May 7 (Bloomberg) -- The current global crisis is “vastly worse” than the 1930s because financial systems and economies worldwide have become more interdependent, “Black Swan” author Nassim Nicholas Taleb said.
“This is the most difficult period of humanity that we’re going through today because governments have no control,” Taleb, 49, told a conference in Singapore today. “Navigating the world is much harder than in the 1930s.”
The International Monetary Fund last month slashed its world economic growth forecasts and said the global recession will be deeper than previously predicted as financial markets take longer to stabilize. Nouriel Roubini, 51, the New York University professor who predicted the crisis, told Bloomberg News yesterday that analysts expecting the U.S. economy to rebound in the third and fourth quarter were “too optimistic.”
“Certainly the rate of economic contraction is slowing down from the freefall of the last two quarters,” Roubini said. “We are going to have negative growth to the end of the year and next year the recovery is going to be weak.”
Federal Reserve Chairman Ben S. Bernanke told lawmakers May 5 that the central bank expects U.S. economic activity “to bottom out, then to turn up later this year.” Another shock to the financial system would undercut that forecast, he added.
‘Big Deflation’
The global economy is facing “big deflation,” though the risks of inflation are also increasing as governments print more money, Taleb told the conference organized by Bank of America- Merrill Lynch. Gold and copper may “rally massively” as a result, he added.
Taleb, a professor of risk engineering at New York University and adviser to Santa Monica, California-based Universa Investments LP, said the current global slump is the worst since the Great Depression that followed Wall Street’s 1929 crash.
The Great Depression saw an increase in global trade barriers and was only overcome after President Franklin D. Roosevelt’s New Deal policies helped revive the U.S. economy.
The world’s largest economy may need additional fiscal stimulus to emerge from its current recession, Kenneth Rogoff, former chief economist at the International Monetary Fund, told Bloomberg News yesterday.
“We’re going to get to the point where recovery is just not soaring and they’re going to do the same again,” he said. “We’re going to have a very slow recovery from here.”
Fiscal Stimulus
The U.S. economy plunged at a 6.1 percent annual pace in the first quarter, making this the worst recession in at least half a century. President Barack Obama signed a $787 billion stimulus plan into law in February that included increases in spending on infrastructure projects and a reduction in taxes.
Gold, copper and other assets “that China will like” are the best investment bets as currencies including the dollar and euro face pressures, Taleb said. The IMF expects the global economy to shrink 1.3 percent this year.
Gold, which jumped to a record $1,032.70 an ounce March 17, 2008, is up 3.6 percent this year. Copper for three-month delivery on the London Metal Exchange has surged 55 percent this year on speculation demand will rebound as the global economy recovers from its worst recession since World War II.
Commodity prices are also gaining amid signs that China’s 4 trillion yuan ($585 billion) stimulus package is beginning to work in Asia’s second-largest economy. Quarter-on-quarter growth improved significantly in the first three months of 2009, the Chinese central bank said yesterday, without giving figures.
Credit Derivatives
China will avoid a recession this year, though it will not be able to pull Asia out of its economic slump as the region still depends on U.S. demand, New York University’s Roubini said.
Equity investments are preferable to debt, a contributor to the current financial crisis, Taleb said. Deflation in an equity bubble will have smaller repercussions for the global financial system, he added.
“Debt pressurizes the system and it has to be replaced with equity,” he said. “Bonds appear stable but have a lot of hidden risks. Equity is volatile, but what you see is what you get.”
Currency and credit derivatives will cause additional losses for companies that hold more than $500 trillion of the securities worldwide, Templeton Asset Management Ltd.’s Mark Mobius told the same Singapore conference today.
“There are going to be more and more losses on the part of companies that have credit derivatives, those who have currency derivatives,” Mobius, who helps oversee $20 billion in emerging-market assets at Templeton, said at the conference. “This is something we’re going to have to watch very, very carefully.”
Taleb is best known for his book “The Black Swan: The Impact of the Highly Improbable.” The book, named after rare and unforeseen events known as “black swans,” was published in 2007, just before the collapse of the subprime market roiled global financial institutions.
Showing posts with label copper. Show all posts
Showing posts with label copper. Show all posts
16 April 2009
A 'Copper Standard' for the world's currency system?
Hard-money enthusiasts have long watched for signs that China is switching its foreign reserves from US Treasury bonds into gold bullion. They may have been eyeing the wrong metal.
