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Correctly calling copper "a doppelganger for whatever stock prices do," Tom McClellan suggests...

Correctly calling copper "a doppelganger for whatever stock prices do," Tom McClellan suggests dropping the tired "Dr. Copper" moniker. Have a look at lumber - uncorrelated from "risk on/off," it may make a better economic indicator. Its recent move into contango suggests prices (and the economy) are headed higher soon.
Comments (9)
  • Papaswamp
    , contributor
    Comments (2178) | Send Message
     
    Except it's being shipped to China not consumed in the US. Demand from China is up 70% this year. US and Canadians are shipping as fast as they can.
    This seems to be the aspect everyone is missing…companies are doing well due to overseas demand…domestic is flat at best. The US consumer is offline.
    http://bit.ly/pfnEvg
    10 Oct 2011, 10:07 AM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    How about "Hopium" as a leading indicator?

     

    Makes as much sense as trying to pin the whole world economy on one commodity.

     

    So "Dr. Copper" was an economic genius until he turned bearish as an indicator so it can't possibly be correct anymore. Maybe Dr. Copper and the markets are in fact forecasting the direction of the world's economy, isn't that more likely than the contango in lumber?

     

    Is your love so fleeting Mr. McLellan?
    10 Oct 2011, 10:13 AM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (540) | Send Message
     
    I don't think he's abandoning copper because he doesn't like what it says (it's up 10% in the past few sessions, btw). The whole Dr. Copper thing is a relic of times past. The metal has become thoroughly "financialized," it's movements no longer leading the economy, but pretty much tracking the S&P 500 wiggle for wiggle.
    10 Oct 2011, 10:28 AM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    Stephen,

     

    I am mocking him because he deserves to be mocked.

     

    "Lumber contago" is more accurate than Dr. Copper? Really?

     

    For years, I have heard the line parroted on CNBC, SA, and elsewhere that Dr. Copper is the metal with a PhD in economics because "he" accurately forecast the upswing in the global economy better than any other indicator.

     

    Search results on SA for Dr. Copper:
    http://bit.ly/pBhfz8

     

    So we are only supposed to pay attention to him when he is rising from $4 to $4.50 but ignore him when falls from there to $3 in a month?

     

    The idea that the markets are a leading indicator is what's at question. I would say the markets are thoroughly "financialized" as well.

     

    Anyway I appreciate the feedback but it doesn't address the issue of why copper was called Dr.Copper in the first place.
    10 Oct 2011, 10:37 AM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (540) | Send Message
     
    If you look through the results, you can see that Dr. Copper has been used ad nauseum on the way down this summer and fall (despite my best efforts to avoid it!), so I'm not sure what your point is about it only being used on the way up. If you watch CNBC or read the WSJ, Dr. Copper's (ugh) fall has been a major story as well.

     

    Lumber may or may not be a good leading indicator. What McClellan is searching for is something economically sensitive that is not tethered to the S&P, which lately is tethered to whatever some euro politician happens to mutter in front of the cameras or off the record to a reporter.

     

    The larger point is that copper at some point in history may have been a reasonable leading indicator. but it is not anymore. It is simply a coincident indicator of what the stock market happens to be doing that day.
    10 Oct 2011, 11:03 AM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    Stephen,

     

    "What McClellan is searching for is something economically sensitive that is not tethered to the S&P, which lately is tethered to whatever some euro politician happens to mutter in front of the cameras or off the record to a reporter."

     

    Seriously that is a pretty lame defense and I am not sure why you are defending him other than the fact you are polite and he is an contributing author here.

     

    Instead of lumber contango, how about this from SA Market Currents:

     

    http://seekingalpha.co...
    "The OECD's leading indicator for global growth falls for the fifth straight month and points strongly to an economic slowdown, with individual country readings falling across the board except for Japan. "

     

    I think my point is rather obvious pumpers look for any reason to pump and ignore any reason that contradicts their viewpoint. Dr.Copper was a reason to be bullish until it doesn't cooperate.

     

    What's the track record for Lumber Contango as a leading indicator?

     

    Is it more accurate than the above?
    More accurate than ECRI?

     

    "The larger point is that copper at some point in history may have been a reasonable leading indicator. but it is not anymore. It is simply a coincident indicator of what the stock market happens to be doing that day."

     

    What's your proof for this statement?
    10 Oct 2011, 12:33 PM Reply Like
  • SA Editor Stephen Alpher
    , contributor
    Comments (540) | Send Message
     
    I had no idea McClellan has a connection with SA (if he's a writer here, so what, we take contrary positions to our writers all the time). Personally, I am unconvinced lumber (or the OECD, or ECRI, or anything that's ever been invented) is a decent leading indicator, but I am pleased he makes the correct point that cooper - contrary to legend - is not.

     

    You're main beef seems to be that you believe the Dr. Copper moniker is only used on the way up, when the experience of just the past few weeks is the exact opposite. The moniker has been used frequently on this site and all over fin'l media (to the point where I want to put my head through my computer monitor) as if somehow mystically explaining the markets having a rough time and economies turning south. It's a fine coincident indicator. But if copper gets to be called Dr., why not Dr. S&P, or Dr. Australian dollar, or Dr. Loonie, or Dr. Presidential approval ratings.
    10 Oct 2011, 04:33 PM Reply Like
  • Conventional Wisdumb
    , contributor
    Comments (1802) | Send Message
     
    Nope that's not my beef.

     

    My "beef" is that people using it as a bullish indicator on the way up are the same to discount or ignore it as a bearish indicator on the way down - professional touts and pumpers.

     

    Anyway, I greatly appreciate the conversation and the attention. For my part, it was a very interesting dialogue.

     

    Thank you
    10 Oct 2011, 04:42 PM Reply Like
  • rubberoptions
    , contributor
    Comments (400) | Send Message
     
    Lumber is tied in too much with US housing; in contrast, housing in China use concrete, wire rods & re-bar's.

     

    There's the Dow Transports Index, yet most US analysts discount natural rubber. No thanks to Singapore Commodities Exchange or Singapore Exchange; who have managed to BUNGLE the natural rubber futures market for the past 18 years!

     

    In contrast, on Shanghai Futures Exchange, natural rubber is the most hotly traded commodity futures on SHFE; annual dollar volume range between US$4-5 Trillion.

     

    China is now the world's biggest auto manufacturer and there are 1.3 billion people & also goods moving around within China. They gonna burn lots more rubber than NASCAR for sure.
    10 Oct 2011, 10:24 AM Reply Like
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