GLOBAL ECONOMICS AND POLITICS

Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.

 

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METALS AND MELTDOWNS © Leo Haviland, September 26, 2011

The onset and acceleration of vicious bear trends in base metals “in general” such as copper in 2007 and 2008 preceded or coincided with meltdowns in other stock and many other commodity marketplaces. In late 2008, the London Metal Exchange’s base metal index’s bottom dawned only about three months before the major low in the S+P 500. What about 2011? Base metals reached their 2011 summits, as during the early stage of the global economic disaster, around the time of those in the S+P 500.

Erosion in base metal prices, especially as it now coincides with tumbles in stock arenas and in many other commodity playgrounds and some strength in the battered US dollar, confirms and points to further worldwide economic weakness. These intertwined marketplace trends underline that America’s policy actions (and related ones by many other nations) such as gigantic deficit spending, massive money printing, and sustained rock-bottom government interest rates have not sufficiently solved the severe debt and leverage problems that emerged into view in 2007 and 2008.

Although a repeat of the massive price declines of 2008 are unlikely, the current bear trends of 2011 in base metals probably will continue, as will those in equities and many other commodities.

The linkage of the base metal complex to stock marketplace and US dollar moves and interest rate policies and trends underscores the benefits of paying close attention to base metals. There has been a close bond in recent years between trends in the S+P 500, commodities “in general”, and the United States dollar. For example, in 2007, the LMEX major high on 5/4/07 at 4557 preceded the S+P 500 plateau on 10/11/07 at 1576. Eventually the crucial 2008 final tops in various marketplaces arrived. Note the timing coincidence in the final highs in the LMEX (3/5 and 7/2/08), the low in the broad real trade-weighted dollar (April 2008), the final top in the S+P 500 (5/19/08, midway between the LMEX 2008 tops), and the broad Goldman Sachs Commodity Index (7/3/08). Compare the 2011 timing coincidence in tops in these various marketplace domains. For example, the LMEX high on 2/14/11 at 4478 is very close in time to the initial S+P 500 top on 2/18/11 at 1344; compare 4/18/11’s 4469 LMEX high with the S+P 500 peak on 5/2/11 at 1371.

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Metals and Meltdowns (9-26-11)