myself away as an Austrian economist.
Maybe China really is in trouble. If so, seems Western problems would be an order of magnitude worse. The set-up for the Big Print and hyper-inflationary endgame would have arrived.
Headlines like this seem spooky too: China major ports face coal oversupply at China Daily. But actually reading the article gives a different flavor: “China’s coal stocks are estimated at about 300 million tons, equivalent to the entire country’s coal consumption in one month.” Remember, as China turns to world markets for a particular commodity to be imported the whole industry sees its dynamics change: “China imported 86.55 million tons of coal in the first four months, up nearly 70 percent year-on-year.”
DEUTSCHE BANK: Actually, Chinese Economic Data Is Being Understated: Business Insider.
Rio Tinto sees 2012 Chinese growth above 8%: Mining Weekly
World GDP at the Economist.
We at ISA are not interested in steel makers. We do, however, like to sell them met coal. A primer by Peter Epstein.
One reason to think the commodity bull is actually still alive inside the secular stock market bear: Commodities trading thrives as equities dive at Marketwatch.
Fundamental to the commodity supercycle is the rise of China: witnessing the birth of a superpower at the Guardian as they suck down the metals per Sprach Analyst. So is the continual currency debasement: Frank Holmes.
Gas, Grains and Growth: Making sense of the fall in commodity prices at the Economist. This was written, however, prior to the price surge this week on the hot and dry weather. Business Week
Oil being transported by rail has replaced coal by an undetermined degree: Value Plays. Coal fired generation facility’s worth less at Bloomberg. Coal Stands to Lose Even More Following Court Ruling at 24/7 Wall Street.
A Jim Chanos presentation suggesting US shale and iron ore assets are value traps. Scribd