April 07, 2004

Copper Bubble

Last week (and in the April issue) I mentioned that one of the odd side effects of so much money sloshing around in the financial economy is the creation of "flash bubbles." These are bubbles created when the market spots something that's relatively undervalued. The problem is, there's very little in the world that's ABSOLUTELY undervalued. And so when a trickle turns into a torrent, it can take an asset you might be mildly bullish on, and turn it into a bubble. An example? Copper. The chart below shows it all. And it explains why I'm holding puts on major copper producer Freeport McMoran.

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