Getting Short a Little Copper via Phelps Dodge (PD)

Includes: BHP, FAL, FCX, PD, RIO, SCCO
by: Greg Newton

Copper fills a unique place in the global economy, writes Greg Newton, investor and ex-President of Metal Bulletin Holdings Corp. More than oil, more than aluminum or zinc, its price, and perhaps more importantly its price trends, are an important tell on the direction of the global economy because of its use in everything from plumbing to air conditioners, architectural finishes to electric motors.

In case you got voted off the island and missed the last three months or so, copper has been trading at historic highs this year with a record London Metal Exchange official price of $3950/tonne – roughly $1.80/lb – on Sept. 2.

Just why copper has run so high is the subject of considerable speculation, although demand – particularly from China – out-running supply growth – due in large part to a lack of investment in new production over the last six years or so – is a good starting point. Jim Rogers and Marc Faber favor the long-cycle global commodities boom theory. And at least some of the recent move is due to a strike at Grupo Mexico’s Asarco facilities in Arizona that has cut supplies.

Good reasons, all. But I could fill Madison Square Garden with people who know the run is down to the usual suspects: Hedge fund speculation. Swiss trading companies and producers manipulating LME stocks. The truly paranoid point out that the latest run-up began after Yasuo Hamanaka, the metal’s arch-manipulator of the early 1990s, got out of jail.

But getting invested in copper is a challenge for the “regular

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