Pro Perspectives 2/19/21

February 19, 2021

We talked about copper yesterday.  What was the biggest mover in global markets today?  Copper. 

Copper was up 4% on the day. 

Here's another look at the chart, comparing this move to the move from the depths of the global financial crisis…

If we compare the absolute price move, it projects a move to the mid $5 area (another 30% higher).  If we compare the percentage move, it projects a move to $7.67 (87% higher).  

Considering the glut of currency being printed and the unending deficit spending, this time relative to the post-financial crisis response, I would argue the extreme of the two projections, is in store for the price of one of the world's most important metals.  This aggressive repricing in copper should be a good warning of where broad consumer prices are going in the coming years. 

Now, this sharp rise in copper prices has put a fire under the profitability of producers.

Here's a look at the Freeport McMoran chart, the world's largest producer of copper. 

As you can see, you get leveraged exposure to these commodities through the producers.  Freeport stock has gone up 8-fold on a just double in the price of copper.  

As we discussed on Wednesday, I suspect gold miners may be set up for a similar opportunity, to get leveraged exposure to gold prices, which have pulled back 14% from the August highs — disconnected, at the moment, from this inflation theme.