A warning from Dr Copper

Copper has earned the title of world’s best economist “Dr Copper” through its historic knack of predicting market performance.  It has just plunged to its lowest price in nearly 6 years as slowing global growth leads to lack of demand and oversupply, as it has already done for oil, coal and iron ore.  Until this year, US stock markets largely defied the good doctor of late, due in large part to being artificially inflated by money printing and zero interest rates (ZIRP) stimulus.  But copper sees through that and the message isn’t good.  The World Bank just cut its global growth forecast again and warned it was too reliant on the (supposed) US recovery.  The key indicators of this supposed recovery are share prices (which are at historically pre-crash price / earnings highs) and jobs growth.  Whilst 2014 ended on a supposed high in this regards with 252,000 new jobs, it was accompanied by the lowest participation rate in 38 years (i.e. after people quitting / giving up on trying – driving down the employment rate) and a drop in wages (which against increased numbers means the new jobs are lower paying).  The other elephant in the room is the mystical birth / death adjustment, a guess (and you can bet they guess high) of those that leave the work force and start a new small business.  For 2014 the US averaged 249,000 new jobs per month.  The birth / death adjustment accounted for 87,000 or 35% of that and the majority of the remainder lower paying and part time jobs.  Our bet is with Dr Copper…