Sometimes in our busy lives, we miss some news or the importance of sound bytes in the news. This aspect of life got compounded by the pandemic. The market uses other people's money and thus, they can gamble on future outlook. In this vein, the market is rallying with new records in all the indexes. Why, you ask?
You know that unemployment is high, although the Fed and government say it fell to 6% last week. This is an obvious feel good lie to hide the fact that only 150 million Americans have a job. Back in 2000 with a lower population, we had employment of over 217 million Americans. This is why we say that the real unemployment percentage is 26%. Nevertheless, the market has the final say and it is saying that the economy will recover and especially, commodities. They are looking at stimulus as the catalyst.
No matter how the Fed and the government BS their way through the rising cost of commodities, this is inflation. Dear Reader, it will be off the charts for the red metal in the very near future. By the way, the Federal Reserve claimed that inflation for February was under their 2% target at 1.5%. So much BS! The rise in gasoline by itself was greater than 1.5%....Meanwhile,
Goldman Sachs predicts another bull market in commodities like the supper cycle of 2003. They have many streams of evidence to reach that conclusion. For example, in the US, 17-million cars sold in a year is considered a record year. We all know that we are in a transition period from combustion engines to electric. The market realizes in order for this change-over to be completed, copper production will need to be greatly expanded. By how much, you ask? The answer is unbelievable. Back to car sales. In China, car sales for 2016 was 28-million! The Chinese government wants the country to transition to all-electric. However, they will need the red metal as electric cars use twice as much as combustion. Now, this is the mind blowing point. If China goes ahead with its designs for all-electric vehicles, they will consume all the copper production for 119 years!...and that is copper only for cars and only in China. It is no wonder that the price for raw copper has doubled from $2 to $4 in the last six months. This is why the Doctor is not taking appointments. His calendar is full. This is super inflationary, but the anti-gold, fiat forces have put a lid on gold...for now.
What are the other points of evidence, you ask? The list is long and in harmony. I will use a selection of commodities from various firms. The prices reflect the range for the last six months and the lows was six months ago and the highs are today.
How about steel? US Steel went from $8 to touch $26.
How about iron ore? Cliffs went from $7 to touch $20.
Alcoa Aluminum (AA) went from $12 to touch $34. In agriculture, you need fertilizer. Mosaic (MOS) went from $16 to touch $35 and is now, $31. Speaking of agriculture, how about the grains? The price of corn rose from $400 to the present $559. This is a huge movement! The price of soybeans also rose. It went from $975 to $1262...Then, there is the record setting surge in lumber. Builders expect pent up demand to take housing to new records. This is reflected in wood. The price of lumber has added almost $20,000 to the cost for a new home. Lumber itself rose from $450 to $1012. Triple!!!
Climate Problem
Almost all the copper producing nations are suffering from drought. Water shortage is limiting nations to expand copper and mining production even though they know the demand is there. The countries are Peru, Australia, S. Africa, Chile and Mongolia. One important aspect of this list is that Chile produces 30% of the world's supply of copper.
3rd. Stimulus Plan
That is no typo. Biden has another plan called, "Clean Energy Revolution." In this package Biden wants to build out an electric charging stations along the highways. One of the leading manufacturers in charging stations is Charge Pont. They will benefit if this plans gets the go ahead and, of course, Dr. Copper. Peace.
