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The Doctor Is In?

Gold’s not buying. Neither is the bond market. Inflation Hysteria #2 has so much less to it than #1 in 2017-18 ever did. But this one isn’t completely empty. There are some asset classes which have been absolutely on fire thus seemingly consistent…

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3 years ago

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Gold’s not buying. Neither is the bond market. Inflation Hysteria #2 has so much less to it than #1 in 2017-18 ever did. But this one isn’t completely empty. There are some asset classes which have been absolutely on fire thus seemingly consistent with the “money printing” excesses of Fed and feds. Investors fearing for currency “debasement” and fiscal breakdown by piling into real and tangible assets in an obvious way.

Just not gold. Other commodities, however, particularly copper.

They call it Dr. Copper for a reason, and that reason is its situational proximity to real fundamental balances – or imbalances – in the real economy. As an industrial metal, there’s as much to its price in economy as what everyone is told to think about dollar currency. But in those instances where the two get together, combined there could be an inflationary indication supposedly like no other.

Or at least not nearly as deflationary as recent years.




Late in 2020 is being talked about as if this is one of those instances. Perhaps, as some say, the most likely candidate for the long-feared final end of the US dollar and the inflationary inferno its collapse is purported to bring about.

So far as the good metal doctor is concerned, the price hasn’t been this high in more than seven and a half years. Surpassing the last cyclical peak during Inflation Hysteria #1, it’s not just that fact but also the manner in which it has come about; a better than forty-five-degree angle shooting up, like QE’s bank reserves, seemingly to the moon (though still much less impressive than during Reflation #1 with so much less “money printing”).

Not only that, look at exactly where the appreciation began: March 23.

 




And it was post-COVID vaccine in early November which has given the price its latest leg higher, the most potent one yet. Turbocharging the buying to an extent that the inflation theory gains this apparently important multi-year high.

Like Larry Summers, is Dr. Copper signaling the imminent danger of Fed and feds having done “too much?”

If there is a problem placing too much emphasis on the mainstream view of its monetary aspects it often comes at the expense of the more fundamental elements to the price action. In this case literally.

For one thing, copper mines, particularly in Chile, were shut down earlier this year along with practically everything else. In many copper production sites around the world, mining has been slow to restart. As a result, copper supply globally will fall this year by a substantial amount, a rare occurrence.

The estimates vary, of course, but a recent one from Citigroup says global metal supply will drop 3.4% from 2019. Another from Macquarie indicates somewhere around -2.5%.

The copper industry had already been facing the prospects of a cumulative supply deficit in the long run. Basically, most or all of the easy pickings have already been depleted and Euro$ #3 did most of the metal mining countries no favors by shutting off required (dollar) capital to have begun turning exploration into investment before getting to production in the years ahead.

There’s a long lag time between finding where the copper is and beginning to get it out of the ground, and it takes an enormous and steady flow of eurodollars to get it done.

Forward-looking approximations made by UBS earlier this month, for example, forecast modest supply deficits (taking into account waste and reclaiming scrap) this year and next, very modest surpluses in ’22 and ’23, followed by larger and larger shortfalls out to 2030. UBS figures that the supply gap could reach as much as 10 million tons (out of estimated future demand of 34 mt) by that point.

In order to get ahead of that imbalance, copper producers would need to really ramp up investment right around…2015. But, like 2014-16, now’s not exactly the best time for monetary and credit flow, sorry Jay Powell, not to mention all the other problems related to the 2020 situation in most places around the world. The future seems to be one where supply bottlenecks become more of a problem and little economics (small “e”) can do about it.

Given that long run scenario, the metals industry had already experienced a severe bottleneck just this year. In the short run, too, the deficit created earlier in 2020 had left even the most nimbly funded users to scramble for material – especially in China. Uncertain as to the ultimate extent of the supply disruption, and with prices in the toilet for a time, this set off what seems to have been a true episode of hoarding.

Going back to UBS again:

Inventories on exchanges have fallen from ~550kt in Apr-20 to ~325kt now. However, we believe that China’s SRB and individual provinces engaged in stockpiling activity mid-year. This can be seen by apparent consumption which is +16% YTD in China, bottom up activity metrics elsewhere suggest real underlying demand would be ~5%.

This has exacerbated the metals deficit in the short-term on top of the longer-term picture which is, however it might work out, one where risks are entirely on the supply side.

Given this material disruption of material scale, the other component left to it is what’s supposed to be in demand. Again, mostly China. In these figures cited above there’s better than cautious optimism as to how the Chinese as well as others around the rest of the Emerging Market world are going to deal with the aftermath of the huge global recession of 2020. It is, of course, expected that policies will be highly “accommodative” for a very long time, boosting economic output on the way back up.

