Copper Sets a New Record! Is Now the Time to Buy? |
Thursday, 16 May 2024 | By James Cooper | Editor, Mining: Phase One and Diggers and Drillers |
|
Twitter (X): @JCooperGeo [6 min read] In this Issue: Copper moves into a new era Preparing for copper’s second act We need to expect the Primary Trend — towards lower real asset prices, higher interest rates, inflation... |
|
Dear Reader, Overnight, copper reached a major milestone, recording its highest-ever price and (briefly) breaching major resistance of US$5 per pound. By market close, copper was sitting back below $5 per pound. Nonetheless, this has been a remarkable come-back story. With prices tearing higher, it’s easy to forget how bad things looked last year. Evergrande Group, China’s second-largest property developer, was facing bankruptcy. Many believed this would be the canary in the coal mine for a much deeper problem in China’s real estate market. There was virtually no reason to be bullish on copper last year. A banking collapse in the US and a never-ending rate-rising cycle in the West. But despite all the negativity, copper prices held firm. And with that, we continued to build exposure. But there’s no point being a contrarian for contrarian’s sake. You need a strong thesis to support your conviction. Like last year, that will get you through the darkest times as an investor. Cut supply and prices will rise If you’re a long-term reader, you probably know that the copper story revolves around a lack of supply. Fundamentally, this was why the copper market HAD to turn. Here’s what I had to say amid the bearish sentiment for copper, last year (emphasis added): ‘Neglect to invest in new projects, including exploration, means ageing mines are being pushed past their use-by date. ‘Large miners have focused more on shoving low grade marginal ore and waste material through processing plants, rather than spend capital on finding new high-grade deposits. ‘The effects of the last commodity cycle — from extreme peak to low — continue to play on the minds of mining executives who remain adverse to risk. ‘But that will come at a major cost…mines are a depleting asset. ‘As commodity prices rise and decade-old mines finally expire, mining giants will be forced into a fierce bidding war to secure the next generation of deposits. ‘Except these deposits are yet to be discovered. ‘Given there is a 15–20-year time lag from discovery to production, a critical supply gap looms. ‘The coming crisis has been fuelled by LACK of investment in new discovery.’ If you wish, you can read the full article here. This thesis, based on a lack of supply, gave us the strength to buy during last year’s terrible bear market for junior mining stocks. So, is now the time to buy? So, here we are today; the tide has shifted on the copper story and resources broadly. But today’s much more bullish mood comes with a word of caution… Copper has had an incredible run over the last 6 months, up a staggering 36%. This is a hot market. Perhaps too hot. The best action for those already holding copper stocks is to sit tight. But if you don’t hold copper stocks, be wary of chasing this market higher. Be patient and wait for a decent pullback. This remains a long-term theme; there’s no need to rush. Opportunities will come. That said, you should be preparing for that outcome right NOW—not necessarily buying but researching and understanding which stocks to buy. Again, this is what I have shared with my paid readership group. We will welcome any pullback from here… An opportunity to build our exposure. Why? Rising prices over the last two months will have a negligible impact on long-term supply. According to Blackrock, price incentives to expand production and develop new mines will kick in once copper reaches at least US$12,000 per tonne. The development of copper mines is extremely capital-intensive. That means miners will need a price that REMAINS at elevated levels for some time to incentivise new development. But if you are looking to add resource stocks right now, which sector should you be targeting? Simple. Oil and gas. Stocks here remain depressed. Yet primed for a comeback, just like copper has done over the last 6 months. This is the opportunity investors should be looking at as the NEXT major turnaround story. It’s part of a recent report I put together, focussing on oil and gas investments and why this could be one of the biggest comeback stories of 2024. You can access that for free here. Enjoy! Regards, James Cooper, Editor, Mining: Phase One and Diggers and Drillers James Cooper has been a working geologist in mines across Australia, Canada, and Africa since the early 2000s. He’s led the operations of tiny explorers through to huge producer outfits. He’s seen booms and busts firsthand and he also understands the cyclical nature of individual commodities. For example, James was right there when Barrick Gold launched an enormous $7.5 billion takeover bid for Equinox. That was the peak of the last cycle. With his background as a geo and finance professional, he brings a unique insight and experience to Fat Tail Investment Research. He writes the broader resource-focused investing letter Diggers and Drillers and the ultra-speculative explorer-focused trading service Mining: Phase One. Advertisement: Four Little-Known Aussie Stocks Primed for a MASSIVE 2025 PLAY #1 IS ‘ONE OF THE BEST SCARCITY STORIES ON ANY LISTED MARKET’. PLAY #2 IS A $400 MILLION PILBARA DOMINATOR. PLAY #3 IS A SUB-40-CENT STOCK WITH PLANS TO OPEN UP THE WORLD’S SECOND-LARGEST GRAPHITE RESERVE. PLAY #4 IS BUILDING THE WORLD’S LARGEST PROCESSING FACILITY FOR ANOTHER SUPER-SQUEEZE METAL. Click here for the full presentation. |
|
The Deep Currents of History |
| By Bill Bonner | Editor, Fat Tail Daily |
|
