Dividends and Copper’s meltdown and the big fund short

Most investors should not trade in the commodity markets, but watching the markets is a good thing to do. The commodity markets are the closest thing we have which is related to those supply and demand curves one learns about in economics 101. If there is a shortage, prices should go up; if there is more commodity than need, the prices should fall. Unless something else is affecting the markets.

In the world of copper, the mines in Chile are big players, there was a possible strike but in late August and the 11th hour before there was to be a strike, the miners settled and worked continued. In normal trading that would have sent the price lower. There is also hope that the trade hostility between China and the US is slowing down.

China has been a key driver for the use of copper in the past decade. The difference according to Andy Home of Reuters is new investors using the Chicago Mercantile Exchange (CME) as opposed to the London Metals Exchange (LME). The only conclusion which was drawn by Mr. Home is the new players has made the exchange more volatile and money moves between being bullish and bearish faster – either calls or puts.

Linking to dividend paying stocks, it used to be reasonably easy to play the commodity markets with supply and demand. There are only a few mines, there are relatively few companies or countries needing the commodity but times change and where there is great volatility it makes it interesting to watch, but be careful if you are investing. Finding good dividend companies whether producers or end users is a less risky way to be involved and use your judgements.

There are more questions than answers, till the next time – to raising questions.

 

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