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Dr. Copper may be telling us its ‘time to get out of equities’: Societe Generale

Dr. Copper is usually a good indicator for economic trends and markets.
SAN FRANCISCO (MarketWatch) — Dr. Copper, as the industrial metal is known to investors, might be offering Wall Street the wrong economic prognosis, or maybe we’re just misreading it.
 
According to Société Générale, Prices for copper futures saw a big rally on Friday, but that doesn’t make up for its year-to-date loss. The July copper contract   settled at $3.315 a pound on Comex, up 21 cents, or 6.8%, for the session. It’s still trading down roughly 10% for the year.
Based on 2011 data Société Générale is France's second largest bank behind BNP Paribas and the no. 8 bank in the European zone.
 
 
Copper, which is also known as “Dr. Copper” because of its ability to serve as an indicator, is “leading the way downward,” Albert Edwards, a strategist at Societe Generale, told clients in a research note dated Thursday.
“Copper is acting exactly as it did when I wrote about the impotence of liquidity in the face of the (then imminent) 2007 recession,” said Edwards. “It is giving us an early warning that liquidity will not save risk assets: time to get out of equities.”
“The unfolding recession accompanied by full-blown deflation will result in a loss of investor confidence that central banks are able to prevent a Japanese-style deflationary event,” he said. “Liquidity will evaporate from equities if we dive into deflationary recession,” and move into “ridiculously expensive bonds” as quantitative easing is ramped up further.

 
Ref: http://articles.marketwatch.com/2013-03-22/markets/37915637_1_copper-futures-prices-economic-activity-indicator
http://blogs.marketwatch.com/thetell/2013/05/03/dr-copper-may-be-telling-us-its-time-to-get-out-of-equities-societe-generale/
 
Chart courtesy: http://blog.yardeni.com/2011/05/copper-vs-stock-prices-in-us-china.html
For more similar analysis visit http://blog.yardeni.com Yardeni Research, Inc. provides in-depth empirical and
analytical research on the global economy, which is the basis for our investment strategy and asset
allocation recommendations

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