Not too long ago Freeport McMoRan Copper & Gold Inc's (NYSE:FCX) Chief Executive Officer Richard Adkerson said he was bullish on the outlook for copper, and the increased imports of copper into the U.S. seem to justify his assertion. Is he right?
It all depends on your outlook. There is very little private sector demand for copper, and the idea that is what's driving copper imports would be wrong.
Copper imports are rising only because the Obama administration has hinted for some time on spending even more taxpayer's dollars in another round of stimulus. This time to the tune of $50 billion for infrastructure projects.
Just like the over trillion dollars spent in the past, all this does is hide the weak economy and give the impression it is recovering, while the recession lingers on. After all, the money isn't free, somebody eventually will have to pay for it.
It's like having a deadbeat son or daughter living at home and you give them thousands of dollars to live on, then announce to your friends and family they're productive because they have capital to spend.
The reality is they're producing nothing, and even in the case of infrastructure, the Chinese did that too, and brought themselves to the brink of disaster, which still could cost them.
As soon as the prior stimulus dollars and gimmicks ended, the American economy reverted back to what it had been all along: in a recession. Spending billions more isn't going to change that.
So in the case of copper, anticipation of another stimulus is what is driving that, and it isn't based on any real demand, but the creation of artificial jobs to give the illusion there is an economic recovery.
The rest of the country has to pay for this "job creation," and it would be better to cut taxes and remove the stifling regulations holding back the free market than the government to continue to throw money down the hole.
Some clueless economists are already jumping on the stimulus bandwagon saying these copper imports prove there isn't a double dip recession.
Hopefully the politicians will have the guts to vote this down and let the economy run its course.
As far as Richard Adkerson's bullish sentiment concerning U.S. copper imports, it's based only on stimulus spending and not real copper demand.