Copper Has More Room -- And Momentum -- to Soar, Dudas Says

Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot Com. Well, PIM, copper is just surging to a two year high, and to get a little bit more of a sense of what's behind that, how much it's driving the shares of mining companies such as Freeport mcmarn shares up almost fift yesterday. Is Mike Judas. He's partner and metals and mining analyst Vertical Research based in Stamford, Connecticut. Mike, thanks so much for joining us. So why is copper rallying so much

right now? Lisa and PIM. Great to be with you, m I think there are four reasons we've seen copper rally strongly over the past couple of weeks. I think the first two are macro oriented. You've seen the dollar reaching multi month lows, which certainly has been beneficial, and

you don't dismiss the oil rally. We've seen over the past couple of weeks, you've seen a three to four dollar move higher and crude that's brought commodity fund money into the space, and I think some of that has vowed into copper and relative the copper itself, you're getting better than expected Chinese demand and data coming out of China, which is very important for copper. And finally, there's been

supply shortfalls throughout two thousand and seventeen. The minors, because of the lack of capital spending and lack of expiration, have not been able to get as much comperence to the market as think people have anticipated. I think all that's combined to allow copper to have a really good past to three weeks. Do you really think it's set to continue, Mike, I mean, I'm looking at Freeport mcmaran, and we make a big deal about it because the stock goes to almost fifteen bucks a share, but this

was a fifty dollar a share stop, you know, back when. Also, I believe that there was a big strike in Peru having to do with copper mining, and the strike is over, so maybe we get some more supply. Yeah, it's interesting so that when you have a strike and cru some people in miners and chillier concerned that that gets over Indonesia, which Freeport is very involved with with some of the

machinations there. Freeports certainly was helped by the copper price move the last few days, but I think the market is starting to feel a little bit better with negotiations the company management of Freeports having with the Indonesian government to try to settle that dispute out a new mining contract license for Freeports like one of the I think it is the largest mine in the world, absolutely, and so that the market has been discounting prease severely in

the valuation of Freeport if they're going to get any value for that mine. I think through yesterday's earnings release in conference calls, I think Freeport and Immunitiian government seemed be getting a little bit better and more discussions to to resolve that situation. I think that's also kind of helped to pop in Freeport stock. I do want to

high like him. If you look back in the historical part of charts of copper, we have seen four for also, so they haven't seen much higher copper prices in the past, so not not that we're predicting that here, but I do think there's some more momentum and room for copper

to move higher as deficits. The difference between demand expectations supply coming to market are looking to grow over the next few years because there's been a lack of capital spending, a lack of supply because of the the downslack we've witnessed the last few years. You know, Mike, you gave a lot of possible reasons for why copper is rallying now, and I do just want to point out that the shares of Glencore and Newmont have also rallied on the back of the of the top in copper. But you know,

it seems like a pretty delicate balance. I mean, yes, it is an increase in demand, but that's one piece mixed with just general favorable sentiment rounds commodities right now. So I mean, do you think that this is a very fickle type of figure that in prices could fall substantially in the I mean volatility. I know everybody has been concerned about the lack of volatility in the overall equity markets, but certainly one thing we do see in

bodies is volatility. Yes, you know, a bad data point out of China, or to this afternoon the FED minutes coming out, which you know, the million people going to read the teleas on. You know, the dovishniss hawkishness could impact some of the near term moves on on some of the commodities. But I think generally expectations from investors over the past couple of months in May June, we're

pretty negative going into Q two. We've seen rally and the commodity prices, and we've seen you know, the reports from the company's being reasonably good, you know, keeping the cost down, keeping the capital spending in check. I think that's given some investors reason to be more optimistic and some of the shorts to cover their positions. Well, I want to thank you very much for joining us. Mike Judas is metals and mining analysts for vertical research talking

about copper as well as some mining share. And indeed, the Federal Reserve is going to be finishing up their today meeting today they are going to give us some words of wisdom that we can pass over in detail for the next month as we await their next miss if Ward McCarthy joins us now he's chief financial economist

