What will eat your entire life on a whim, but doesn't have a leg to stand on? You guessed it! It's the stock market! This stuff is not for the faint of heart.
I am increasingly frustrated and annoyed with how these markets are playing. It seems that no one can decide for themselves what is good, so they go by whatever the news says. Or they get spooked easily. Last week, Hedge funds starting to call in their options in gold and silver, the dollar gained on less than catastrophic news from Europe, and . As a result, the price took a nose dive. It seemed to only worsen as again today, another 5% was shed off of silver's price, and gold was down to under 1600 at one point in spot trading. I don't know about you, but that sounds great to me! Nothing beats getting something I already want at a discount. A few years ago, I really wanted a Fender Stratocaster, but they were too expensive for my thin wallet. Well, after some patience and digging around, I found a guy who was selling his Mexican Strat for 200 bucks. Bang! I snatched it up and have been enjoying its sweet sounds ever since.
Since the news seems polarized between happy shiny and apocalyptic doom stories, it's no wonder the markets look like a sawtooth wave these days. I don't mean to say that news channels are under and overblowing the problem on purpose - it's just that when we're dealing with something as large as a world-wide debt crisis, the voices of reason and patience tend to fade into the background, while the voices of paranoia and chaos push themselves to the foreground. As calm and collected as the newscasters are (at least in the UK and Canada), the words coming out their mouths are frightening. Sometimes the contrast between the two is paradoxical.
Since August of this year, I've become keenly aware of the scope and magnitude of the impending crisis that threatens the US and Europe. The problems are clear: overspending, too much debt, and thus a glut of fiat currency waits on the sidelines to unleash massive inflation on all of us. The solutions are equally as clear, although it would be political suicide to suggest them: In North America, cut the military by at least two-thirds, throw out universal health care (at least for anyone who makes at least the average state or national wage - already the case in many parts of Canada), curb useless government programs, and use those inflated dollars to invest in something that has intrinsic value. This could be anything from coffee to corn to copper, or even gold, silver, platinum or palladium.
To help us see what might come - we can look to copper for a picture of where we are currently at. Copper is a base metal that is used in just about all areas of life. Copper coins are in mass circulation, and copper has an extremely wide usage in every industrial sector.
When copper hits an extended period of depressed prices, you can be sure that a recession is just around the corner. This isn't always true, but typically this has been the case.
You can see by the chart that when copper dropped off the table in 2008, it took two full years to get back to its pre-sub-prime price. Then 2011 hit, and copper has been a mixed bag all year. However, the price got so depressed in '08 that it seems like copper has been in a bull run for quite some time. indeed, if one got into the copper market at the bottom when copper was $1.25, you would have made piles of money. Take a look, however, at the high just before the fall: $4.07. We surpassed that high through 2011, but are now seeing another significant sell-off, and copper is back down to just over 3 bucks. So it seems that just as copper was getting the wind back in its sails, another major crisis (this time involving the entire first world) has set copper, along with just about every other commodity, on a random-looking tailspin. The real question I am raising here is, "Will future short and long-term demand from China, India and other developing nations make-up for the almost certain lack of demand that will come from the West?" Unfortunately, nothing has the answer to that question except the future itself, and it might be better to not be burdened with it. We'll have to wait and see what kind of prices the markets decide to bake into the cake for copper.
Full disclosure: As of this writing, I have no positions in any of the above commodities or related stocks.