China's State Reserves Bureau (SRB) has instead been buying copper and other industrial metals over recent months on a scale that appears to go beyond the usual rebuilding of stocks for commercial reasons.
Nobu Su, head of Taiwan's TMT group, which ships commodities to China, said Beijing is trying to extricate itself from dollar dependency as fast as it can.
"China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get 10 times the impact, and can cover their infrastructure for 50 years."
"The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources," he said.
The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters), and praseodymium (glass).
While it makes sense for China to take advantage of last year's commodity crash to restock cheaply, there is clearly more behind the move. "They are definitely buying metals to diversify out of US Treasuries and dollar holdings," said Jim Lennon, head of commodities at Macquarie Bank.
John Reade, metals chief at UBS, said Beijing may have a made strategic decision to stockpile metal as an alternative to foreign bonds. "We're very surprised by Chinese demand. They are buying much more copper than they will need this year. If this is strategic, there may be no effective limit on the purchases as China's pockets are deep."
Zhou Xiaochuan, the central bank governor, piqued the interest of metal buffs last month by calling for a world currency modelled on the "Bancor," floated by John Maynard Keynes at Bretton Woods in 1944.
The Bancor was to be anchored on 30 commodities -- a broader base than the gold standard, which had caused so much grief in the 1930s. Mr Zhou said such a currency would prevent the sort of "credit-based" excess that has brought the global finance to its knees.
If his thoughts reflect Communist Party thinking, it would explain the bizarre moves in commodity markets over recent weeks. Copper prices have surged 49 percent this year to $4,925 a tonne despite estimates by the CRU copper group that world demand will fall 15 to 20 percent this year as construction wilts.
Analysts say "short covering" by funds betting on price falls has played a role. But the jump is largely due to Chinese imports, which reached a record 329,000 tonnes in February and a further 375,000 tonnes in March. Chinese industrial demand cannot explain this. China has been badly hit by global recession. Its exports -- almost half GDP -- fell 17 percent in March.
While Beijing's fiscal stimulus package and credit expansion have helped lift demand, China faces a property downturn of its own. One government adviser warned this week that house prices could fall 50 percent.
One thing is clear: Beijing suspects that the US Federal Reserve is engineering a covert default on America's debt by printing money. Premier Wen Jiabao issued a blunt warning last month that China was tiring of US bonds. "We have lent a huge amount of money to the US, so of course we are concerned about the safety of our assets," he said.
This is slightly disingenuous. China has the world's largest reserves -- $1.95 trillion, mostly in dollars -- because it has been holding down the yuan to boost exports. This mercantilist strategy has reached its limits.
The beauty of recycling China's surplus into metals instead of US bonds is that it kills so many birds with one stone: It stops the yuan rising without provoking complaints of currency manipulation by Washington; metals are easily stored in warehouses, unlike oil; and the holdings are likely to rise in value over time since the earth's crust is gradually depleting its accessible ores. Above all, such a policy safeguards China's industrial revolution, while the West may one day face a supply crisis.
Beijing may yet buy gold as well, although it has not done so yet. The gold share of reserves has fallen to 1 percent, far below the historic norm in Asia. But if a metal-based currency ever emerges to end the reign of fiat paper, it is just as likely to be a copper standard as a gold standard.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5160120/A-Copper-Standard-for-the-worlds-currency-system.html
China's State Reserves Bureau (SRB) has instead been buying copper and other industrial metals over recent months on a scale that appears to go beyond the usual rebuilding of stocks for commercial reasons.
Nobu Su, head of Taiwan's TMT group, which ships commodities to China, said Beijing is trying to extricate itself from dollar dependency as fast as it can.
"China has woken up. The West is a black hole with all this money being printed. The Chinese are buying raw materials because it is a much better way to use their $1.9 trillion of reserves. They get 10 times the impact, and can cover their infrastructure for 50 years."
"The next industrial revolution is going to be led by hybrid cars, and that needs copper. You can see the subtle way that China is moving into 30 or 40 countries with resources," he said.
The SRB has also been accumulating aluminium, zinc, nickel, and rarer metals such as titanium, indium (thin-film technology), rhodium (catalytic converters), and praseodymium (glass).
While it makes sense for China to take advantage of last year's commodity crash to restock cheaply, there is clearly more behind the move. "They are definitely buying metals to diversify out of US Treasuries and dollar holdings," said Jim Lennon, head of commodities at Macquarie Bank.
