Friday, January 18, 2013
Quick post on the few remaining newsbits
FT Alphaville - BHP is intervening in the iron ore price. Sort of like how the goldbugs always wanted their heroes to do with gold. Frankly, Chinese iron ore buying is so crooked (the recent iron crash was so severe partly because Chinese buyers all reneged on their contracts the minute the iron showed up in port, forcing suppliers to sell at a discount) that I'm happy to see an iron supplier starting to play hardball in return. Now all we need is for BHP to start up a cartel: that'll teach the Chinese bastards a lesson.
Bonddad - China. Positive. And btw, don't pay attention to the China doomers - consumers also buy steel.
(Side story: my dad said when he came back from WWII, he had a big pile of money in back pay - I guess the RAF held back some pay in case you died, so your widow would get something. Probably prudent, a lot of bomber crews died. Anyway, his dad told him when he came back to invest all his money in Algoma Steel. My dad said "at that time, 1945, we thought we were going right back into the depression, and Algoma had only stayed in business during the war by supplying steel for the war effort. I thought they would go bankrupt with the war over, so I didn't invest anything. Turns out, Algoma made a fortune for a long time, making steel for cars, and ovens, and fridges, and washing machines....")
Mining.com - Macquarie says the resource cycle is over. Because apparently consumers don't buy steel?
Whatever. Download the referenced report and read it. But note, iron is not copper is not silver is not gold: silver is used in electronics, which the developing world has a hard-on for, while gold is a dependable store of wealth in countries with little in the way of respectable banking or successful government economic planning.
Also, note that while you can see huge build-out in iron or copper supply, we haven't seen the same new supply build-out in gold. And in case you're worried about gold scrap, note that in the Thompson GFMS report I referenced yesterday or so, scrap only spikes in economic crises.
(Developing nations seem to sometimes leap-frog certain historical industrialization sectors. So for example, in Africa, there is no landline infrastructure: Africans are all going cellular with their first phone. Similarly, what seems really neat, Africans seem to be leapfrogging banking, going instead for smartphone money transfers. And by the way, I wonder what that would mean for gold?)