With that plus expected recovery from the trough, even a partial one, and now vaccines plotting a realistic end to the pandemic, there’s quite a bit of optimism about the intermediate term, too, on the demand side thus creating even more of a projected fundamental imbalance.

Short and long run supply problems mixing with vaccine-aphoria and Dr. Copper’s sent flying upward (note: it’s not just copper where these same imbalances have and are showing up, as inventory hoarding has been spotted in other industrial metals, too, as well as supply disruptions which have been even more severe).

 

 




It’s not a “money printing” trend so much as, like oil, a negative story of economic activity held back by the repercussion of a deflationary posture. A good way to picture this, at least in the US, is using BLS data on the employment situation in the mining (and logging) industries (above). If there’s a commodity super-cycle forming here predicated on a price surge fed by too much Fed and feds, or even just a roaring global recovery China-style, then domestic producers sure aren’t ramping up their hiring (and short run output) in direct anticipation of it.

On the contrary (back to UBS on last time):

The copper price rallied during Q4 to an 8-year high of US$3.50/lb. This appears to be partially ahead of the fundamentals, driven in part by speculative buying.

In other words, classic supply bottleneck further amplified, as all these commodity commentators have noted, by the “money printing” speculators looking for something other than Bitcoin (also 2017 again) to insure against what they’re led to believe is a looming inflationary breakout.

Not even the metals producers – here or anywhere – think this is the case. Or if they do, they curiously aren’t moving very quickly to take advantage, being hindered by the very thing which, like 2017 into 2018, had thwarted the last inflation hysteria. In fact, they aren’t moving much at all which is really the entire point here.

With earlier copper hoarding expected to unwind over the months and year ahead, even the most demand-optimistic of these commodity watchers is expecting a modest pullback in the price during 2021. And these are mainstream Economist projections. Not to mention what’s actually going on in China, and it’s not massive “accommodation” by any stretch.

Supply constraints rather than Jay Powell’s name are all over Dr. Copper’s prescription pad. Thus, copper versus gold isn’t actually a direct comparison. Not yet, anyway.

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Key shipping company files for Chapter 11 bankruptcy

The Illinois-based general freight trucking company filed for Chapter 11 bankruptcy to reorganize.

Published

2 hours ago

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March 14, 2024

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The U.S. trucking industry has had a difficult beginning of the year for 2024 with several logistics companies filing for bankruptcy to seek either a Chapter 7 liquidation or Chapter 11 reorganization.

The Covid-19 pandemic caused a lot of supply chain issues for logistics companies and also created a shortage of truck drivers as many left the business for other occupations. Shipping companies, in the meantime, have had extreme difficulty recruiting new drivers for thousands of unfilled jobs.

Related: Tesla rival’s filing reveals Chapter 11 bankruptcy is possible

Freight forwarder company Boateng Logistics joined a growing list of shipping companies that permanently shuttered their businesses as the firm on Feb. 22 filed for Chapter 7 bankruptcy with plans to liquidate.

The Carlsbad, Calif., logistics company filed its petition in the U.S. Bankruptcy Court for the Southern District of California listing assets up to $50,000 and and $1 million to $10 million in liabilities. Court papers said it owed millions of dollars in liabilities to trucking, logistics and factoring companies. The company filed bankruptcy before any creditors could take legal action.

Lawsuits force companies to liquidate in bankruptcy

Lawsuits, however, can force companies to file bankruptcy, which was the case for J.J. & Sons Logistics of Clint, Texas, which on Jan. 22 filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Western District of Texas. The company filed bankruptcy four days before the scheduled start of a trial for a wrongful death lawsuit filed by the family of a former company truck driver who had died from drowning in 2016.

California-based logistics company Wise Choice Trans Corp. shut down operations and filed for Chapter 7 liquidation on Jan. 4 in the U.S. Bankruptcy Court for the Northern District of California, listing $1 million to $10 million in assets and liabilities.

The Hayward, Calif., third-party logistics company, founded in 2009, provided final mile, less-than-truckload and full truckload services, as well as warehouse and fulfillment services in the San Francisco Bay Area.

The Chapter 7 filing also implemented an automatic stay against all legal proceedings, as the company listed its involvement in four legal actions that were ongoing or concluded. Court papers reportedly did not list amounts for damages.

In some cases, debtors don't have to take a drastic action, such as a liquidation, and can instead file a Chapter 11 reorganization.

Truck shipping products.

Shutterstock

Nationwide Cargo seeks to reorganize its business

Nationwide Cargo Inc., a general freight trucking company that also hauls fresh produce and meat, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Illinois with plans to reorganize its business.

The East Dundee, Ill., shipping company listed $1 million to $10 million in assets and $10 million to $50 million in liabilities in its petition and said funds will not be available to pay unsecured creditors. The company operates with 183 trucks and 171 drivers, FreightWaves reported.