John Reade, metals chief at UBS, said Beijing may have a made strategic decision to stockpile metal as an alternative to foreign bonds. "We're very surprised by Chinese demand. They are buying much more copper than they will need this year. If this is strategic, there may be no effective limit on the purchases as China's pockets are deep."
Zhou Xiaochuan, the central bank governor, piqued the interest of metal buffs last month by calling for a world currency modelled on the "Bancor," floated by John Maynard Keynes at Bretton Woods in 1944.
The Bancor was to be anchored on 30 commodities -- a broader base than the gold standard, which had caused so much grief in the 1930s. Mr Zhou said such a currency would prevent the sort of "credit-based" excess that has brought the global finance to its knees.
If his thoughts reflect Communist Party thinking, it would explain the bizarre moves in commodity markets over recent weeks. Copper prices have surged 49 percent this year to $4,925 a tonne despite estimates by the CRU copper group that world demand will fall 15 to 20 percent this year as construction wilts.
Analysts say "short covering" by funds betting on price falls has played a role. But the jump is largely due to Chinese imports, which reached a record 329,000 tonnes in February and a further 375,000 tonnes in March. Chinese industrial demand cannot explain this. China has been badly hit by global recession. Its exports -- almost half GDP -- fell 17 percent in March.
While Beijing's fiscal stimulus package and credit expansion have helped lift demand, China faces a property downturn of its own. One government adviser warned this week that house prices could fall 50 percent.
One thing is clear: Beijing suspects that the US Federal Reserve is engineering a covert default on America's debt by printing money. Premier Wen Jiabao issued a blunt warning last month that China was tiring of US bonds. "We have lent a huge amount of money to the US, so of course we are concerned about the safety of our assets," he said.
This is slightly disingenuous. China has the world's largest reserves -- $1.95 trillion, mostly in dollars -- because it has been holding down the yuan to boost exports. This mercantilist strategy has reached its limits.
The beauty of recycling China's surplus into metals instead of US bonds is that it kills so many birds with one stone: It stops the yuan rising without provoking complaints of currency manipulation by Washington; metals are easily stored in warehouses, unlike oil; and the holdings are likely to rise in value over time since the earth's crust is gradually depleting its accessible ores. Above all, such a policy safeguards China's industrial revolution, while the West may one day face a supply crisis.
Beijing may yet buy gold as well, although it has not done so yet. The gold share of reserves has fallen to 1 percent, far below the historic norm in Asia. But if a metal-based currency ever emerges to end the reign of fiat paper, it is just as likely to be a copper standard as a gold standard.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/5160120/A-Copper-Standard-for-the-worlds-currency-system.html
15 April 2009
Commodity supercycle thesis remains solid
Most prices for commodities are merely correcting there first massive upleg of a bull market that will be driven by infrastructure spends and chinese financed infrastructure in the third world, my contrarian viewpoint it looks as though things are lining up for the commodity market to regain momentum and continue in its secular bull. While the relative decline of the West is baked in the cake, the long term preasures of demand, future putative supply destruction due to the credit crunch, I would expect stronger commodity prices going forward. Kevin(New Kontent).
Zeal look at the case for copper..
"From a macro perspective copper, and commodities as a whole, will be long-term beneficiaries of the staggering inflationary actions of the world’s governments. Not only is there a massive pipeline of stimulus projects that will directly benefit the infrastructure build out, but rampant and careless monetary policies that have been set into motion will be a huge boon for commodities prices.
We also cannot forget where demand growth will come from in the future. Though this recession has slowed growth from the developing economies in Asia, these countries still have a long ways to go in their strategic development plans.
For example the Indian government says its recently completed fiscal year should see growth around 7%. And even with the current economic calamity it sees growth in the next year exceeding 5%. Moving to the northeast, according to one of China’s largest banks this growing economic powerhouse should see 2009 GDP growth of around 8%.
Interestingly the China Geological Survey is actually worried about commodities production shortfalls in 2009. And this has been evident in 2009’s activity so far at the Shanghai Futures Exchange. The SHFE saw record copper gains in Q1 as the metal has been trading at a premium to the LME in order to encourage producers to ship more copper to China.
Though China and India see growth at less than 10% in 2009, it is growth nonetheless and a lot of this will come in the form of infrastructure growth. China in particular has shouldered a larger portion of copper demand of recent, but when demand eventually picks back up in the rest of the world there will be fierce competition for what is likely to be a shrinking copper supply.
With copper near multi-year lows and demand growth slowing a bit, it is natural that the miners will eventually throttle back production. Production cutbacks are usually lagging and reactionary events in response to shifts in demand. And this is why we are seeing global stockpiles on the rise.
