Trading Copper and Gold in a Recession (w/ Peter Boockvar) | Stock Trade Ideas


Oh Welcome to trade ideas I’m Jake Merle sitting down Peter book bar CIO of Bleakley advisory group and editor of the book report Peter great to have you back on the show. Thanks. Jake always good to be here So we’ve got a lot going on in markets right now if there’s 16 trillion dollars worth of negative yielding debt The Fed is cutting rates. We have weak economic data. The yield curve is inverting The stock market is selling off people are saying we’re entering a recession soon. So what are your thoughts Peter? What do you think markets are telling us right now? Well, it seems so long ago We only had 12 trillion of negative yielding bonds It’s amazing how fast we’re accelerating this process and it’s it’s almost two things that are feeding on each other It’s legitimate slowdown in growth that leads to expectations of more central bank easing and then we get more data that leads to a weak or growth that reinforces the Expectations are more easing. But when I say easing all I’m saying is lowering interest rates I don’t believe that what the European Central Bank or Bank of Japan is now doing is technically easing I actually think it’s restrictive and it’s something that I’ve said on a previous real vision interview is that the Europeans and the Japanese are destroying their banking system and As they do that it further believes the economy of capital therefore They’re just spitting in the wind in terms of hoping to generate faster growth. So you throw on the Fed tightening the lack of any Stimulus overseas the China slowdown and then you group that on with the tariffs and we have the end of this economic cycle With a situation where central banks are not going to be able to save the day Whereas pretty much in all the previous Downturns they’ve been able to ease policy which then stimulated growth and we’ve been somehow able to get out of it So when you look at today there, is this belief. Okay? Yeah, the Fed is going to cut it there No, it’s not going to help though and when you think about Stimulus the government makes a deal with you when they create stimulus whether it’s fiscal and monetary on the monetary side They’re saying to you. I’ll make a deal and say you saving money to buy that car a house I’ll lower interest rates and you promise me that you’ll buy that car or house today instead of waiting til tomorrow Well, if rates are just low forever You don’t have that Impulse because you can just wait till tomorrow because rates will not be any higher. If anything they can be even lower So that’s why there’s really no more Stimulus to be had even though these central banks are basically trying they’re basically shooting blanks at this point And as I said earlier actually doing damage now in Europe and Japan and the question with the Fed is Does Jake Jay Powell and and company? Take the evidence of the experience overseas and say, okay Market, we’ll give you some of your rate cuts Okay, Trump will give you some of your rate cuts, but this is not the path down to zero now unfortunately Jay Powell in his speech a few months ago said it’s not if we go back to zero to when Which shows that he’s learned nothing and then in terms of qyz, like oh, yeah There’s plenty of Treasuries for us to buy so that’s his do something instinct. That’s his own institutionalized I’m in the Fed. I drink that kool-aid. That’s the only thing I know Instinct but we’ll have to see whether it actually comes to fruition. Like if I was in his spot I Again, I don’t think rate cuts are gonna do anything because the cost of capital is not an inhibiting factor in anything. I mean, For those buying a house the bond market just ease policy by 100 basis points for you And the only thing that it stimulated was reef eyes It’s done little to stimulate purchases because the average person is saying well rates aren’t down because things are good Things are softening. Therefore. I need to be nervous and rein it in and affordability is a major problem of Multiple years of excessive home price growth so I would be cutting rates To no less than 1% I would basically say 1% is where we stop and the chips will fall where they may now I’m saying what they should do Obviously, they’re not going to do that. They’re gonna follow what the others have done, but I think that’s the situation we’re in Therefore investors need to reevaluate p/e multiples because there’s assumption. Oh the lower rates go It’s the discount rate for future cash flows asset prices can go to the moon But the flipside is is that cash flows are now shrinking Margins are now receding earnings are now going to reverse. How much do you want to pay for that? Do you still want to pay 18 times earning just because rates although no I want to pay less than that because as I said rates will not stimulate growth and all I’m gonna be left with is a lower lower earnings piece at which to price So in terms of timing the end of the cycle How close do you think we’re actually to a recession so I get asked that question all the time When will when will we have the recession and I argue we’re manufacturing and trade. We’re already in a recession Capital investment is is bordering on a recession particularly an equipment on software. It’s doing better So really the only thing that’s keeping us afloat is the services side of the economy in the u.s Consumer and the question is okay. What tips over the US consumer? Well, that’ll be the labor market that’ll be wages. And that’ll be the direction of the stock market So in the July payroll number we saw a few weeks ago We’re beginning to see a change in in the labor market so hours worked slipped because when you’re an employer and your business, all of a sudden is more uncertain the first thing you do is Okay, let me reduce the hours worked in my employees. I don’t want to get rid of them. I like my employees They’re good people. They’re qualified but businesses a little slow. So instead of working, you know, 40 hours a week. They’re going to work 37 hours a week. Well if time goes and business doesn’t improve and you need to protect your earnings well Then you’ll you’ll you’ll you’ll stop hiring and then you’ll eventually start to lay off workers Well, then what’s the spillover into the services sector? Well, look at the trucking sector, which is a service sector Those trucks are taking everything that the manufacturers are making putting along the trucks and delivering it to their end points Well, we’re beginning to see a slowdown in the trucking business. We’re beginning to see bankruptcies and a reduction in hiring well if these truckers are Doing less miles and then less people on the road where they’re stopping at restaurants less often. They’re making less money so we’re beginning to see the progression of how this is now spreading and So all the sudden hiring slows down consumers become less confident about their job Wage growth starts to slow down then lose that consumer support Then all within this the stock market will not be able to be kept up by the Fed So you get a decline in the stock market? Well that affects consumer spending because we are an asset price depend an economy So as the stock market goes so goes confidence and you can really make a correlation Between the sp500 and the University of Michigan consumer confidence number So it’s going to be a combination of the decline in asset prices with the economic scenario that I think unfortunately is Unfolding now things could reverse Trump can pull back the tariffs and there can be a kumbaya and we can somehow regenerate confidence again because a lot of it is at least right now confidence that is then of now affecting business decision making But it doesn’t look like he’s gonna pull that back. It doesn’t look like there’s going to be any potential for a deal So I’m afraid that This is going to continue so given the current environment How should traders