Monday, July 25, 2022

Morning Note: In Our Sights

In last Friday’s video commentary I mentioned that it’ll be a “target rich” macro environment in the years to come. The following entry to our internal market log touches on just one of the areas we have in our sights:


Freeport McMoRan CEO interview on recent copper action, 7/22:
“This is the 3rd decline we’ve had in the last 15 years, there’s been rapid recoveries in each of the prior 3 and we managed our way through it.
What’s different this time is the huge disconnect between the physical market and the financial market. These lower prices are truly anticipatory; people are expecting things to get worse — in our business it hasn’t.
Things are the same now as they were when copper was approaching $5 – even with the drop, global inventories dropped slightly during the quarter.”

“If the future is better than anticipated, watch out, because the market is really tight.”

“Our projects are flexible, they’re not going away, we don’t have to spend money now. The next step is to adjust operations to drive costs down further.”
Hmm…. in a market that is already historically-tight, to see producers cutting costs lends itself to higher prices if indeed “the future is better than anticipated” for the metal… I've pointed to China over and over again as a major catalyst for the recent selloff -- and, yes, global economic conditions are a current headwind as well… That said, there’s a not-small amount of global infrastructure dialed up over the next few years, along with what will remain a relentless push to go renewable, that (amid these supply issues) utterly screams higher copper prices (and higher mining company equities) in the years ahead.

Lastly; let’s say we do (as we anticipate) enter recession in the coming months; infrastructure spending tends to be the government go-to amid fiscal stimulus amid economic slowdowns... Which would occur against a capacity-light production backdrop.

Goldman agrees:
"While commodity prices have retreated over the last month amid investors’ fears of a global recession, analysts at Goldman Sachs expect them to rise later this year because inventories are at record lows and producers have little spare capacity."

Busy week ahead, to put it mildly, for markets: Fed meeting, housing data, manufacturing data, consumer confidence, Q2 GDP, PCE (inflation) data, loads of earnings releases, yada yada.

Stay tuned...

Asian equities struggled overnight, with 13 of the 16 markets we track closing lower.

Europe's faring better so far this morning, with 11 of the 19 bourses we follow trading up as I type.

US stocks are lower to start the session: Dow down 20 points (0.06%), SP500 down 0.14%, SP500 Equal Weight down 0.40%, Nasdaq 100 down 0.43%, Nasdaq Comp down 0.42%, Russell 2000 down 0.56%.

The VIX sits at 24.03, up 4.34%.

Oil futures are up 0.73%, gold's down 0.09%, silver's down 1.23%, copper futures are up 0.60% and the ag complex (DBA) is up 1.35%.

The 10-year treasury is down (yield up) and the dollar is down 0.41%.

Among our 35 core positions (excluding options hedges, cash and short-term bond ETF), 19 -- led by MP Materials, Brazil equities, carbon credits, ag futures and Eurozone equities -- are in the green so far this morning. The losers are being led lower by chip stocks, treasury bonds, silver, Dutch Bros and Albemarle.

"...the reality of our day-to-day life consists of an endless flow of perceptual interpretations which we, the individuals who share a specific membership, have learned to make in common."  
-- Carlos Castaneda 

Have a great day!


  1. Good Morning Marty! Definitely a busy week this week. Everyone is saying that the Fed is predictable (maybe); instead, the corporate earnings will drive stocks higher. We will see how this week is going to unfold.