Most of us believe that supply and demand fundamentals dictate the prices of everyday commodities. This is typically not the case in the short-term. One such commodity that is not trading based on these basic economic principles is copper. One financial advisor Matt Badiali, feels that copper is completely out of tune with reality. According to his research, the demand for copper is significantly higher than the supply. If supply and demand fundamentals were in line, copper should be higher than it is trading today. In the long-term these economic principles do hold, however, there are several factors that have played into the poor price action performance for the metal.
Matt Badiali spent many years traveling around the world as a geologist. He has personally inspected the natural resource assets of numerous corporations. As a financial advisor with a strong background in natural resources, he makes it his priority to stay on top of the developments of the worlds most important commodities.
He feels that irrational fear in the markets is the main reason for the poor performance for copper. The fear comes from the trade war between the United States and China. Many financial analysts feel that the trade war is going to push the world into a recession. China consumes an exorbitant amount of copper and may end up consuming substantially less in poor economic conditions. Matt Badiali recently read from a Bloomberg article about a Grasberg copper mine that was not going to be finished being constructed on time. As a geologist, Matt Badiali is familiar with the delays in the mining industry. He also has pointed out that some major producers are anticipating deficits in their copper production. He feels these factors are going to launch copper in a bull market.
Matt Badiali feels that copper is presenting the value investor with a substantial opportunity. Copper has very strong long-term fundamentals. Governments around the world are trying to push an agenda to go green. Many solar and windmill energy projects are going to require copper. The area that Mr. Badiali feels is going to be the most promising is the electric car. He is urging investors to focus on the long-term fundamentals for copper and not get scared of the short-term irrationality.
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