at Jeffreys in Company in New York. And ward, Before we talk about what the Fed is expected to say today, which is, to be honest, not very much, I want to talk about some words of some interesting words from President Donald Trump. He was speaking with the Wall Street Journal yesterday, UH, and he said that he is considering both Gary Cone, who is his chief economic advisor right now, uh, in addition to Janet Yellen, to lead the Federal Reserve next year. This is going to be the next episode

of the Fed Chair. Uh. Gary Khane, what do you think he would do as FED Chair? Do you think that it would translate into a hawkish policy for the country? Well, I think that that. Well, first of all, he's a big question mark because we really have no history at

all in terms of what his policy inclinations are. Uh. The fact that that Donald Trump has been pushing him and also um promoting Jenny Ellen in a sense as being a low rate UH FED Chair suggests to me that he may be less hawkish than uh he is being expected to be, at least in some quarters. All Right, So if that's the case, then this is just you know, you kind of spin these fantasies, right you kind of say, well, so what what Wow, wild fantasy? But I mean, but

you can't. It's difficult to kind of pin someone down obviously if he'd know their views, you know, But what is there anything, no matter who is the central bank chief, is there something specific that you can point to that they should be doing that they are not doing well.

Jenny Yellen is trying to do everything that I think she should do at this point in the sense that she's moving rates up to higher levels, although you know, maybe not as quickly as the FED could, and she is also trying to get the troops in line here, um,

so they can start balance sheet normalization. But one thing that I don't think the FED has focused a lot on yet that they're going to have to uh in the not too distant future, is that balance sheet normalization so far has really just focused on size, and that

is shrinking the balance sheet. And even in her last testimony, Jenny Yellen acknowledged that the FED wants to get back to a balance sheet that is all treasuries and other aways, get rid of all the more gages, and the plan that the FED laid out on June fourteenth will not accomplish that. So the Fed's going to have to circle back and address this issue at some point. You know,

you bring up a really important point. And I were Jersey, our own interest rate strategist here at Bloomberg was talking about the same point. In other words, as we get more details from the FED about their balancing normalization, we could see an undo amount of volatility and mortgage backed securities. Uh. Do you agree? Well? Yeah, well, I don't know what you mean by undo, but I certainly think we should

expect to see more volatility in mortgage backed securities. And of course the caps that the FED outlined on June four UH are not necessarily binding. Uh. And the FED always adds the caveat that they're going to proceed um and be data sensitive. So if they did not like the way things were unfolding, um, you know, they could temper it. Someone I was going to say, they could fold it back up. It was about the Let's talk about the U S economy for just a moment, because

unemployment rates are low, inflation low growth while middling. Uh. Is there anything that we need to pay attention to that we're not looking at? Well? I think in some respects maybe we we focus on too many things that uh, and that can distract us from the drivers. All right, so good point. Tell us what those are? Well, I think that the primary things we need to focus on are really what what the labor market is doing, because that's the heartbeat of the US economy. And the labor

market continues to do well. Uh. The one missing piece continuing to be sustained increase in wage growth, which we would love to see because that probably would also boost consumer spending. Uh. The other but is that going to happen? It is going to happen. Uh. It has been delayed this cycle for reasons that I think are fairly numerous, uh, ranging anything from demographics to immigration policy. Um. But the

laws of supply and demand have not been repealed. And as we get closer to full employment and we see labor market conditions tightening, wage growth is going to happen. Um. And we're you know, every day we're closer. We just don't know how much closer we are on that front. Or do you know? The Federal Reserve has a number of mandates that seemed to be floating. It was unemployment rates than it was inflation rates. And some people say

it's asset price UH stability or financial system stability. And I'm wondering to what degree do you expect the FED today to comment on the elevated prices in the corporate bond and the equity markets in the US. And we we're seeing right now the extra yield investors are demanding to own investment grade corporate bonds in the US plunging

