Chinese buying copper

At the London Metal Exchange (LME) the copper stock levels keep declining as can be seen on following graph:

LME Copper warehouse level

The Chinese were importing copper at record levels during December 2011 to restock their inventory. There has been a concern that in 2012, there will be a copper deficit, which resulted into this buying frenzy.

As a result we can see that since September 2011 the copper price was going up, just at the same time that LME stock levels were going down.

Copper price

I can't blame the Chinese to buy copper, they want real assets and not some US government paper, which they are dumping by the way as can be seen on following graph:

China US treasury holdings

I think the buying frenzy is not over yet, as China is positioning itself to create competition against the London Metals Exchange in June 2012. On that date China will open the Pan Asia Gold Exchange, also known as PAGE, challenging the LME and COMEX.

I predict that gold and silver will explode on that event. Interesting times will emerge later in 2012, so prepare accordingly by buying precious metals!

Belgium Downgraded by Fitch

Today Belgium was downgraded by Fitch from AA+ to AA with negative outlook. All of this due to the Dexia fiasco. I'm from Belgium and I can say that the bailout of Dexia was the most immoral thing the government has ever done. Dexia has an enormous amount of Greek debt (US$5 billion write down)  and everyone knows Greece is going to default sooner than later. Supporting Dexia was the dumbest act ever. The only reason why Belgium government bonds are doing well is because Belgians have an enormous amount of savings and the unemployment rate is improving.

But we see the consequences already from Dexia. Several cantons lost several millions of money. Of course, we tax payers will need to pay for this.

Amount of shares in Dexia per capita

4 other countries were downgraded as well:

Italy: A => A-
Spain: AA- => A
Cyprus: BBB => BBB-
Slovenia: AA- => A

Surprisingly, the euro went up...

Gold Spike?

Today there was this large gold spike to 2263.65 EUR/oz during New York Globex time. I have no idea what this phenomenon is. If somebody could point out what this is, it would be really helpful.

Maybe it's an omen of what is yet to come!

Spot gold in EUR/oz

Baltic Dry VS Copper

The last few weeks we see that the Baltic Dry Index has been dropping while copper prices surge. How can this be?

Is the economy slowing down as evidenced by the falling BDI, or is the economy growing as evidenced by the rising copper prices. Nobody really knows. My take on this is that the economy actually is growing, on phony money that is (or you can equally say the money supply is increasing).

What is happening to the BDI though, is a consequence of the massive creation of ships during the period of 2005-2008.

BDI VS Copper

While the BDI may keep falling, the copper price is steadily going up, together with the S&P. The chart below shows the high correlation between copper prices and the S&P.

S&P VS Copper

Another evidence of the improving economy can be seen in the BullandBearwise index, which measures the performance of key macro-economic metrics (capacity utilization, unemployment, CPI, PPI, yields, etc...). This index is still in an uptrend:

BullandBearWise Index

So frankly, I don't see a crash coming soon, even if the BDI keeps dropping. Because this is a disparity created by an oversupply of ships.

The Fed will never increase interest rates again

Today Ben Bernanke said he would keep the benchmark rate essentially at zero percent till 2014. Earlier he said he would keep it at zero percent till 2013.

My take on this is that they will never increase interest rates again, until the whole system collapses. Marc Faber already pointed this out in 2010.

Look at what effect it has on the silver and gold price...

To see the whole interview, see below: