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Old 01-15-2015, 02:03 PM   #21
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My mom used to talk about hard times on the farm in the 1920s. The 1920 recession was no brief blip for a lot of farmers and rural communities.
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Old 01-15-2015, 05:22 PM   #22
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My mom used to talk about hard times on the farm in the 1920s. The 1920 recession was no brief blip for a lot of farmers and rural communities.
That was largely caused because the US was provisioner to the world during the teens, due to WW1 and its immediate aftermath. When those markets reverted to their European prewar status, the bottom fell out of agricultural commodity demand.

The rest of the economy was in a huge boom.

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Old 01-15-2015, 06:17 PM   #23
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Worldwide Copper potential production since the QE has started in 2009 has increased by about 6 percent per year, like oil there was talk of Peak Copper just like Peak oil as China was going to consume the worlds supply. But growth has averaged well under 6 percent and so mines are operating under capacity, causing prices to drop as demand is not enough to meet growth, a similar problem to oil in that cheap financing makes high capital investment ideas seem like sure things.

Many of the mining complexes have the same problem, a good early example was the potash market when everyone was building potash mines, at a cost of 2-4 billion dollars a mine when Potash was $1000 a ton and that collapsed the potash market.

This is why the central banks of the world despite being very stimulative have sent money to stock markets and commodity speculation in production. I am skeptical that negative interest rates and governments buying all speculative debt in an attempt to inflate an economy can actual do what central bankers are hoping for, this situation is extremely abnormal.
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Old 01-15-2015, 09:03 PM   #24
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That was largely caused because the US was provisioner to the world during the teens, due to WW1 and its immediate aftermath. When those markets reverted to their European prewar status, the bottom fell out of agricultural commodity demand.

The rest of the economy was in a huge boom.

Ha
Yes, but the agricultural sector represented nearly half of the economy at the time, so half the economy was booming and half was in turmoil. The farm foreclosure rate grew steadily from 1921 to 1928. "Paris" wasn't the only reason you couldn't keep them down on the farm.

I'm just saying that the 1920 recession wasn't a brief blip for everybody.
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Old 01-15-2015, 10:04 PM   #25
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Worldwide Copper potential production since the QE has started in 2009 has increased by about 6 percent per year, like oil there was talk of Peak Copper just like Peak oil as China was going to consume the worlds supply. But growth has averaged well under 6 percent and so mines are operating under capacity, causing prices to drop as demand is not enough to meet growth, a similar problem to oil in that cheap financing makes high capital investment ideas seem like sure things.

Many of the mining complexes have the same problem, a good early example was the potash market when everyone was building potash mines, at a cost of 2-4 billion dollars a mine when Potash was $1000 a ton and that collapsed the potash market.
That's the way mining companies roll. My early career was as a mining geologist, until one of the regular production downturns did me in. I also recall copper mining has been in the tank at least twice in my lifetime.
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Old 01-15-2015, 10:11 PM   #26
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That's the way mining companies roll. My early career was as a mining geologist, until one of the regular production downturns did me in. I also recall copper mining has been in the tank at least twice in my lifetime.
I am going to ride the next cycle down. I can't predict the bottom, but the top seems very easy to predict. Wait until a copper shortage and the price goes so high that people start get electrocuted again stealing wire. Wait about a year for the greed to cause overbuilding of mines. Short the $@#$ out of all of the miners. I won't miss it next time!
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Old 01-15-2015, 10:42 PM   #27
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That's the way mining companies roll. My early career was as a mining geologist, until one of the regular production downturns did me in. I also recall copper mining has been in the tank at least twice in my lifetime.
Yes but the level of borrowing for these companies is unreal due to the low rates - BHP Billiton has seen long term debt go from 9 billion in 2008 to 31 billion today, Freeport McMoran has gone from 6 billion in debt in 2008 to 20 billion today while revenues have picked up only 10 percent in that time, Southern copper has gone from 1 billion to 4 billion in LT Debt while sales went from 4.8 billion to 5.9 billion. Now the interest is pretty low at only 150 million and probably has not changed much since 2008 but that is the danger with all these companies, the borrowing appears free and this is where the Fed's QE is going, borrowing long term for mining companies at 4 percent interest rates.

What has change is the opinion that copper and oil had bright pricing futures so limitless low interest loans to these companies was no-brainers.
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Old 01-15-2015, 11:12 PM   #28
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Yes but the level of borrowing for these companies is unreal due to the low rates - BHP Billiton has seen long term debt go from 9 billion in 2008 to 31 billion today, Freeport McMoran has gone from 6 billion in debt in 2008 to 20 billion today while revenues have picked up only 10 percent in that time, Southern copper has gone from 1 billion to 4 billion in LT Debt while sales went from 4.8 billion to 5.9 billion. Now the interest is pretty low at only 150 million and probably has not changed much since 2008 but that is the danger with all these companies, the borrowing appears free and this is where the Fed's QE is going, borrowing long term for mining companies at 4 percent interest rates.

