Latest / The Bear Market Podcast with Fexingo: Surviving Downturns, Buying the Dip, and Long-Term Resilience / Why Copper at Record Highs Is a Signal Worth Reading
Transcript
- Lucas: So copper just hit its highest level ever. And I think that's one of those headlines that people scroll past without stopping, but it's actually telling us a lot about where the global economy is headed. Luna: It's interesting because copper is so industrial. You don't think of it as a headline-grabbing metal, but it's everywhere. Wiring, pipes, electronics. Lucas: Right, it's literally the metal of economic growth. They call it Dr. Copper because it's got a PhD in economics — it tends to anticipate turning points in the global business cycle. And when it's making new highs, that's usually a sign that demand is solid, or that supply is really tight, or both. Luna: So what's driving this particular record? Is it demand or supply? Lucas: It's both, and that's what makes it interesting. On the demand side, you've got the energy transition — solar, wind, EVs, grid upgrades — all of that is extremely copper-intensive. An EV uses several times more copper than a conventional car. On the supply side, copper mines are getting harder to build. Permits take years, ore grades are declining, and there haven't been enough major discoveries. So you have this structural deficit that's been building for a while. Luna: And that's why copper is at a record even as the broader economy is slowing. Real GDP growth just came in at 1.5 percent annualized, down from over two percent. Lucas: Exactly. That's the paradox. The headline economic numbers are softening, but copper is saying that the underlying demand for stuff — physical stuff — is still strong. Part of that is the energy transition, which is being driven by policy more than by GDP growth. Part of it is that China's stimulus has been propping up infrastructure spending. But it's also a signal that the market believes this demand is durable, not just a blip. Luna: So for investors, what does that mean? If you're sitting in a mostly tech-heavy portfolio, do you need to pay attention to copper? Lucas: I think you do, because copper is a leading indicator for the whole cyclical complex. When copper goes up, it often precedes strength in industrials, materials, even energy. And conversely, when copper breaks down, it can be an early warning for a global slowdown. So even if you're not buying copper stocks or a copper ETF, it's a useful barometer for the health of the global economy — and that impacts everything, including earnings for tech companies that sell into industrial supply chains. Luna: Speaking of signals, the S&P 500 is up nearly two percent over the past five days, and the VIX is down to just under fifteen. The market is feeling pretty complacent. Does copper break that calm? Lucas: It's a good counterpoint. The equity market is pricing in a soft landing — no recession, earnings hold up, rates come down gradually. But copper is pricing in something more like a reflation: demand staying hot enough to push commodity prices higher. Those two narratives aren't necessarily inconsistent, but they can diverge. And when they do, one of them is usually wrong. Luna: Which one do you think is wrong? Lucas: I'm not sure either is wrong yet. The bond market is telling a different story too. The ten-year Treasury is at 4.63 percent, which is historically elevated, even though the Fed has been cutting. That suggests the market is worried about inflation, or about the supply of Treasuries, or both. Copper fits into that — it's a real-asset inflation hedge. So when copper is at a record and the ten-year is above four and a half percent, that's a signal that the market is not fully confident in the 'inflation is dead' narrative. Luna: So if copper is saying inflation might come back, does that change the calculus for stocks like NVIDIA or Microsoft that trade on super high multiples? Lucas: It potentially does. Because if inflation reaccelerates, the Fed is going to have to keep rates higher for longer, and that's a headwind for long-duration assets — which is exactly what high multiple tech stocks are. Copper doesn't cause that, but it's an early warning. So I think investors should watch copper not just for what it says about commodities, but for what it implies about the discount rate. Luna: That's a lot of weight for one metal to carry. Lucas: It's been doing it for decades. There's a reason they call it Dr. Copper. But I want to be careful — it's not a perfect oracle. There have been false signals before. In 2011, copper hit a record and then the global economy stumbled. So it's a guide, not a guarantee. Luna: So if we're not going to run out and buy copper futures, what should a regular investor do with this information? Lucas: I think the practical takeaway is to make sure your portfolio isn't exclusively growth stocks. Having some exposure to real assets — whether that's a commodity fund, a materials ETF, or even just energy and industrial stocks — can be a hedge against the scenario where copper is right and inflation picks up. That doesn't mean you need to make a big shift, but it's worth checking if you have any cyclical exposure at all. Luna: I think that's a really good point. And speaking of practical steps, if today's conversation helped you think about your own portfolio, and you feel like it was worth a coffee, there's actually a small way you can support the show. It's buy me a coffee dot com slash fexingo. No pressure, but it's what keeps this podcast going and ad-free. Lucas: Yeah, that's right. Every little bit helps us keep doing these deep dives. And honestly, even if you never do, we're glad you're here. But back to copper — I want to dig a little deeper into the supply side, because that's where the real story is. Luna: Please, because everyone talks about demand from EVs, but I bet the supply story is even more interesting. Lucas: It is. The problem is that copper mines are a decade-long investment. You can't just turn on a new mine in a year. You have to find the deposit, get the permits, build the infrastructure — it's a ten-year horizon. And in the meantime, existing mines are aging. Ore grades are falling, meaning you have to process more rock to get the same amount of copper. That's expensive and energy-intensive. Luna: So the supply curve is basically stuck. Lucas: Exactly. And that's why copper prices can stay elevated for long periods. Unlike something like oil, where shale can respond relatively quickly to higher prices, copper has no quick fix. The project pipeline is thin. Even with record prices, the incentive to build new mines isn't translating into new supply fast enough because of regulatory and political hurdles. So we could be looking at a multi-year deficit. Luna: Is there any technology that could help, like recycling or alternative materials? Lucas: Recycling helps around the margins, but it's not going to close the gap. And there's no real substitute for copper in most applications. Aluminum can replace it in some power lines, but it's less efficient. So the demand is fairly inelastic. That's why copper is such a powerful signal — when it goes up, it's because the market is genuinely worried about a shortage. Luna: And that shortage feeds into higher costs for everything from construction to electronics. So not only is copper a signal, it's also a cost driver. Lucas: Right. And that's the double-edged sword. For investors, it's an opportunity. For the economy, it's a potential inflation headache. We've already seen copper's move push up input costs in some sectors. If it keeps going, it could start showing up in consumer prices. But we're not there yet. Luna: So what's the one thing you'd want listeners to remember from this episode? Lucas: I'd say this: copper is not just a commodity price, it's a window into the global economy. When it's at a record high, it's telling you that the market sees strong demand and tight supply. That has implications for your portfolio, especially if you're heavy in growth stocks. It's worth paying attention to. Luna: And if copper starts to fall sharply, that might be an even louder warning. Lucas: Absolutely. That's when you really want to listen. But for now, it's giving us a pretty confident signal that the industrial side of the economy is not in a recession. It's a good reminder that the market is not just about tech.