This article was originally published by Michael Snyder at The Economic Collapse
Oil, copper and lumber are all telling us the exact same thing, and it isn’t good news for the global economy. When economic activity is booming, demand for commodities such as oil, copper and lumber goes up and that generally causes prices to rise. But when economic activity is slowing down, demand for such commodities falls and that generally causes prices to decline. In recent weeks, we have witnessed a decline in commodity prices unlike anything that we have witnessed in years, and many are concerned that this is a very clear indication that hard times are ahead for the global economy.
Let’s talk about oil first. The price of oil peaked in early October, but since that time it has fallen more than 25 percent, and the IEA is warning of “relatively weak” demand out of Asia and Europe…
The International Energy Agency said on Wednesday that while US demand for oil has been “very robust,” demand in Europe and developed Asian countries “continues to be relatively weak.” The IEA also warned of a “slowdown” in demand in developing nations such as India, Brazil and Argentina caused by high oil prices, weak currencies and deteriorating economic activity.
“The outlook for the global economy has deteriorated,” the IEA wrote.
Meanwhile, the price of copper has been declining for quite some time now. The price of copper also fell substantially just before the last recession, and many analysts are pointing out that “Dr. Copper” is now waving a red flag once again…
The message of weakening demand on the oil front was reinforced by the falling price of copper. The base metal is often referred to as “Dr. Copper” on its presumed ability to forecast the peaks and troughs of business cycles since it is used in different areas of the economy such as homes, factories and electricity generation. Copper has served as a leading indicator of both recessions and economic booms.
The price of lumber is a “third witness” that indicates that big trouble is looming.
Last month, lumber dropped more than 10 percent, and that was the biggest monthly drop that we have seen in more than 7 years…
In October, prices for softwood lumber in the U.S. dropped 10.3% – the largest decline since May 2011, according to the Producer Price Index (PPI) release by the Bureau of Labor Statistics. The producer price index for softwood lumber has fallen 21.2% since setting the cycle and all-time high in June.
If oil, copper and lumber are all telling us the same thing simultaneously, don’t you think that we should be listening?
At this point, even Bloomberg is admitting that the global economy is heading toward “a generalized slowdown”…
These developments suggest the synchronized growth that the global economy has enjoyed in recent years is likely to be replaced by a generalized slowdown. Just take a look at the data out of Japan and Germany this week, which showed the world’s third- and fourth-largest economies contracted in the third quarter.
How many signs is it going to take before people start understanding what is happening?
Wells Fargo just notified about 1,000 employees that they will be laid off. Job losses are starting to mount, and it is likely that we will start to see these sorts of news stories on an almost daily basis now.
And as the shaking on Wall Street accelerates, we are going to see more financial firms get into trouble. In fact, we just witnessed the total collapse of OptionSellers.com. The following comes from a notice that they sent to investors informing them that they lost all their money and that the firm is being liquidated…
I am writing to give you an update on the situation here with your account.
We have spent the week unwinding our short natural gas call position as expediently as possible.
Today which was to be the final day of liquidation, the market flared as prices appear to have been caught in a “short squeeze.”
The speed at which it took place is truly beyond anything I have seen in my career. It overran our risk control systems and left us at the mercy of the market.
In short, it was a rogue wave and it overwhelmed us.
Unfortunately, this has resulted in a catastrophic loss.
Our clearing firm, FC Stone now requires us to liquidate all positions. We hoped to have this done today. If not, it will be completed tomorrow.
Your account could potentially be facing a debit balance as of tomorrow. OptionSellers.com will be processing fee credits over the course of the coming days to help alleviate debit balances. What these will be will be determined after all positions are cleared.
This has in effect, crippled the firm. At this point, our brokers at FC Stone have been assisting us in liquidation.
Our offices will remain open and we will all still be here to answer your questions and process account closings. We will do everything in our power to ease what discomfort we can.
I am truly sorry this has happened.
I will be updating you again via memo in 24 hours.
Regards,
OptionSellers.com
Those investors are among the first to be completely wiped out, but they certainly won’t be the last.
The ironic thing is that Americans are less concerned about another crisis than they have been at any point since 2008 at a time when they should be more focused on getting prepared than ever.
You know that it is really late in the game when even Jim Cramer of CNBC is saying that the U.S. economy is really slowing down. A few of my readers wrote me after that article because they didn’t like the fact that I had quoted Jim Cramer. But I don’t think that they really got my point. I was not endorsing Jim Cramer as some sort of financial guru. Rather, I was pointing out that even mainstream media celebrities that were previously cheerleaders for the economy are now recognizing the reality of what we are facing.
Global economic activity is slowing down, and things are shifting very rapidly now. The weather is already getting very cold, the mood of the nation is very dark, and it would only take a very small push to send us completely tumbling over the edge.
***
Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.
Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream.
If you want to know what is coming and what you can do to prepare, read his latest book [amazon text=Get Prepared Now!: Why A Great Crisis Is Coming & How You Can Survive It&asin=150522599X].
“Your account could potentially be facing a debit balance as of tomorrow.”
So, if I have read this correctly, they not only lose all your money but leave you with a fee. The balance is not zero but in the negative.
I like it when the markets behave realistically.
A semi-realistic valuation for Amazon (PE ratio of 25, instead of 84) means a price drop of 70%.
For Salesforce, allowing a very optimistic PE of 30 (instead of 126), a realistic valuation involves a 76% price drop.
Salesforce looks pretty mature to me, they have their own skyscraper. So why the sky-high valuation ?
The real reason lumber is dropping in price and still they cant Kill Bill
ht tps://youtu.be/KZgzuso-wCU
https://youtu.be/KZgzuso-wCU
Stock market is back up this morning and everyone is feeling the Chris Matthews tingling in their leg. I’m still buying silver!
Sound wisdom. Buy it while its still cheap.
When it goes up to $20 an ounce the herd jumps in.
Then you won’t find it anywhere.
Yup, I love my silver. For years I used to buy CULL grade Morgan dollars for just over melt. I had over 1000 of them at one point. So glad I did because I had about a year and a half of hard times and moved around a lot and I sold most of them. Most at 3x what I paid for them so I did good. Silver is a great prep item and can save yer skin in a pinch. WHAT’S IN YOUR WALLET?
Snyder AGAIN? HO HUM, back to sleep.
I think he might be on to something this time.
In my opinion;
High commodity prices equals inflation, BAD!
Lower commodity prices equals depression, GOOD!
There is something very wrong with this Snyder
guy to want price inflation when wages and
pensions are essentially fixed incomes.
What goes up must come down. Everything is grossly overpriced and if capitalism dictates prices must always rise then it is not a system worthy of support. It is no holds barred thievery because enough profit begets never enough profit.
Oil is dropping in price because there is an over supply.
Copper is lower in demand because builders are using plastic for water pipes in newer homes. Still using copper for electric wire but for little else.
Can’t speak for lumber except I would expect with the new Cali Gov the state will be doing some clear cutting of their forests in the near future. Overabundance of lumber form Cali.
Not that the SHTF will not hit the fan for other reasons. Such as a democratic house of reps.
Ya copper plumbing is shit, especially in freezing climates. Besides electrical uses, or making a worm for your still, it doesn’t hold a lot of value for me.
These are not drivers, their global indicators. As they say Dr Copper has a PHD in Economics.
Copper was high because the Chinese and others where buying it to make all those inferior electric tools and appliances that soon expired and needed replacing with a new piece of junk. Eventually some USA based Manufactures will start making stuff the uses copper.