What has change is the opinion that copper and oil had bright pricing futures so limitless low interest loans to these companies was no-brainers.
Two things: 1) Did all the bankers lose their memories, or retire, or what? Or is there some kind of scam going on here. There is a no-brainer clear historical pattern that nothing rises forever. But every downturn, bankers are like 'oh, we didn't think <whatever commodity> would collapse'. 2) Since most hard rock mining is in countries that need the income, would they be able to prop up the mines waaaay past profitability? That would distort the market also. Years ago when most of the copper mines were in the USA, the cycle could flow unimpeded.
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Old 01-16-2015, 12:52 AM   #29
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The oil industry was carrying the US economy in both GDP and job growth. That's now gone. Our government has increased the cost of doing business in the US with new regulations and mandates. We're going into a recession whether anyone wants to believe it or not. Copper prices reflect the declining industrial demand. The hope in the US is that consumer spending picks up as the gasoline prices continue to drop.

I'm pretty negative in the near-term. I don't see a 2008/2009 redux but we'll see a hit (IMHO). It seems to clearly demonstrate how useless QE has been. It hasn't worked in decades for Japan. Europe has extremely low interest rates yet they seem to be planning to start it there. Why? The only defense that QE has is the cry that it would have been so much worse without it.


I have been having the same thoughts. Christmas retail sales were not good... Wage growth has been nonexistent for a really long time. Data I have seen shows that most of the US recovery was due to the oil boom.

We will also start seeing bigger impacts from the sequestration cuts. I happen to live near a large military base which may end up having a 50% troop reduction due to the sequestration budget cuts. That will be devastating to the local economy.

My w-2 job is potentially more at risk than ever before, as once the military cuts come in, that could impact my employer's revenue by 20% or more. Fortunately due to years of saving and investing I am pretty well off. My taxable account (roughly 50% of investments) stock dividends can almost cover 50% of my living expenses. I'm currently building up my cash again. I've got about 4 months living expenses in cash. Need to get that back to one year living expenses in cash asap.

My investments are situated how I want them. When the inevitable price correction comes it won't matter as I will have no desire to reallocate out of anything I own. It'll be an opportunity to buy, provided I am not too concerned with w-2 job situation at the time... Knowing how I am, I will probably just hoard cash if w-2 situation is precarious.
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Old 01-16-2015, 08:42 AM   #30
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Yes but the level of borrowing for these companies is unreal due to the low rates - BHP Billiton has seen long term debt go from 9 billion in 2008 to 31 billion today, Freeport McMoran has gone from 6 billion in debt in 2008 to 20 billion today while revenues have picked up only 10 percent in that time, Southern copper has gone from 1 billion to 4 billion in LT Debt while sales went from 4.8 billion to 5.9 billion. Now the interest is pretty low at only 150 million and probably has not changed much since 2008 but that is the danger with all these companies, the borrowing appears free and this is where the Fed's QE is going, borrowing long term for mining companies at 4 percent interest rates.

What has change is the opinion that copper and oil had bright pricing futures so limitless low interest loans to these companies was no-brainers.
Is it your opinion that copper's reputation as a leading indicator is warped by all this cheap money? Or is it still "Doctor Copper"
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Old 01-16-2015, 10:51 AM   #31
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I'm not sure that the net effect of all this is going to be very large either way. Sure, exports will take a hit, but imports (including oil) are suddenly cheaper as well. That generates a lot of winners in the US economy to counteract the damage.

The bulk of US consumers suddenly have a lot more money in their pockets do to the drop in gas prices. Retailers that import their goods will suddenly have much better margins (or consumers will have better prices, leading to more potential spending).

The multinationals will see a hit to earnings, but since they are running at record profit margins, I don't see that as a disaster.

Ultimately, I think all of this is going to result in us all saying "meh" in five years. It's exciting on CNBC, but I don't think its going be exciting enough to matter long-term.

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As other countries devalue their currencies against our dollar, US exports will take a hit which does not bode well for the multinationals. Global deflation and cheaper global goods will take the wind out of the U.S. recovery….(I think anyway).
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Old 01-17-2015, 03:08 PM   #32
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Yes, but the agricultural sector represented nearly half of the economy at the time, so half the economy was booming and half was in turmoil. The farm foreclosure rate grew steadily from 1921 to 1928. "Paris" wasn't the only reason you couldn't keep them down on the farm.