to about the lowest in the post crisis era. Well, I think I do not think they will specifically address this in the policy statement today, and of course there's no press conference either. But you make a good point, and that is that since the FIT has been raising rates and talking about drinking the balance sheet UH, financial market conditions have actually eased UH, and that is spreads of Titan stock market has gone higher, etcetera. And this should be a green light for them to continue UH

down the road towards normalization. The problem is they also have two specific UH policy mandates by law, one being maximum employment, the other stable inflation. And the inflation pictures since February has spooked them somewhat. So I think that that has become or the inflation picture has been elevated from being kind of a nuance, excuse me, a nuisance UH to something that is interfering with their plans at least temporarily. What McCarthy, your thoughts on the dollar and

recent dollar strength going to continue. We're at one sixteen against the euro right now. Well, I don't think that we'll we'll see any persistent dollar strength. I think what's happening now is that the dollar is trying to carve out at trading range. We've seen some pretty substantial moves in currencies over recent months, and in large part because of changes in UH in perspectives on what's happening on the political front, and right now the US political situation

UM is pretty murky. Murky, that's a nice way to describe it. Thanks very much, Warden McCarthy. He's our He's not a murky economist, but he does put his finger on something there. Um, Thanks very much, Chief Financial Economist. For jeffreason, I guess we'll just have to wait and see what the what the minutes say new diesel and petrol cars and vans they're going to be banned from the United Kingdom from twenty forty in order to tackle air pollution is according to the UK government, and here

to tell us more. As Jeff Shackleman, renewables reporter for Bloomberg joining us from London, Jess boy, I gotta say this kind of uh, there's an interesting development and it certainly must help companies such as Volvo which are looking to really go all electric or all hybrid. That's right?

How that yes? So, I mean I think if we just stepped back a little bit, diesel has really been the enemy over the last couple of years since the emissions cheating scandal with Volkswagen erupted um and it's just become the target of air pollution campaigners as the thing that is causing the problem. But as you say, there's companies like Volvo, Nissan, UM BMW that are planning to lots more electric models that at the tailpipe have zero emissions. So this is this is completely on track with with

what they're planning to do. So just how exactly would such a ban work? So the UK says it will ban the sale of diesel and gasoline powered cars by twenty forty. This comes a couple of weeks after French President Emmanuel Macro announced a similar plan. The objective is

to cut smarg and become a carbon neutral nation. How so, what's really interesting about this announcement today is it sending a strong signal from ministers and and the announcement two weeks go in France that in in twenty five years time, twenty five is years time, they don't want to have

internal engine internal combustion engine cars on the roads. Actually, if you look at what the analysts say, we're probably not going to have many of those anyway at that point because the direction of travel for carmakers like Tesla is towards electrics. So Bloomberg New Energy finances that in the UK almost of new cars sold in twenty will be electric anyway. So you ask how this is going to be done, Well, I think probably the markets are

already doing it themselves. Well, you know, but this is interesting because in the US, for example, we saw unprecedented auto sales and a lot of the autos that were being sold were diesel fuel and not diesel but gasoline fueled cars and trucks. I mean, it was sort of going the opposite way of electric vehicles. When will we see that shift in consumer preference? This this huge shift happening in the mobility market, and I expected to happen

over the next twenty five thirty years. And it's not really even just about changing the kind of technology that is powering your car. It's also about the uberization of of our transport system. People are going to be sharing cars a lot more, and there's going to be a lot more self driving cars. So there's gonna be this gigantic leaps that we can't even really get our head around at the moment in terms of how how they

drive cars. But the thing about the kind of fuels that people use is that actually in the UK, where we have the largest ease or fleets in Europe, people bought these cars in good faith, thinking that they were environmentally friendly, and then a few years down the line governments realized that they were actually the complete opposite and they were causing more damage to the heir than and

people's lungs than they thought. I just want to ask you about the cost of all of this, because I understand that the government has said that they are putting aside about three thirty million dollars or two hundred and fifty million pounds in order to help councils local councils tackle emissions. Why do they need the money. I would think that people would need the money in order to get rid of their old cars that burn foss or fuel in order to go electric. Yeah, it's not really

