A Contrarian View: Why Wall Street Is Wrong About Copper Today
Two words that investors need to know: “imminent” and “immediate.”
One means “about to happen” … the other means “happening now.” As contrarian investors, we look toward imminent events to make our plans. We like to plan for what’s coming, not what’s happening right now.
For example, we know that massive demand for copper is imminent.
The Development Bank of Singapore’s research department forecasts a 3.1% growth in copper demand through 2022.
That will come from renewable energy and electric vehicles. By 2030, we will need an extra 2.65 billion metric tons of copper per year.
That’s about 15% of the world’s current production. It’s equal to the annual production of Peru, the world’s second-largest copper producer.
We have 10 years to find, develop and produce a volume of copper equal to the output of Peru…
In other words, a shortage of copper is imminent.
The Decline in the Price of Copper
If you look at the spot price of copper, you would never suspect that was the case. The chart below shows what I mean:
The price of copper fell 21% from its recent high of $3.33 per pound in 2018 to today. Copper stocks are down even more.
Giant copper miners Southern Copper Corp. and Freeport-McMoRan Inc. saw shares fall 37% and 50%, respectively. Copper miner Turquoise Hill Resources’ shares are down 68% over that period.
The market is so wrapped up in the headlines that it isn’t doing the simple math. Wall Street doesn’t see the shortage of copper as immediate … so it isn’t priced in.
That’s because there are other fears overwhelming investors’ minds today:
- Great Britain’s messy exit (Brexit) from the European Union.
- The ugly trade war between the U.S. and China.
- And the fear of war in the Middle East over the Iranian sanctions.
Wall Street worries about current events — who said what about whom.
As natural resources guru Rick Rule said to me on the phone: “Narrative is easier to understand than arithmetic…”
The screaming headlines all pushed Wall Street traders to the same conclusion. They believe the world economy will get worse before we need all that copper. The market priced in a decline in demand immediately.
This is an ideal situation for a contrarian investor.
Play the Inevitable Rise in Copper Demand
You see, this is the best time to buy natural resource stocks.
We know that the rise in copper demand is inevitable. And we know that the fears over Brexit, trade wars and Iran are temporary. When you can buy the major copper producers for pennies on the dollar … you should.
That’s where we are today.
In Real Wealth Strategist, I keep a close eye on cycles in natural resources. We’re researching great copper companies, and we’ll recommend them when the time is right.
When the market realizes we are out of the stuff and sends the price soaring, we can make a truckload of money.
Editor, Real Wealth Strategist
P.S. If you’d like to get the best insight on natural resource markets from me, Rick Rule and many other experts, you need to attend the Sprott Natural Resource Symposium. It’s located in the beautiful Fairmont Hotel Vancouver in downtown Vancouver, British Columbia. This conference delivers the best speakers in the natural resource industry. Instead of folks quoting CEOs, you get to hear the CEOs themselves!
I’ll be the host for one of the days. I’d love to see you there!