Friday, April 4, 2008
That was the cryptic message from a reformed metals trader this afternoon. No rationale, no investment thesis, just "buy tin".The reformed metals trader worked for one of the discrete, some might say secretive Swiss-based physical commodities traders.
I couldn't help thinking of the Barney Miller episode "Child Stealers".
Time traveler "Adam Boyer" comes back from 2057 and is hounded by Harris for stock tips:
[Harris, acting on a tip from a "twinkie" claiming to be a Sociology Professor from Columbia University who's traveled back in time from the year 2057 (played by the great character actor Richard Libertini), calls his broker to transfer his assets from gold bullion to the financial standard of the future--Zinc!!]:
"...no, no blue chips, either...I was thinking about Zinc! (pause) Yeah, Zinc! What's it goin for these days? (writing the figure on a notepad)...Thirty seven and a half cents---a POUND?? (The "Professor" gives Harris an encouraging nod)...Yeah, well, I might be willin' to spring for a coupla TONS!" Source
Since the episode aired in January 1980 and zinc today is $1.075, zinc didn't do so hot (but much better than gold, which hit $850 that same month). Here's Kitco's zinc chart.
He had up to $50 mil. discretion to buy Russian copper cathodes or aluminum or whatever, figure out the logistics, rail, shipping, bribe the right port authorities etc. Pretty much end-to-end, turnkey, whatever you wanted to call it.
So when he called, I listened. And started laughing. I couldn't get that damned Barney Miller scene out of my head.
Matt likes tin. But the folks at Deutsche Bank like something else: zinc!I might be willin' to spring for a coupla tons.
In a report today, the analysts at DB compare zinc to other base metals such as nickel, copper and aluminum. The latter three have performed strongly due to supply constraints and strong demand. But zinc has not followed, mainly because investors feel zinc supplies are plentiful.
Back in December, Goldman Sachs called zinc the “next copper.” Perhaps they were early.
Deutsche notes that investors have shorted zinc as “a hedge against long positions in other metals. This has been a good trade but we believe that it has run its course and would suggest investors reverse this trade over the near-term.”
Deutsche trots out several reasons to like zinc compared to other base metals. Among them:
- The nickel/zinc ratio is 11.5x, compared with a 20-year average of 8 and a 10-year average of 10. That means either nickel needs to fall or zinc needs to rise to bring the ratio back to its historical balance....MORE
As I asked in our link to the GS buy rec: "Who will garner the nom de hoard 'Zincfinger'"?