Thursday, September 22, 2011

Copper no longer turning green...

The Dow closed today at 10733.83, down almost 400 points from its close yesterday. Needless to say, that's not good. Of course, with such a drop there will bill bargain hunters a-plenty out tomorrow, especially with the week-end coming, so perhaps we'll see a bit of a bounce back.

But I fear that may be short-lived (God knows, I hope I'm wrong).

Aside from stocks taking a dive, commodities and precious metals did the same. Copper fell off a cliff, finishing down 7% to a one year low.

So what does that mean? Well for one thing, it means that people went looking for safety nets today. And--as usual--they went back to US Treasuries, thanks in part to the Fed's move to exchange short-term debt for long-term debt.

But there's something else. The sharp drop in copper indicates a drop in demand. And that may mean a drop--or expected drop--in manufacturing. To put it another way, the drop in copper is an indicator of a potential severe economic downturn in the near future.

Over at Seeking Alpha, Bob Johnson lays all of this out quite nicely. As he says:
Dr. Copper indicated, I believe, a downturn in the economy in May and it materialized as reflected by the Dow in August. Now, Dr. Copper is signaling another decline. This is evidence that the US and Europe are headed for another dip in the recession.
Doesn't bode well for a merry Christmas this year...

Cheers, all.

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