[3 min read] A deep, mega-political kind of corruption twists policies away from the well-being of the public and the nation...in favour of elite special interests. Today’s favoured industries, pet projects, and key voter groups get money they didn’t earn...and the next generation gets a $35 trillion debt bomb. Let’s begin with the Russo-Ukrainian war. The Russians appear to be winning. But that is merely a detail. The important thing is that the Ukrainians are losing...and taking the US down with them. US involvement began as a result of neocon ideologues in Washington...and the firepower industry that funds them and profits from their warmongering. The war in the Ukraine followed the pattern of Vietnam, Iraq and Afghanistan. That is, US involvement begins with lies and misconceptions...continues with payoffs, double dealing and overspending...and ends in disgrace. And in the Ukraine, the US goes further. It shows the world that its military strategists are incompetent...its sanctions are impotent...and its modern, high-tech weapons are no match for the Russians. In other words, supporting the Ukrainians was more than just a waste of money. It revealed to us all that the empire of ‘the West’ is not nearly as strong as it pretends to be…and invites challengers. Sanctions Fail The combined resources (GDP) of the NATO allies are 30 times greater than those of Russia. So, there was never any real danger that Russian troops would go boating on the Seine. And stopping Putin’s invasion of the Ukraine looked like a cinch. And when the US first rolled out its sanctions, it was believed that they would cripple the Russian economy...that Putin would soon be gone...and the ‘The West’ would be triumphant. But the sanctions didn’t work. Russia’s economy is now thought to be growing three times faster than the US’s. And the financial restrictions brought China, Iran, Russia, Turkey, India — most of the world’s population — closer together to invent their own trading systems. The latest news, from the Straits Times: ‘Malaysia rebuffs US on Iran oil sales, says it recognises only UN sanctions’ Then, when sanctions fizzled, the US and NATO allies sent their latest weapons. These were ‘game changers,’ said the press; they would clearly show the superiority of ‘Western’ technology. But what happened? AP: ‘Ukraine has sidelined U.S.-provided Abrams M1A1 battle tanks for now in its fight against Russia, in part because Russian drone warfare has made it too difficult for them to operate without detection or coming under attack, two U.S. military officials told The Associated Press.’ Captured US tanks were put on display in Moscow...their technology and construction minutely analysed by Russian experts. Other US weapons were ‘too sophisticated’ or simply ‘inappropriate’ for the terrain. Or, there weren’t enough of them. The ‘game’ went on, unchanged. Now, the press reports that Russian forces have regained the initiative and are pushing westward. And the defensive lines, that US aid supposedly paid for, aren’t there. According to press reports, corrupt contractors never did the work...and disappeared with the money. A reasonable, ‘America First’ foreign policy would have been not to meddle in Ukrainian politics in the first place. US money and weapons were better kept at home. The Pentagon might have benefited from the war as an observer, carefully studying Russian weapons and tactics, rather than getting whupped itself. Sensible policy was overruled by corruption. Big money from the firepower lobby prevents an honest, reasonable response. (Money sent to the Ukraine, as Joe Biden let us know, ‘comes back to us’...or, at least the part that isn’t stolen...to the Northern Virginia arms industries). But corruption comes with a fuse attached…and it’s lit. Overseas, it strengthens the empire’s designated ‘enemies’...and hastens the day of its own collapse. And at home…here’s the Committee for a Responsible Federal Budget: ‘In the first seven months of Fiscal Year 2024, spending on net interest has reached $514 billion, surpassing spending on both national defense ($498 billion) and Medicare ($465 billion). Overall spending has totaled $3.9 trillion thus far. Spending on interest is also more than all the money spent this year on veterans, education, and transportation combined.’ The problem is not political...it’s mega-political. Mega-politics tells us that people don’t always say what they want, know what they want, or get what they want. Instead, they think what they need to think...do what they want to do...and get what they deserve. And they end up where they ought to be...carried along by the deep currents of history. Nobody wants to die, for example, but everybody does. Nobody wants Social Security to go broke. But if not corrected, it will. Both Trump and Biden have pledged not to touch America’s ‘insurance’ programs; so, they can’t be fixed. And so, it comes to pass that even the greatest empire shuffles towards its own funeral pyre. This happens in plain sight, like an old man dying in a nursing home. It’s a natural, organic corruption, much like the rot that gets into old bones and old trees. They hollow out...they gnarl...and then they break. The US butts up against $35 trillion in debt...going up at the rate of about $5 billion per day while the interest alone (based on the latest figures, above), tots to $2.4 million per day. Who wants that? Who wants to die? Who wants to saddle his own children with a lifetime of debt? But who can stop it? Looking out for ourselves, and our Dear Readers, the answer is: probably no one. So, we need to expect the Primary Trend — towards lower real asset prices, higher interest rates, inflation...along with chaos and corruption — to continue. Stay tuned. Regards, Bill Bonner, For Fat Tail Daily All advice is general advice and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment. |
|
|