TGIF! January 13, 2017

If you have a penny in your pocket, take it out and see if it was minted before 1982. I’ll tell you why later. Or simply jump to the end…

We are always looking for signals and indicators for where the Market is headed. In fact it is our passion as Market professionals. One such barometer for economic growth, both here and abroad, is the price of Copper. Why Copper you may ask? It’s not because we see Hall of Famer Brett Favre pitching the benefits of Copper socks. Copper is a very important industrial metal. It’s valuable with its relatively softness, and transmits both heat and electricity well. Roughly 90% of Copper is used today for electrical use and construction. When you’re building stuff, chances are you are using Copper. Because of that, Copper prices are a good indicator of overall economic health. It’s known to have a Ph.D. in economics and earned the nickname “Dr. Copper”.

Most copper mined today is used to conduct electricity, mostly as wiring. You see it with consumer electronics, appliances and in cars. It is also an excellent conductor of heat and is used in cooking utensils. Electric vehicles are on the rise. Conventional gasoline vehicles will be increasingly replaced with electric cars, which simultaneously reduces demand for oil and increases demand for copper. As our economy continues to reduce its dependence on oil, it continues to redirect consumption to Copper.

In November, Copper hit an 18-month high on the back of optimism for a comprehensive, bipartisan infrastructure plan. Copper is widely used in construction, manufacturing, transportation and power. An infrastructure plan to fix our nation’s roads, tunnels, airports and bridges will require a whole lot of Copper. Demand isn’t just picking up in the US. China’s refined copper imports surged nearly 30% in December, a strong indicator of economic activity. China has had a tough go the last few years as its economy has been transitioning from an emphasis on exporting to that of consumption. It’s population of a billion plus is consuming like never before. China is responsible for roughly 45% of global consumption.

So with increasing demand, supplies become an issue. And supplies just became an issue because just this week, Indonesia halted its Copper exports. Indonesia has the 3rd largest copper mine in the world. We expect this stoppage to be short-lived, but the price of Copper jumped in response. We think that the price of Copper is in the early stages of a multi-year recovery, and that bodes well for the global economy. Keep in mind, the World has generally lagged the growth experienced in the US the last few years. There is a lot of catch-up to be had. While the DOW and S&P hover near all-time highs, international stocks look like they have plenty of room to run. Dr. Copper is telling us the narrow strength is broadening.

If you’ve read this long, you might be interested in some fun facts about Copper:

  • The Statue of Liberty is made from 179,000 pounds of Copper.
  • The average home contains 400 pounds of Copper that is used for electrical wiring, pipes and appliances.
  • Copper is naturally antibacterial, so great for public door knobs and hand rails.
  • Copper is the 3rd most consumed metal in the US, behind Iron and Aluminum.
  • Copper melts at 1,981 degrees Fahrenheit.
  • Since 1982, pennies consist of 97.5% zinc, with just a thin Copper coating.  The Copper penny is a collector’s item.  According to the US Mint, it costs nearly 2 cents to make 1 penny.  There’s talk of actually taking the coin out of circulation.  So your grandparents were right when they told you to save those pennies!

Have a nice weekend. Our office will be closed Monday in honor of Dr. Martin Luther King. We will be back, dark and early on Tuesday.


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