business, China, China bubble, China fixed asset bubble, commodities, commodity bubble, copper, copper bubble, copper prices, currency peg, economics, economy, FCX, Freeport-McMoran, housing bubble, investing, Japanese Asset Bubble, Jim Chanos, macroeconomics, SCCO, Southern Copper, United States
Copper has been on top of the world for much of the past half decade. If you started investing in copper or copper producers in the early years of the new millennium, you would have made spectacular returns in a time when the S&P 500 would’ve produced modest to flat returns.
Just how well did copper do? From September 2002 to February 2011, copper prices increased a whopping 450%! Not a bad little gain.
If you had been fortunate enough to have held stock in Freeport-McMoran Copper and Gold (FCX) during that same timeframe, you would’ve seen even greater returns; around 700% – 800%! And here’s where it gets really interesting: Freeport’s returns look impressive until you take a look at the astronomical 1900% gains you could’ve realized by owning shares of Southern Copper (SCCO)! Aside from owning stock in Apple (AAPL) during that same timeframe, it would be very difficult to beat that.
This data looks even more dramatic in chart form, where the S&P 500 looks almost like a straight line compared to the massive twin mountains produced by FCX and SCCO; which is of course odd for those of who have watched the housing bubble, followed by the crash, and then the rebound of 2009. On this chart, however, all of those major market movements are overwhelmed by the otherworldly movements of copper producers.
In spite of this, both Freeport-McMoran and Southern Copper have been some of 2011’s worst performers. Freeport has tumbled 38% from its all-time high last December. Meanwhile, Southern Copper is down an almost-identical 39%. This rapid decline is, in no small part, a result of falling copper prices. Copper is down about 23% from its peak in February ’11.