My Daughter Doesn’t Care About “PhD Metals”… But You Should!
We were sitting around the family dinner table, taking turns talking about our day, when I got the mother of all insults from my daughter.
“Cool story dad,” she said as she rolled her eyes.
Now, if you don’t speak “teen sarcasm” let me translate.
“Cool Story” — accompanied by an eye-roll — is code for “nobody cares.”
And to be fair, I didn’t really expect her to care about the highlight of my workday.
But as an investor, you should definitely be excited about my day last Friday, and what it means for your wealth.
The Fastest Way to Get Smart on the Economy
The exciting event I was telling my kids about was the fact that copper prices surged higher last week.
Just take a look at the sharp break higher. Especially the action on Friday!
Hopefully you’re not rolling your eyes like Rebekah at this point. “What’s so important about copper?” you might ask.
Wall Street veterans have commonly referred to copper as the metal with a PhD in Economics.
That’s because ever since the industrial revolution, the price of copper has been a reliable indicator of what is happening in the overall economy.
If the price of copper drops, it often means that a recession (or at least a slowdown in growth) is around the corner.
And if copper trades higher — like the surge we saw last Friday — it’s a reliable indicator that the overall economy is picking up momentum. And that’s great news for the United States and for our wealth-building investment plays!
So why is “Dr. Copper” so smart?
Well in our world today, copper is an important element tied to many different functions in the economy.
If you embark on a new construction project, you need a ton of copper for all of the necessary wiring. Copper is also used in a lot of tech items because of its ability to conduct electricity.
Copper is used for metal alloys which are part of many different manufacturing processes. And copper even has medical properties as an essential element in the body. (Did you know your body uses 1.2 milligrams of copper a day?)
Bottom line, when economic activity picks up, demand for copper also increases.
So when you see the price of copper surge higher, it’s a very smart way for you to get ahead of other investors in anticipating an economic recovery (and fresh legs for our bull market).
A Playbook for Trading the Copper Breakout
Friday’s breakout got me excited about our market and the wealth building opportunities heading into the new year.
While my kids may not have been enthused, I took some time over the weekend to round up the best opportunities that could benefit from copper’s rebound.
One thing you need to realize is that copper is an international metal. It’s used around the world, so a rise in the price of copper doesn’t just mean things are good here in the U.S.
It also points to global growth!
For instance, the overall European economy has been under a lot of pressure for the past several years. But copper’s breakout — along with some of the other research I’ve been reading — tells me that Europe is starting to turn things around.
Some of it may have to do with more clarity on Brexit. Some of it is due to countries hitting rock bottom (economically) and starting to implement more reasonable economic policies.
Regardless of cause, an economic rebound in Europe is great news for American manufacturers. Because as European business and individuals buy equipment, appliances, and automobiles, American companies who export those products will benefit.
Here at home, we’re seeing similar demand from individuals and businesses alike.
“Hard goods” — like concrete, lumber, and other construction materials — are in high demand.
Homebuilders are struggling to build enough houses to keep up with demand.
Even auto makers are doing quite well selling expensive pickup trucks and SUVs to American customers. That’s due in no small part to the strong job market and low interest rates, which make new cars affordable to a larger number of people.
Copper’s breakout is a great sign confirming that these economic trends are not only intact, but picking up momentum.
So next time someone tells you that the economy is weak, that our outlook is poor, or that 2020 is going to be a tough year, just print out the chart of copper above and tell them all about Dr. Copper!
If they roll their eyes and say “Cool story, [%= :subscriberName(E, Reader) %],” you can just smile knowing you’re in good company here at The Daily Edge alongside people who know what this indicator is telling us.
Here’s to growing and protecting your wealth!