But many of the world’s top copper miners have already adjusted 2009 production forecasts to the downside. Some of these cutbacks are voluntary as a means to conserve copper for when prices and demand are higher. But some of these cutbacks are forced as a result of waning economics.
From mid-2005 to mid-2008 copper averaged over $3, thus prompting aggressive industry-wide exploration and development programs. These high prices also allowed the producers to profitably mine lower-grade ore within the confines of existing operations as well as bring past-producing mines back to life.
But these lower-grade, thus higher cost, operations and development projects that were economically feasible at higher copper prices are now losers. Production cutbacks, mine closures, and the scrapping of now-uneconomical exploration and development projects will eventually translate into materially lower mine production. Supply will eventually shrink enough to balance demand, even if demand stays weak for an extended period of time.
Regardless of where this balance is met, I believe copper has seen its low. And investors and speculators have taken advantage of this wildly oversold environment to reap fantastic gains as the markets bounce back to reality. As mentioned the futures traders have seen the metal pop 50%+ since the beginning of the year. But stock traders have fared even better.
By the time the dust settled at the initial panic low in November, the copper miners had leveraged copper’s losses to the downside in a big way. Even the world’s largest copper stocks had sold off by 80% or so from their highs. As mentioned earlier investors had discounted an apocalyptic ending to the commodities trade and sold their shares with reckless abandon. But in hindsight this November stock-market low was the time to load up on commodities stocks, especially copper stocks.
After coming to the brilliant conclusion that the world wasn’t coming to an end and we weren’t entering into the next Great Depression, buyers returned to commodities stocks and took advantage of their wildly oversold levels.
Copper stocks in particular have been among the best performers in the entire markets in the last 4+ months. Many have already seen triple-digit gains from their bottoms in the midst of an S&P 500 grind that had seen new lows set just last month."
Charts and data
Zeal look at the case for copper..
"From a macro perspective copper, and commodities as a whole, will be long-term beneficiaries of the staggering inflationary actions of the world’s governments. Not only is there a massive pipeline of stimulus projects that will directly benefit the infrastructure build out, but rampant and careless monetary policies that have been set into motion will be a huge boon for commodities prices.
We also cannot forget where demand growth will come from in the future. Though this recession has slowed growth from the developing economies in Asia, these countries still have a long ways to go in their strategic development plans.
For example the Indian government says its recently completed fiscal year should see growth around 7%. And even with the current economic calamity it sees growth in the next year exceeding 5%. Moving to the northeast, according to one of China’s largest banks this growing economic powerhouse should see 2009 GDP growth of around 8%.
Interestingly the China Geological Survey is actually worried about commodities production shortfalls in 2009. And this has been evident in 2009’s activity so far at the Shanghai Futures Exchange. The SHFE saw record copper gains in Q1 as the metal has been trading at a premium to the LME in order to encourage producers to ship more copper to China.
Though China and India see growth at less than 10% in 2009, it is growth nonetheless and a lot of this will come in the form of infrastructure growth. China in particular has shouldered a larger portion of copper demand of recent, but when demand eventually picks back up in the rest of the world there will be fierce competition for what is likely to be a shrinking copper supply.
With copper near multi-year lows and demand growth slowing a bit, it is natural that the miners will eventually throttle back production. Production cutbacks are usually lagging and reactionary events in response to shifts in demand. And this is why we are seeing global stockpiles on the rise.
But many of the world’s top copper miners have already adjusted 2009 production forecasts to the downside. Some of these cutbacks are voluntary as a means to conserve copper for when prices and demand are higher. But some of these cutbacks are forced as a result of waning economics.
From mid-2005 to mid-2008 copper averaged over $3, thus prompting aggressive industry-wide exploration and development programs. These high prices also allowed the producers to profitably mine lower-grade ore within the confines of existing operations as well as bring past-producing mines back to life.
But these lower-grade, thus higher cost, operations and development projects that were economically feasible at higher copper prices are now losers. Production cutbacks, mine closures, and the scrapping of now-uneconomical exploration and development projects will eventually translate into materially lower mine production. Supply will eventually shrink enough to balance demand, even if demand stays weak for an extended period of time.
Regardless of where this balance is met, I believe copper has seen its low. And investors and speculators have taken advantage of this wildly oversold environment to reap fantastic gains as the markets bounce back to reality. As mentioned the futures traders have seen the metal pop 50%+ since the beginning of the year. But stock traders have fared even better.
