It feels a little like 2008 right now… and I don’t mean with a tremendous market crash.
As I write, oil prices are one of the biggest headlines every single day — just as they were fourteen years ago. In 2008, “black gold” soared to its all-time highs, only to then fall 70% in the next seven months.
Generally speaking, oil has been snoozing ever since. The big exception was April 2020 when prices briefly went negative. (I’m still waiting for someone to pay me to take their oil, or however negative prices are supposed to work.)
Oil is dominating the headlines after Russia’s invasion of Ukraine. Russia is the third-largest oil producer in the world and the second-biggest exporter. With uncertainty now through the roof, traders are bidding prices higher.
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On Sunday, oil rose to more than $130 a barrel for the first time since July 2008. Later that month, oil hit its all-time high of $147.27 a barrel. Much of the wild trading was due to fundamentals, but speculative traders got in on the action, too, which made for some pretty heady price moves.
Oil soared more than 600% in six years leading up to its all-time highs, including a 60% pop to start 2008. The bottom then fell out as the financial crisis and recession hit the market and the economy. As a result, oil plummeted 70% in just seven months.
Whenever any asset moves as quickly as oil has, speculators will get involved. Oil is traded in futures contracts, which makes it even more attractive to speculators. Based on options activity, some are already betting it will hit $200 a barrel by the end of this month, which would be a 55% run in just three weeks.
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Commodity prices are higher across the board amid the Russia-Ukraine conflict. Supply disruptions are a real possibility, not to mention the war’s potential impact on the global economy. Oil is getting most of the attention, and rightfully so, but copper has quietly made new all-time highs.
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Russia’s invasion of Ukraine bumped copper over $5 a pound on Monday — for the first time ever. It wasn’t some wild spike, as copper has more than doubled since the Covid-19-induced bear market two years ago; it’s because of strong demand.
Quite simply, copper is a great conductor of electricity, and if you just look around, you can see the world is going electrical. This fuels what Eric sees as a battery metal “rush” that he expects will push prices higher for copper other metals electric technologies require.
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He calls it the Second Electric Revolution…
“I’m talking about the massive worldwide transition from combustion-based modes of power generation to renewable modes that fuel an array of electric- and battery-based technologies.
“Because electric vehicles (EVs) require large quantities of metals like copper, nickel, lithium, and manganese, mining companies have become the newest heartthrobs of the global auto industry.
“The car companies are realizing that if they wish to ramp up EV production, they must secure long-term supplies of the ‘battery metals’ that make their eco-friendly new autos possible.
“The average EV, for example, uses almost half as much copper as the average American house. And EVs aren’t the only ‘green’ products that require electric metals.
“Wind energy, for example, uses five times more copper per unit of electrical energy than does the conventional burning of coal. Photovoltaic solar power uses six times more copper per unit of electrical energy.
“So we should not be surprised if the copper boom becomes a ‘copper rush,’ followed by a buying panic that pushes the metal’s price even higher.”
The battery metal “rush” was one of Eric’s Power Trends for 2021, and his forecast panned out almost exactly as he predicted. He believes the trend is far from over, and that select stocks and ETFs will continue their market-beating ways here in 2022.
Copper isn’t just pipes and pennies anymore. It hasn’t been for a long time. It’s already helping power a lot of what’s around you, and it may help power your portfolio, too.
Sincerely,
Dave Gilbert
Editor, Smart Money
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