position I know you’ve mentioned a few different trades over the past few months You’ve been long gold, which has finally started to work out for you finally after quite some time I know you’re excited about that one and you’ve also been long copper which is kind of unique To be long copper in a slowing growth environment. I know you mentioned that last time can you please break down your copper trade? And why it hasn’t worked out recently. So I I unfocused on value right now and one of the caveats I gave when I talked about copper was This is highly economically sensitive This is going to be driven in the short term where China’s growth goes and where global growth goes That is the risk. I was making the argument from a longer-term perspective that the supply-demand imbalance Is is beginning to get out of whack and that there even with this reduction and demand? There’s still major supply deficits in copper and that we were on the cusp of getting a secular shift in the demand drivers for copper away from the historical construction, you know in China, for example You know building apartment building after apartment building and that solar wind electric vehicles was going to be over the next five to ten years a voracious buyer of copper and that trading and commodities hugely volatile, of course and You want to buy them when they’re out of favor? You want to sell them when they’re in favor and You know for all these to me today The recession fears are the greatest It’s hard to make this case for copper right now because the trades not going to work If the globe is gonna go into recession So the way that I sort of danced around it rather than saying go out and buy copper was southern copper Was a name that I liked because it’s paying a five percent dividend and its cost as 80 cents a pound With the price of copper now about 260 and that I was willing to ride out this demand Destruction you can call it if the global economy goes into a recession for this longer-term Supply-demand imbalance that’s only growing. And if anything you get a further decline in copper You know expansion plans and all that easy copper mines are going to get cut even more So you’re really setting ourselves up for a voracious bull market at some point. It’s just from a trading standpoint It’s not worked and for all you know, I called in probably high 30s now it’s in the low thirties So for the short term trader, you can say okay cut my losses at you know A 20% decline for those were the long-term perspective like myself Any decline in copper, I’m gonna buy this stock at and I’m specifying the stock might interest supplying copper futures I’m not interested in buying Freeport This is a company with a strong balance sheet that can get through, you know Any short-term difficult time because I know this is this is a big trade I mean, I’m expecting copper to go to four or five dollars a pound From two and a half to two sixty now. So yeah, maybe copper goes back to two But the upside to me is much greater than the downside So you’re saying right here right now Southern coppers trading around $30 or so, you’d be buying the stock right here Yes buying more but people have to understand that again. This is a very sick This is cyclical downturn we’re in but I emphasize a cyclical downturn. There’s not a secular story. That’s Negative here for copper copper is the most important industrial metal with them the most attractive Fundamentals over the next ten years in terms of what it’s going to be used for my commodity exposure. My portfolio is usually Much smaller than my you know secular Ideas that I have it’s just so happens that my recent ones for real vision have been more of the commodity more cyclically Impacted ideas. So how much upside I guess over the next two to three years. Do you see for southern copper? well if I’m right and and and we do actually grow again globally and and and this Evy story really picks up steam and Copper does go to four or five because of the major imbalances that I’m seeing I mean, I think you’ll get you know, at least a double from here in southern copper And you know their dividend is is could be somewhat variable. But at least right now it’s paying about a five percent Dividend and just in case things don’t go your way And we do see this recession unfold where would you put your stop-loss for southern copper? Well in a short term trading basis my stop when I gave the last idea I would have been stopped out. Correct? Yeah Dollars or so. Yeah, it was down at these levels stopped out twenty percent the climate which which when you’re dealing with the commodity, It’s fine. I’ll take that because usually the upside is much greater But because of what I see over time, I’m comfortable, you know The mistake people make is buying on the dip in broken situations broken companies and bad balance sheets Where you never recover that capital? I’m more comfortable buying on the pull backs when I know I’m buying not a broken story, but a cyclical e Impacted story but a company with a good balance sheet that can survive the downturns because then you know those stories rebound It’s the value traps that you get into that you want to avoid. So it’s not for everybody buying on the dip some traders They should stay discipline and to be out of the trade and and wait for The story to get better in terms of the the economic situation, you know, I tend to be more patient. So I’m willing to To write out the situation just in case traders or investors wanted to play more of a short-term thesis here. What should they do? I know you I know you like gold you mentioned copper. But what else can they do? Well, I I would be in the short-term swapping, you know If you wanted to be out of that copper trade to me gold and silver This is just the beginning of something more and when I say just the beginning Gold’s already of fifty percent From its December 2015. Beer market low Silver though is is barely above its low. So silver has a lot of catch up to do and silver somehow some days It’s treated as a currency just as gold is some days it’s treated as an industrial metal where those economic worries you know filter in I Think over time it’ll be more grouped in as a currency than an industrial metal and that gold is silver ratio will compress leading to a lot of upside in the price of silver So I am really optimistic about gold and silver and I’ve talked about gold and silver multiple times But I remember last time I talked about it. It felt like everything was coming together both in terms of the bear case disappearing With the bear case was of the feds raising rates in there far away Tightening more than any other central bank and that’s good for the dollar – now the feds obviously easing the dollars hung in pretty well here But gold is rallying in the face of that dollar strength, and then you throw in this collapse and real rates Which the rise in negative yielding rates is another way of saying that and then you have the technical story getting above this 1375 level which I mentioned last time and to me you’re you know, now you’re looking at the September 2011 highs Silver silver got 250 now, it’s 17. So you have a lot of upside in silver as well So in the short term that’s where the trader should have their focus. That’s where the bull market is right now That’s where you want to buy dips. That’s where you want to ride on the upside The other stuff is you know coppers gonna be more a difficult situation here in the short term because of the cyclical Demand issues that it’s now experiencing Peter bullish on copper bullish on gold. We’ll see how it plays out in the months to come Thanks so much for joining us. Thanks changing. So Peter is still bullish on precious metals and copper he recommends traders buy gold and silver for short term trades and suggests investors buy shares of southern copper ticker symbol s CCO at current levels. He thinks the stock could double over the next few years

12 thoughts on “Trading Copper and Gold in a Recession (w/ Peter Boockvar) | Stock Trade Ideas”

  1. after hearing brag on copper while watching it tank I'm not going to listen to what he thinks about Gold.. this guy is full of crap trend will last longer than you will stay solvent RV dont waste my time

  2. I've been watching Peter for many years and he always impressed me with his candor and levelheaded approach. I heed his advice.

  3. Great advice. I'm buying the dips in both southern copper and lundin mining. I totally agree with him on silver. Great interview too, I like the interviewer's style. I personally think that Chinese technology companies and commodities are going to be the big gainers in 2020-2021. Cheers.

  4. I think we should raise interest rates up to 8% FED FUND Rate to help the middle class to increase savings rate and to fully fund all of these retirement pension funds for retirees. If the stock market bubble pop, so what, this stock market is in a big bubble anyway and real estate prices is way too high as well for the average person can afford it. Having a big deflationary recession for the next 3 to 5 years is actually good for the middle class for they can afford to buy things again at affordable prices. The reason why the FED will not do this is because the multi-international corporations are controlling Washington and or politicians. The FED does not actually help the middle class people here. So because the international corporations are controlling our government, USA will be heading into stagflation economy and will eventually become the next Venezuela country and will sacrifice the middle class families. I hope President Trump or some other politician will prevent this from happening. God Bless America.

  5. This is trading stuff. Buy and hold

    not pump and dump. Everybody hold their metal till after the next pop and it will settle at a plateau. Then you spend it as needed.

  6. Truck tonnage is making a new all time high. Service sector matters for jobs (75% share of emplyoment) whilst manufacturing matters for GDP

Leave a Reply

Your email address will not be published. Required fields are marked *