If anyone has been following the economic news recently, they will have heard about the fundamental disconnect in the supply vs. price of base metals. There are all sorts of thinking/reasoning on why this is happening. I only see two possibilities for the future. Either the markets are in another bubble with easy money for banker investing going into everything, making the entire market a bubble. Or, the current price is justified even though the stock piles are huge, which would indicate inflation. So, if the market is in a bubble, we'd expect a drop in the market once the bubble is realized and traders start to look at the fundamentals and return to them. Or, the money boosting the price is real, and when the stock piles start to be depleted, the price will soar (inflation). I'm sure there are other thoughts on this. Anyone care to speculate? Check out this article. http://www.kitco.com/ind/Wright/jan292010.html
The most important thing I'd like to point out is that high prices are not the same thing as a bubble. Thanks to TV business news, the word bubble is now completely misused. It is difficult to think about economic conditions intelligently if you imagine bubbles all over the place where they just don't exist. It is very difficult to outguess the market. It is much more likely that the current price is the correct price for now given the fundamentals combined with short term actions of speculators on both the short and long side. In the long run, it appears to me that current mine supply for many base metals will turn out to be insufficient. Maybe that's why prices are higher than you think they should be given current inventory levels. The users of the metals are looking out farther into the future.
Laugh or cry I'm trying to figure out if I should Laugh or cry. Then again I'm also waiting for the neurosurgeon in Florida working on my Mother~in~Law to get to the point that elevated NH3 levels....oh, never mind. Think I'll have some one else make supper tonight. Is THERE TOO MUCH OR TOO LITTLE? Dang. Now the computer is getting funny on me as well.:goofer:
Thanks for linking the article from Kitco, I do not think it is that remarkable, I think traders are trying to get in front of the economic recovery, IOW they are betting that the world economy will pick up and they are locking in raw materials now before they are faced with the heat that was so apparent a few years back. If they are right about the recovery they will have locked in supplies at a price that they can calculate for future profits. The big what if is what if the economy goes for a double dip?
