Investors Head for Exit as Commodities Extend Slump – Bloomberg 09-30-14

Salient to Investors:

  • Investors pulled the most money from US ETPs backed by raw materials since April.
  • US corn and soybean crops are the biggest ever, global stockpiles of nickel are at an all-time high, the US is producing the most oil since 1986, while China is headed for its slowest expansion in two decades.
  • The Bloomberg Commodity Index is set for a fourth straight annual loss, the longest slide since data began in 1991.
  • Societe Generale lowered its price forecasts for more than half of the 43 raw materials it tracks, and recommended shorting gold on rising US interest rates and a rising dollar, target below $1,000 over the medium-term.
  • Citigroup pared its outlook on crude oil, gold, corn and wheat.
  • Goldman Sachs still expects losses in copper and gold.
  • In August, Citigroup forecast the Arabica-coffee crop shortfall may leave a global production deficit lasting into 2016. Citigroup is bullish on palladium, copper, nickel, lead, coking and thermal coal, cocoa and coffee.
  • Deutsche Bank forecast commodities will end 2014 in a positive run with nickel, zinc and lead outperforming.
  • Donald Selkin at National Securities said certain markets are bullish because of supply issues, including cattle, nickel and coffee, while the worst may also be over for the big three – gold, crude oil and grains.
  • Jeffrey Currie at Goldman Sachs expects gold to fall to $1,050 by year-end, copper to fall to $6,200 a metric ton over 12 months due to a major increase in stockpiles.
  • The IEA said global oil demand will weaken because of weaker growth in China and Europe, rising exports from Libya, and booming US output, all outweighing potential output disruptions in Iraq.
  • Economists expect China to grow 7% in 2015, the slowest rate since 1990.
  • Quincy Krosby at Prudential Financial said you need growth in China to support a rally in raw-material prices.

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Commodities Drop Signals Global Growth Concern: Chart of the Day – Bloomberg 09-22-14

Salient to Investors:

  • The slump in commodity prices to a 5-year low signals investors are cautious about the strength of the global economy. Brent crude touched a 2-year low last week and iron ore at Qingdao is the lowest since 2009.
  • Economists expect China to grow 7.4% in 2014, the weakest since 1990.
  • Daniel Briesemann at Commerzbank sees high pessimism among speculative financial investors on commodities.
  • IEA said oil inventories in developed countries probably expanded in August at twice the usual pace for the time of year Morgan Stanley expects supply to beat demand in aluminum to nickel to iron ore in 2014.

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Stocks Triumph 3rd Month in Best Run Since ’09 as Gold Sinks – Bloomberg 12-01-13

Salient to Investors:

Bill O’Neill at UBS Wealth Mgmt said the story is still the combination of easy money policies and expectations of growth into 2014 and that growth is on the horizon.

The Investment Companies Institute reports individual investors gave $30 billion to managers in 2013, the first net inflows into equity funds since 2006, and versus $400 billion outflows in the previous 4 years.

The average of 19 forecasts expects the S&P 500 to fall 4 percent in December to 1,733. December has been the second-best month for US equity returns in data from 1928, with an average return of 1.5 percent, versus the monthly mean of 0.6 percent.

The S&P 500 trades at 16.3 times projected earnings.

Michael O’Sullivan at Credit Suisse Private Banking & Wealth Mgmt said the economy looks much, much more healthy.

4 of 5 investors, traders and analysts expect the Fed to taper in March or later, with just 5 percent looking for a move this month.

Goldman Sachs expects gold at $1,110 and Brent at $105 in 12 months.

Barclays sees gluts in aluminum, copper, nickel and zinc this year or next, and says copper will average $6,500 in Q4 2014.

The US is meeting 86 percent of its own energy needs, the most since 1986, and the International Energy Agency predicts the US will overtake Russia and Saudi Arabia as the world’s largest oil producer by 2015.

The median economist expects the 10-yr Treasury yield to rise to 3.1 percent by mid-2014.

John Rutledge at Safanad expects many months in which the Fed is the dominant story, and said the tapering story worries investors as to whether the Fed is there to sop up Treasury issues.

The median economist expects the euro to weaken to $1.30 against the dollar by mid-2014, and the yen to weaken to 104.

Benoit Anne at Societe Generale sees no appetite to invest into emerging markets as fear of the Fed prevails and investors are reluctant to take on risk as year-end looms.

 Jim McDonald at Northern Trust said economic momentum and monetary policy momentum are better in the developed economies, while there is too much uncertainty in the emerging world as reflected in their stocks.

