Tuesday, November 22, 2016

"Goldman Overweights Commodities for First Time in Four Years"

Oh good grief, ya think?

The timestamp on "If You've Noticed A Perma-Bid In Commodities, You're Not Imagining It" was  6:42 AM October 20 and FT Alphaville, who have a pretty big megaphone, flagged it the next day.
 (thank you Mr. Keohane)
And in the month since that was posted even copper, specifically called out as a laggard, joined the party:
Copper via FinViz


From Bloomberg:
Goldman Sachs Group Inc. said investors should bet on higher commodities prices in the next year as manufacturing picks up around the world, the first time the bank has recommended an overweight position for the asset class in more than four years.

Purchasing managers’ indexes strengthened in all major regions in October, helping to spur gains in iron ore, copper and other base metals. Goldman raised its iron ore price forecasts, citing an unexpected resilience in steel usage and a demand boost coming from broad restocking, as well as its oil price estimates into next year.

“The recent re-acceleration in global PMIs suggests commodity markets are entering a cyclically stronger environment,” Goldman analysts led by Jeff Currie wrote in a report e-mailed Monday. “Supply restrictions from policy actions should benefit oil, coking coal and nickel in the near term while economic reductions should boost natural gas and zinc.”

Goldman Sachs is the biggest commodities dealer on Wall Street by sales and for that reason the views of its analysts carry extra weight among natural resources investors.

The bank raised its outlook for returns on the Standard & Poor’s GSCI Enhanced commodity index to 9 percent on a three-month basis, compared with a previous expectation for a decline of 2 percent. It also forecasts returns of 11 percent and 6 percent on a six-month and 12-month basis, respectively.

Industrial metals have rallied 14 percent in London in the past month on expectations that the economy in top user China is stabilizing and a Donald Trump presidency in the U.S. will bolster demand. Credit-fueled stimulus in China this year has been the primary driver of recent gains, rather than speculation surrounding the size of Trump’s infrastructure-investment plan, Goldman said....MORE
Zinc? I got your zinc right here:
...From an April '08 post, "Buy Tin":
That was the cryptic message from a reformed metals trader this afternoon. No rationale, no investment thesis, just "buy tin".
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!"...
The episode aired in January 1980 so at $.8580, zinc didn't do so hot (but actually better than gold, which hit $850 that same month). The reformed metals trader worked for one of the discrete, some might say secretive  Swiss-based physical commodities traders.

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....
There hasn't been a lot of urgency to pull the trigger....
 Here's the last half decade via Kitco: