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Thursday, July 22, 2010

A LOOK AT OUR TOP ECONOMIC INDICATOR


Our chart of the week is our old friend Dr. Copper. This week, he's saying, "Things aren't so bad."

You see, one of the great debates in the investment community right now is whether the global economic recovery "has legs." On one side, you have the optimists, who say the recovery is real and we're doing just fine, don't worry so much. On the other side, you have the pessimists, who say the recovery is a short-term goosing based on cheap credit… and the bear market of 2008 will resume within a year, go ahead and worry and invest accordingly.

One way to monitor this argument is by watching the price of copper. Copper is in nearly everything around you… from cars and plumbing to electronics and power lines. This "in everything" attribute makes the metal rise and fall with economic activity.

In early June, we published a bearish note when copper "broke down" to $2.80 per pound, its lowest low in eight months. Copper promptly bounced from this level and now sits near $3 per pound. As long as copper remains buoyant and above the breakdown level of $2.80, one has to say the optimists are winning.

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