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New shape-shifting metals discovered – BBC News 10-04-13

Salient to Investors:

A new martensite metal is the prototype of a new family of smart materials that can change shape tens of thousands of times when heated and cooled without degrading, unlike existing technology.

Currently, martensite metals are made of an alloy of nickel and titanium but after repeated shape changes build up stresses inside that degrade them and eventually break them apart. The new alloy is made of zinc, gold and copper, and could be used in applications ranging from space vehicles to electronics to jet engines.

Prof Richard James said devices could convert heat to electricity directly, e.g. using the waste heat from computers and cell phones to recharge the battery and make them more efficient.

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Copper Users Squeezed as Glut Clogs Warehouse Lines: Commodities – Bloomberg 05-29-13

Salient to Investors:

Copper stockpiles are rising to the highest in a decade, yet manufacturers are paying the biggest premiums for the metal in as much as 7 years as financing deals lock up supply and extend lines at warehouses.

LME copper inventories more than doubled in the past year and supplies exceed demand for the first time since 2009.

Metal Bulletin data show buyers in Shanghai pay $135 a metric ton more than LME futures, up from $55 last year.

Copper entered a bear market in April. Goldman Sachs expects a decline to $7,000 in 12 months.

Standard Bank predicts global output to rise 4.3 percent to 21.1 million tons in 2013 as demand expands 2.2 percent to 20.9 million tons.

Glencore Xstrata, Goldman Sachs, JPMorgan Chase and Trafigura Beheer control more than half of the 700-plus sheds in the LME’s network.

Financing typically involves buying the metal for nearby delivery and forward selling to take advantage of a contango, where prices rise into the future – transactions helped by record-low borrowing costs.

Robin Bhar at Societe Generale said most manufacturers get metal on long-term contracts with suppliers, using LME warehouses to buy metal if needed. Societe Generale estimates that as much as 80 percent of aluminum inventory tracked by the LME, as much as 60 percent of zinc and as much as 50 percent of nickel are tied up in financing agreements. Bhar said the main casualties will be consumers – historically, higher stocks, higher supply would result in lower premiums, but we have circumvented the normal laws of economics.

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Best Metals Forecaster Smirk Sees China Recovering: Commodities – Bloomberg 11-14-12

Salient to Investors:

Justin Smirk at Westpac Banking focuses primarily on economic cycles, central banks and financial markets to make commodity predictions. He says:

  • Industrial metals will rally through June 2013 as the economy strengthens in China. China’s economy is at a turning point both for policy and inventories, said
  • We are at the worst for the growth cycle and commodity prices will rise through 2012 and into 2013.
  • Aluminum will rise to $2,380 a metric ton by June because of China’s recovery and central-bank actions in Europe and the US, boosting energy prices, which are 40 percent of smelters’ production costs.
  • Nickel will rise 14 percent to $18,500 a ton, copper as much as 11 percent to $8,500 a ton, zinc gains 7.7 percent to $2,100 a ton
  • See little value in gold so tend to miss the bullish runs, and its price stability is surprising.
  • Iron ore  has seen the worst of the rise in costs, so expect $170 by June.

Barclays  increased estimates for an aluminum glut for 2012 and 2013 said prices will decline. Goldman Sachs is increasingly cautious about copper for the next several months, partly because of record stockpiles in China’s bonded warehouses.

The median analysts expects aluminum to average $2,200 in Q2, copper $8,225, zinc $2,200 and nickel $18,875.

 Barclays estimates China consumes 43 percent of all aluminum, 41 percent of copper, 44 percent of nickel and 43 percent of zinc. Europe consumes 18 percent of all copper and 14 percent of aluminum.

Itay Simkin at Krom River Trading said having an economist on staff is a must.

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Why Are People Hoarding Coins? – Investopedia 09-26-12

Salient to Investors:

Prior to 1965, dimes and quarters were made primarily of silver. Prior to 1982, pennies were composed of 95% copper. Nickels are 25% nickel and 75% copper.
At today’s prices for copper and nickel, a dime is worth almost seven cents, though it is illegal to melt down pennies and nickels.

Small-time hoarders get coins from their local bank tellers, more serious ones buy online in bulk. 

Hoarders’ investments won’t pay off unless the government lifts the restriction on melting currency.

Pennies and nickels are the most popular with hoarders because of their high copper content. Most pre-1965 dimes and quarters have been removed from circulation by collectors and rarely seen mixed in with other coins.

Coin hoarding has not yet affected the amount of coinage in circulation in the US, unlike Argentina which is facing a coin crisis. and the Philippines.

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