I'm just saying that the 1920 recession wasn't a brief blip for everybody.
I completely agree. My mother came off the farm as a young woman in the mid 30s, The farm economy had been in the toilet for most of her life, she was determined to get away from this.
Ha
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Old 01-20-2015, 09:32 PM   #33
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Is it your opinion that copper's reputation as a leading indicator is warped by all this cheap money? Or is it still "Doctor Copper"
Everything has been warped by cheap money, but the effects of overproducing commodities is from growth being less than what was assumed to be a sure thing for these commodities. I think in this case and oil's case this is the leading indicator, along with the Swiss Franc that the economy is starting to get away from the Central Bankers.

The fear of deflation by all the Central Bankers has blinded them to allow markets to be actual markets, control of the situation is always evident until control stops. I am as interested as anyone to see if the control stops sometime this year or if the world muddies on like Japan for the next 20 years.
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Old 03-20-2015, 03:26 PM   #34
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Every economic downturn in the US prior to the Great Depression was resolved with a short, sharp deflationary period. Economic growth and recovery quickly followed. The Depression of 1920 was the last one that was allowed to run its course. Never heard of it? You didn't because it was so short. The Great Depression had major deficit government spending based on the Italian Fascist model and Soviet propagana of their supposed success (all lies). Without WWII we might still be in the Great Depression because we sure weren't coming out of it on our own. We've double downed on the same policies and we have now had the longest Great Recession in history.

This flies in the face of everything the textbooks and Harvard profs teach about macro history and the depression. Do you have any reference evidence to support the contrarian stance?


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Old 03-20-2015, 10:53 PM   #35
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This flies in the face of everything the textbooks and Harvard profs teach about macro history and the depression. Do you have any reference evidence to support the contrarian stance?


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Yes in the 100 years before central banks in the US net inflation was Zero, inflation since then........ The main issue is merely that citizens once it was shown FED could prevent a downturn with monetary policy have gotten more and more power to stop them. I think whatever happens now is unknown because this type of monetary policy has never been tried. That the FED was able to stop the economic downturn that would have been severe and led to many bankrupt companies is for sure, issue is money used to save them is doing what? Long term interest rates around the globe have NEVER been this low. You want your ten year investment in Germany? 0.18% WOW!! And that country has had economic collapse twice in the last 100 years
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Old 03-21-2015, 10:54 AM   #36
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"And that country has had economic collapse twice in the last 100 years."

Germany? Right - the country that started two world wars and was punished for WWI by extreme fines and after WWII by nearly total destruction. Maybe that contributed to their economic collapse both times in the 20th century? Politics caused the economic collapses in Germany - not the other way around. Their defeat in both wars led to their collapse. If it hadn't been for the Marshall Plan after WWII, Germany may not have ever recovered.
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Old 03-21-2015, 01:34 PM   #37
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Early warning indicator. Copper dipping to $2.55 a pound.

A few weeks ago there was talk that everything was ok as long as copper held $2.75. Now it is dipping into the $2.40s.

Weak copper demand when inventories are at historic low seems to indicate a much slower global growth demand than we have been led to believe.
Not a copper specialist but bear in mind that the dollar has appreciated quite drastically.

Price in euro and volume paints a slightly different picture, pretty stable (even pointing upwards).

Same thing with oil. Part of the oil price staying low is the USD going up.
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Old 03-21-2015, 11:42 PM   #38
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"And that country has had economic collapse twice in the last 100 years."

Germany? Right - the country that started two world wars and was punished for WWI by extreme fines and after WWII by nearly total destruction. Maybe that contributed to their economic collapse both times in the 20th century? Politics caused the economic collapses in Germany - not the other way around. Their defeat in both wars led to their collapse. If it hadn't been for the Marshall Plan after WWII, Germany may not have ever recovered.
They were well under way to economic collapse before World War One - Need to look at the history Germany had a theory of win war and reparations would balance budget.

Between 1932 and 1939 Germany had revenues of 62 billion marks and 110 billion spent creating a huge deficit, to cover this countries always resort to war, after all it is not the government's fault they have no money it is always the enemy, whoever that may be.
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Old 03-22-2015, 05:30 AM   #39
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Early warning indicator. Copper dipping to $2.55 a pound.

A few weeks ago there was talk that everything was ok as long as copper held $2.75. Now it is dipping into the $2.40s.

Weak copper demand when inventories are at historic low seems to indicate a much slower global growth demand than we have been led to believe.
Stay tuned? http://www.wsj.com/articles/copper-p...ent-1426791156
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Old 03-22-2015, 09:25 AM   #40
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I think a drop this year was inevitable with me beginning my retirement.
So much so that I was pretty much counting on it but not complaining with the run of good years already in the bank.
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