By the time the dust settled at the initial panic low in November, the copper miners had leveraged copper’s losses to the downside in a big way. Even the world’s largest copper stocks had sold off by 80% or so from their highs. As mentioned earlier investors had discounted an apocalyptic ending to the commodities trade and sold their shares with reckless abandon. But in hindsight this November stock-market low was the time to load up on commodities stocks, especially copper stocks.
After coming to the brilliant conclusion that the world wasn’t coming to an end and we weren’t entering into the next Great Depression, buyers returned to commodities stocks and took advantage of their wildly oversold levels.
Copper stocks in particular have been among the best performers in the entire markets in the last 4+ months. Many have already seen triple-digit gains from their bottoms in the midst of an S&P 500 grind that had seen new lows set just last month."
Charts and data
30 October 2008
Copper kills superbugs no worries
Making door handles, taps and light switches from copper could help the country beat superbugs, scientists say.
A study found that copper fittings rapidly killed bugs on hospital wards, succeeding where other infection control measures failed.
In the trial at Selly Oak hospital, in Birmingham, copper taps, toilet seats and push plates on doors all but eliminated common bugs.
It is thought the metal 'suffocates' germs, preventing them breathing. It may also stop them from feeding and destroy their DNA.
Lab tests show that the metal kills off the deadly MRSA and C difficile superbugs.
It also kills other dangerous germs, including the flu virus and the E coli food poisoning bug.
Although the number of cases of MRSA and C difficile is falling, the two bugs still claim thousands of lives a year.
During the ten-week trial on a medical ward, a set of taps, a lavatory seat and a push plate on an entrance door were replaced with copper versions. They were swabbed twice a day for bugs and the results compared with a traditional tap, lavatory seat and push plate elsewhere in the ward.
The copper items had up to 95 per cent fewer bugs on their surface whenever they were tested, a U.S. conference on antibiotics heard yesterday.
Professor Tom Elliott, the lead researcher and a consultant microbiologist at the hospital, said: 'The findings of 90 to 95 per cent killing of those organisms, even after a busy day on a medical ward with items being touched by numerous people, is remarkable.
'I have been a consultant microbiologist for several decades. This is the first time I have seen anything like copper in terms of the effect it will have in the environment.
'It may well offer us another mechanism for trying to defeat the spread of infection.'
Researcher Professor Peter Lambert, of Aston University, Birmingham, said: 'The numbers decreased always on copper but not on the steel surfaces.'
If further hospital-based trials prove as successful, the researchers would like copper fixtures and fittings installed in hospitals around the country.
Doorknobs, taps, light switches, toilet seats and handles and bathroom 'grab rails' could all be ripped out and replaced with copper versions.
Link
A study found that copper fittings rapidly killed bugs on hospital wards, succeeding where other infection control measures failed.
In the trial at Selly Oak hospital, in Birmingham, copper taps, toilet seats and push plates on doors all but eliminated common bugs.
It is thought the metal 'suffocates' germs, preventing them breathing. It may also stop them from feeding and destroy their DNA.
Lab tests show that the metal kills off the deadly MRSA and C difficile superbugs.
It also kills other dangerous germs, including the flu virus and the E coli food poisoning bug.
Although the number of cases of MRSA and C difficile is falling, the two bugs still claim thousands of lives a year.
During the ten-week trial on a medical ward, a set of taps, a lavatory seat and a push plate on an entrance door were replaced with copper versions. They were swabbed twice a day for bugs and the results compared with a traditional tap, lavatory seat and push plate elsewhere in the ward.
The copper items had up to 95 per cent fewer bugs on their surface whenever they were tested, a U.S. conference on antibiotics heard yesterday.
Professor Tom Elliott, the lead researcher and a consultant microbiologist at the hospital, said: 'The findings of 90 to 95 per cent killing of those organisms, even after a busy day on a medical ward with items being touched by numerous people, is remarkable.
'I have been a consultant microbiologist for several decades. This is the first time I have seen anything like copper in terms of the effect it will have in the environment.
'It may well offer us another mechanism for trying to defeat the spread of infection.'
Researcher Professor Peter Lambert, of Aston University, Birmingham, said: 'The numbers decreased always on copper but not on the steel surfaces.'
If further hospital-based trials prove as successful, the researchers would like copper fixtures and fittings installed in hospitals around the country.
Doorknobs, taps, light switches, toilet seats and handles and bathroom 'grab rails' could all be ripped out and replaced with copper versions.
Link
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