Trading Copper and Gold in a Recession

Published on
August 19th, 2019
Duration
16 minutes

Trading Copper and Gold in a Recession

Trade Ideas ·
Featuring Peter Boockvar

Published on: August 19th, 2019 • Duration: 16 minutes

Peter Boockvar, CIO of Bleakley Advisory Group, believes that we’re on the cusp of a full-blown recession — and in this interview with Jake Merl, he discusses what that could mean for metals markets. Boockvar revisits the secular bull case for copper, highlights the recent price action in gold and silver, and makes a suggestion for how traders should position themselves at this point. Filmed on August 15, 2019.

Comments

Transcript

  • DR
    David R.
    21 August 2019 @ 15:19
    Superb interview and guest. I skip many but often try to catch Peter both here and on the Financial Repression Authority when I've time. Thanks for this!
  • lD
    lance D.
    20 August 2019 @ 13:19
    this thing goes to 22 first is my bet
  • GR
    Garey R.
    20 August 2019 @ 12:04
    An interesting counter intuitive trade in face of slow down. One factor Peter is missing though with regard to CU supply/demand balance is the underlying increase in scrap copper supply within US. China policy changes in 2018 have kept once exported scrap within the US which in turn presents a non primary alternative. Recycled copper production needs to be added onto the primary production capacity to get a clear picture.
  • SA
    Stephen A.
    20 August 2019 @ 03:52
    Bookvar is great. One of my favorites.
  • KA
    Kevin A.
    19 August 2019 @ 22:11
    Owned FCX for more than ten years and got burned mainly because of Jim-Bob Moffett moving the company into oil and gas. Finally took the capital loss this year for taxes. Want to get back into the copper trade. Definitely going to check out SCCO. Very good interview.
  • WM
    William M.
    19 August 2019 @ 20:17
    How about a 100% Canadian gold miner with significant copper by product at one of its two mines. Plus a really capable new CEO the past 11 months, who is rapidly turning the company around. And at a 20% pullback right now because of a smartly timed equity raise. New Gold (NGD) check it out for good upside even if gold stalls at this level. And a likely buyout candidate in the next couple of years because it's got about 13 million oz of Gold plus significant copper and silver.
    • DR
      David R.
      21 August 2019 @ 15:05
      For tax reasons now, in view of Dotard's fucked-up tax "reform", non-US ppl should NEVER buy ANY U.S. assets, period. And are *strongly* urged to SELL every single US asset, period. Because now the estate of anyone who dies while holding a US asset MUST pay the US IRS tax pigs 40% of the *value* (yes, 40% of the entire market value, not the gain or cost) as a US estate tax on foreigners. This outrageous cash grab applies even in the case of joint account holders and spouses (ie, the surviving spouse and/or joint accountholder loses 40% of the value as a tax to IRS). Foreign brokers must comply or they're liable for the tax and subject to a ban from US financial system and Swift. A survey of Cdn bank brokers which hold US stocks, bonds, ETFs for Cdn clients shows they're all compliant and will not release assets to the Cdn estate until an IRS certificate proving you've paid 40% to IRS first.). Therefore, SELL ALL US assets immediately!! Check with your tax advisor or broker if you don't believe. For complete disclosure, there is an exemption level, but in my case, I'm many multiples beyond that and my spouse would lose 38.5% of the account value if I passed, despite it being a joint account with my spouse. There IS a workaround, if you hold everything in a corporation and then you & your spouse own the corporation, as the corporation does not die when you do. The corp lives on unaffected and isn't subject to this IRS estate tax on foreigners, and then the corp can sell the assets subject to the ususal US capital gains tax and no 40% foreigner estate tax. Generally you'll want well up into the 7-digits of US investment before such schemes become worthhile. Otherwise, it's better and simpler for foreigners and renounced expats to just never own anything U.S. (The only exception is US gov't bonds as IRS doesn't levy this tax on foreigners/expats for whatever reason: I guess because they're desperate for people to fund the US gov't?)
  • GP
    Geoff P.
    19 August 2019 @ 19:36
    Great point about the lack of stimulatory effect on spenders. We're told how bad deflation is because of the concept of waiting for lower prices, but the central banks have literally created their deflationary nightmare by this NIRP / ZIRP policy.
    • DR
      David R.
      21 August 2019 @ 15:17
      Yes, and everyone in the world who borrows to consume is already up to their eyeballs in debt (except actually US households are better than most, having cleaned up their balance sheets significantly in a dozen years). Instead, what if interest rates went back to the historic norm of about 6%..... I imagine a LOT of households with savings whose interest income tripled could/would go out and buy up a storm. As they've been repressed for 12+ years and have massive pent-up demand that remains untapped, having been repressed so long. In fact, the strongest consumption in the world, proportionately, according to the Swiss Wealth Management association, is in several non-developed smaller countries mostly in SE Asia where interest rates are 6-10%, the currencies are strong (eg., Thai Baht is up 10% against USD in a year and up ~50% in a decade), consumers earn decent returns, and spend it on consumption which is strong there. Cash sales, not all on credit, so the future there is much more promising too, because unlike countries with 0% loans, these others haven't already spent their future income years before they've received it as is generally the case in the stagnnating West. So maybe they're onto something?
  • SB
    Stephen B.
    19 August 2019 @ 15:28
    What a great guest!
  • WW
    Wayne W.
    19 August 2019 @ 12:34
    PB is a really smart guy. Good to have him back in 3 to 6 months to see how his thesis plays out. Gold yes, Silver maybe, Copper ...yes you get the dividend but the whopping smackdown on the price when the ponzi casino markets finally get smashed and takes most commodities etc with it will be painful.
    • CM
      C M.
      19 August 2019 @ 15:39
      That is the only thing holding me back from buying Southern Copper today.
  • SR
    Steve R.
    19 August 2019 @ 08:11
    If you want to get long Southern Copper then wait for the flush out first, no point in getting long now with the market at these levels. If the broader market tanks it will take everything down with it short term. Keep your powder dry and put in a few cheeky limit orders well below current levels. All IMHO of course.
    • DH
      Dirk H.
      19 August 2019 @ 20:51
      Nothing like a good ole’ stink bid
    • JM
      John M.
      19 August 2019 @ 21:11
      I like Peter's thinking! Hope someone at the Fed is listening. I agree lowering rates from these low levels will have little impact except damaging the banking sector and then watch out below! For those home buyers with adequate equity, a better option (than lowering rates) might be to extend mortgage amortizations.
  • JH
    Jesse H.
    19 August 2019 @ 07:33
    Excellent - thanks, Peter (and Jake).
  • DS
    David S.
    19 August 2019 @ 07:10
    Well done. I am in on gold. With SCCO I do feel compensated to wait with a 5.35% yield and good B/S. It may be a marathon but sized correctly to limit my nervousness. Thanks, DLS
    • JS
      Johannes S.
      19 August 2019 @ 07:45
      I’m long copper with a basket of miners since early 2018 and have seen a 30% since then. Still believe very much in the thesis, but am weary of doubling down now when the recession is likely around the corner and we could easily see another 20-30% drop. Riding it out for now. If it goes up, good for my current position. If there is a further market drop, I can still buy more.
    • JS
      Johannes S.
      21 August 2019 @ 01:22
      Sorry, I meant I’ve see a 30% decline!