Nationwide Cargo's three largest secured creditors in the petition were Equify Financial LLC (owed about $3.5 million,) Commercial Credit Group (owed about $1.8 million) and Continental Bank NA (owed about $676,000.)

The shipping company reported gross revenue of about $34 million in 2022 and about $40 million in 2023.  From Jan. 1 until its petition date, the company generated $9.3 million in gross revenue.

Related: Veteran fund manager picks favorite stocks for 2024

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Key shipping company files Chapter 11 bankruptcy

The Illinois-based general freight trucking company filed for Chapter 11 bankruptcy to reorganize.

Published

2 hours ago

on

March 14, 2024

By

The U.S. trucking industry has had a difficult beginning of the year for 2024 with several logistics companies filing for bankruptcy to seek either a Chapter 7 liquidation or Chapter 11 reorganization.

The Covid-19 pandemic caused a lot of supply chain issues for logistics companies and also created a shortage of truck drivers as many left the business for other occupations. Shipping companies, in the meantime, have had extreme difficulty recruiting new drivers for thousands of unfilled jobs.

Related: Tesla rival’s filing reveals Chapter 11 bankruptcy is possible

Freight forwarder company Boateng Logistics joined a growing list of shipping companies that permanently shuttered their businesses as the firm on Feb. 22 filed for Chapter 7 bankruptcy with plans to liquidate.

The Carlsbad, Calif., logistics company filed its petition in the U.S. Bankruptcy Court for the Southern District of California listing assets up to $50,000 and and $1 million to $10 million in liabilities. Court papers said it owed millions of dollars in liabilities to trucking, logistics and factoring companies. The company filed bankruptcy before any creditors could take legal action.

Lawsuits force companies to liquidate in bankruptcy

Lawsuits, however, can force companies to file bankruptcy, which was the case for J.J. & Sons Logistics of Clint, Texas, which on Jan. 22 filed for Chapter 7 liquidation in the U.S. Bankruptcy Court for the Western District of Texas. The company filed bankruptcy four days before the scheduled start of a trial for a wrongful death lawsuit filed by the family of a former company truck driver who had died from drowning in 2016.

California-based logistics company Wise Choice Trans Corp. shut down operations and filed for Chapter 7 liquidation on Jan. 4 in the U.S. Bankruptcy Court for the Northern District of California, listing $1 million to $10 million in assets and liabilities.

The Hayward, Calif., third-party logistics company, founded in 2009, provided final mile, less-than-truckload and full truckload services, as well as warehouse and fulfillment services in the San Francisco Bay Area.

The Chapter 7 filing also implemented an automatic stay against all legal proceedings, as the company listed its involvement in four legal actions that were ongoing or concluded. Court papers reportedly did not list amounts for damages.

In some cases, debtors don't have to take a drastic action, such as a liquidation, and can instead file a Chapter 11 reorganization.

Truck shipping products.

Shutterstock

Nationwide Cargo seeks to reorganize its business

Nationwide Cargo Inc., a general freight trucking company that also hauls fresh produce and meat, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Illinois with plans to reorganize its business.

The East Dundee, Ill., shipping company listed $1 million to $10 million in assets and $10 million to $50 million in liabilities in its petition and said funds will not be available to pay unsecured creditors. The company operates with 183 trucks and 171 drivers, FreightWaves reported.

Nationwide Cargo's three largest secured creditors in the petition were Equify Financial LLC (owed about $3.5 million,) Commercial Credit Group (owed about $1.8 million) and Continental Bank NA (owed about $676,000.)

The shipping company reported gross revenue of about $34 million in 2022 and about $40 million in 2023.  From Jan. 1 until its petition date, the company generated $9.3 million in gross revenue.

Related: Veteran fund manager picks favorite stocks for 2024

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Tight inventory and frustrated buyers challenge agents in Virginia

With inventory a little more than half of what it was pre-pandemic, agents are struggling to find homes for clients in Virginia.

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5 hours ago

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March 14, 2024

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No matter where you are in the state, real estate agents in Virginia are facing low inventory conditions that are creating frustrating scenarios for their buyers.

“I think people are getting used to the interest rates where they are now, but there is just a huge lack of inventory,” said Chelsea Newcomb, a RE/MAX Realty Specialists agent based in Charlottesville. “I have buyers that are looking, but to find a house that you love enough to pay a high price for — and to be at over a 6.5% interest rate — it’s just a little bit harder to find something.”

Newcomb said that interest rates and higher prices, which have risen by more than $100,000 since March 2020, according to data from Altos Research, have caused her clients to be pickier when selecting a home.

“When rates and prices were lower, people were more willing to compromise,” Newcomb said.

Out in Wise, Virginia, near the westernmost tip of the state, RE/MAX Cavaliers agent Brett Tiller and his clients are also struggling to find suitable properties.

