La Vie En Rouge

Ah, to be miserable in Paris! Here we are prattling on about the moral failings of the Europeans and their impending economic doom…and there is Diggers and Drillers editor Dr Alex Cowie sending us the following note from the City of Lights on Sunday:

After months of headlines focused on Europe’s demise, it is good to get over here and have a look from street level. Frankly, you’d never know anything was wrong. The shops in Paris were busy, nothing was reduced in price, and service was just as snooty as it has always been. Grand French dames were walking down the street with enough pearls to pay off the Greek debt. Everyone was so dolled up that when I saw my reflection in the mirror I thought I was looking at a homeless person.

We also went to see the Red Hot Chilli Peppers concert while we were in Paris. Even though they are pushing 50 and tour with their kids these days, the band still put on a hell of a show. And despite the ridiculous price of the tickets, the place was still packed to the rafters.

La Economie?

It seemed fine from what I could see.

But so much hangs on the resolution from the meetings taking place as I write this on Sunday afternoon. The markets have essentially been treading water most of the week in anticipation of some ‘big bazooka’ solution.

Hmm. Paris is NOT burning. And according to the Financial Times, “Risk appetite firms on hopes for Eurozone deal.” The FT reports that, “Risk assets are strongly in positive territory as traders bet that European leaders are making progress on a plan to resolve the region’s debt crisis and after China data countered fears that the world’s second-biggest economy faced a ‘hard landing.'”

We’ll get back to China in a moment. But the FT is not wrong, at least about traders betting the house that Europe will get its own house in order. The best example is copper, the red metal, or rouge if you’re a resource analyst enjoying the countryside in Normandy.

Life in red – or la vie en rouge – was pretty good yesterday for metals traders. Copper was up 7%. That makes two big days in a row. After two shocking days in which traders seriously considered what a Greek default might mean (world recession), copper traded in New York is trying to cross over its 50-day moving average.

Copper Spot Price
Click here to enlarge

Alex would be pleased with this. He’s been banging on about copper since his trip to the Kalahari desert last year. It’s one of the commodities he’s bullish on for 2012. Gold, potash, and tin are some of the others. If you want to read the method behind his resource stock picking, have a look here.

We should pause to make a quick point. How can it be that one of our analysts has a view on copper that’s diametrically opposed to our own? Not only is it confusing to a new reader of the Markets and Money, it can seem like the height of inconsistency. Allow us to quickly explain…

We don’t tell our analysts what to write or think. As a publisher of independent and unconventional ideas, it wouldn’t make any sense for us to only hire analysts who already agreed with us. We pay them to think for themselves and all that we really ask is that they’re not lazy or conventional.

In fact, we really only have four criteria for editors we hire: they must be capable of (and prefer) independent thought, they must be handy with a spreadsheet, the must know their way around a balance sheet and cash flow statement (income statements are increasingly worthless), and they must be able to write to you about sometimes complex subjects without using financial jargon.

The marketplace decides who’s right and who’s wrong. Either an investment idea works or it doesn’t. All of our editors are comfortable putting their names and ideas on the line. And because we accept no advertising income from companies or third parties, everyone is free to say exactly what they think without worrying about upsetting an advertiser.

This, by the way, is why our e-letters only have ads for our own products and this is why our advertising is probably harder hitting than what you’re used to seeing in Australia. We don’t have corporate sponsors paying the bills. But producing financial research, hiring independent analysts with their own ideas, and writing the Markets and Money and Money Morning five days a week is not cheap.

Our sole source of revenue is the price you pay for your subscription. If you don’t like the advertising, just ignore it. And as always, if it really bothers you, we’re happy to refund the price of your free subscription, in full, no questions asked.

Now, back to China. Part of the reason copper was up so much on Monday is that the HSBC China Purchasing Managers Index was in positive territory for the first time in three months. This must mean that China is going to save the world after all and that a slowdown there is not possible. Mustn’t it?

We’ll see about that! Of 30 economists surveyed by Reuters, not a single one thinks China will grow at less than 8% in 2012. Based on our own research and Greg Canavan’s monthly report of Sound Money. Sound Investments, which we peaked at this morning, we’re willing to say all 30 of those economists are complete morons!!

There is huge “tail risk” from the Dragon right now. That is, the risk of a statistically improbable Chinese bust is probably a lot higher than conventional economists are capable of imagining. Not only that, these economists are probably wrong about human nature, just as the Europeans are. And to compound their error, they’re completely wrong about economics. How? All will be revealed tomorrow. Until then…

Dan Denning
for Markets and Money

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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DD: “Of 30 economists surveyed by Reuters, not a single one thinks China will grow at less than 8% in 2012… we’re willing to say all 30 of those economists are complete morons!!

That’s the stuff, Dan! What a l-o-n-g time it’s been since a DRA journo has been prepared to provide such an easily-and-quickly-confirmed punt on the Chinese situation. In just fourteen months you can look back and state, with great pride: “There ya go. Thirty moronic economists were wrong… and I, Dan Denning have been proven right (again!)” ;)

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