“The thing that really stands out, especially compared to two years ago, is the lack of quality listings,” Tiller said. “The slightly more upscale single-family listings for move-up buyers with children looking for their forever home just aren’t coming on the market right now, and demand is still very high.”

Statewide, Virginia had a 90-day average of 8,068 active single-family listings as of March 8, 2024, down from 14,471 single-family listings in early March 2020 at the onset of the COVID-19 pandemic, according to Altos Research. That represents a decrease of 44%.

Virginia-Inventory-Line-Chart-Virginia-90-day-Single-Family

In Newcomb’s base metro area of Charlottesville, there were an average of only 277 active single-family listings during the same recent 90-day period, compared to 892 at the onset of the pandemic. In Wise County, there were only 56 listings.

Due to the demand from move-up buyers in Tiller’s area, the average days on market for homes with a median price of roughly $190,000 was just 17 days as of early March 2024.

“For the right home, which is rare to find right now, we are still seeing multiple offers,” Tiller said. “The demand is the same right now as it was during the heart of the pandemic.”

According to Tiller, the tight inventory has caused homebuyers to spend up to six months searching for their new property, roughly double the time it took prior to the pandemic.

For Matt Salway in the Virginia Beach metro area, the tight inventory conditions are creating a rather hot market.

“Depending on where you are in the area, your listing could have 15 offers in two days,” the agent for Iron Valley Real Estate Hampton Roads | Virginia Beach said. “It has been crazy competition for most of Virginia Beach, and Norfolk is pretty hot too, especially for anything under $400,000.”

According to Altos Research, the Virginia Beach-Norfolk-Newport News housing market had a seven-day average Market Action Index score of 52.44 as of March 14, making it the seventh hottest housing market in the country. Altos considers any Market Action Index score above 30 to be indicative of a seller’s market.

Virginia-Beach-Metro-Area-Market-Action-Index-Line-Chart-Virginia-Beach-Norfolk-Newport-News-VA-NC-90-day-Single-Family

Further up the coastline on the vacation destination of Chincoteague Island, Long & Foster agent Meghan O. Clarkson is also seeing a decent amount of competition despite higher prices and interest rates.

“People are taking their time to actually come see things now instead of buying site unseen, and occasionally we see some seller concessions, but the traffic and the demand is still there; you might just work a little longer with people because we don’t have anything for sale,” Clarkson said.

“I’m busy and constantly have appointments, but the underlying frenzy from the height of the pandemic has gone away, but I think it is because we have just gotten used to it.”

While much of the demand that Clarkson’s market faces is for vacation homes and from retirees looking for a scenic spot to retire, a large portion of the demand in Salway’s market comes from military personnel and civilians working under government contracts.

“We have over a dozen military bases here, plus a bunch of shipyards, so the closer you get to all of those bases, the easier it is to sell a home and the faster the sale happens,” Salway said.

Due to this, Salway said that existing-home inventory typically does not come on the market unless an employment contract ends or the owner is reassigned to a different base, which is currently contributing to the tight inventory situation in his market.

Things are a bit different for Tiller and Newcomb, who are seeing a decent number of buyers from other, more expensive parts of the state.

“One of the crazy things about Louisa and Goochland, which are kind of like suburbs on the western side of Richmond, is that they are growing like crazy,” Newcomb said. “A lot of people are coming in from Northern Virginia because they can work remotely now.”

With a Market Action Index score of 50, it is easy to see why people are leaving the Washington-Arlington-Alexandria market for the Charlottesville market, which has an index score of 41.

In addition, the 90-day average median list price in Charlottesville is $585,000 compared to $729,900 in the D.C. area, which Newcomb said is also luring many Virginia homebuyers to move further south.

Median-Price-D.C.-vs.-Charlottesville-Line-Chart-90-day-Single-Family

“They are very accustomed to higher prices, so they are super impressed with the prices we offer here in the central Virginia area,” Newcomb said.

For local buyers, Newcomb said this means they are frequently being outbid or outpriced.

“A couple who is local to the area and has been here their whole life, they are just now starting to get their mind wrapped around the fact that you can’t get a house for $200,000 anymore,” Newcomb said.

As the year heads closer to spring, triggering the start of the prime homebuying season, agents in Virginia feel optimistic about the market.

“We are seeing seasonal trends like we did up through 2019,” Clarkson said. “The market kind of soft launched around President’s Day and it is still building, but I expect it to pick right back up and be in full swing by Easter like it always used to.”

But while they are confident in demand, questions still remain about whether there will be enough inventory to support even more homebuyers entering the market.

“I have a lot of buyers starting to come off the sidelines, but in my office, I also have a lot of people who are going to list their house in the next two to three weeks now that the weather is starting to break,” Newcomb said. “I think we are going to have a good spring and summer.”

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