a huge of money that that they've put aside. So um. Yet, what you're suggesting is that there should be a diesel scrappage scheme, and that's something that the Mayor of London, Sadik Khan, has asked for money for because as you know, as I said, you know, people bought these diesel cars in good faith thinking they were good for the environment, and the government doesn't really want to have to now penalize them and say, sorry, guys, you actually turns out

you're doing a lot of damage to the planet into people's health, so you know, you have to get rid of that car, so that you know they're helping that they've already put they've already set aside money for helping taxi drivers, black cab drivers for example, to buy new

black cabs. Um. But this this headline, um that we're talking about, that the ban on on diesel cars is actually part of a much bigger air quality strategy that they've been forced to put out because the government isn't delivering on its air quality plan, and it's been taken to court twice by environmental activists and it keeps failing to produce a plan that is good enough for tackling knights and dark side. And just now this environmental group has come out again and said we still don't think

it's good enough. So there's still a chance we're going to see the government back in court for a third time if if they don't think this plan is up to scratch. Just in the UK, plug in cars are still only about one percent of all vehicle sales in the country. Um, that's expected to grow to eight by What's the sort of threshold. What's the sort of tipping point at which we'll see a more widespread adoption of plug in vehicles? So I think the real key is UM, Well,

I guess there's two things. The main one is cost. If you turn up at four Court, um, and you want to be able to buy an electric car, you want to see that it's cheaper on the price tag compared to an internal combustion engine, and I think that's expect to help it happen about the middle of the next century. But the other issue people have is range. Anxiety that their battery is going to run out, and

that's tied into having enough charging stations. And in the UK, in London particularly, they're still aren't enough and the ones that are there aren't really charging people's cars quickly enough. You have to wander off for a couple of hours and come back or they're broken. Yeah. Um, so that really needs to be sorted out before people feel confident enough to buy them and be able to drive long distances. Just, gentlemen,

thank you so much for joining us. Truly a fascinating issue and it'll be interesting to see what legal parameters the UK and France put into play to try to achieve these targets. Just just Shankleman is renewables and climate change reporter for Bloomberg News, coming to us from London. All right, let's talk about technology. Let's get our Facebook

out and find out what's going on with Facebook. We have Shira Oviday, our technology columnist, a Bloomberg gad fly which has that all fast commentary section and you can follow Shira on Twitter at Shira Oviday. Um. I was looking at the details for Facebook. This is a company that's worth about four hundred and seventy six billion dollars, let's say five billion dollars rounding up? Yeah right, why not?

I mean they'll probably get there anyway. Um, they had thirty billion in sales in the year, eleven billion a third is net income. They were able to take a third of that in sock it away and get this, the free cash flow is over twelve billion dollars. Not a bad little business that marks there. Oh and everyone keeps saying, well, you know, can it continue? Can it continue?

What is your overday think? Well, I think that is exactly the right question, right that if you look at what Facebook has done basically from almost zero to one of the biggest companies in the world in five years and extremely profitable, has been very amazing. But the big question, of course, as investors look at Facebook is how much more room to grow is there for a company that has grown so quickly in such a short period of time. And I mean I think that I agree that the

short term is pretty promising. The longer term is a question mark. Well, and just to give this some perspective, Facebook shares up more than so far a year to date. I imagine we're also going to hear something out of Facebook about uh displaying more news and sort of getting people out of their uh particular bubbles and expose them to more ideas. What do you think is going to be said on that? I mean, this is a topic that Mark Zuckerberg has been talking about for much of

this year that he's been on this. I don't know, what do you what do you want to call it? Like a quasi presidential tour of the United States, meeting with regular folks, right to to sort of try to understand, um, people in the United States and how they use Facebook and how basically to make Facebook a more hospitable place

for people and communities and groups. And as you said, one of the biggest issues for Facebook is how to you know, get people out of their little self contained bubbles and expose them to news or information or points of view that they might not have heard um otherwise in their Facebook network. And that is a big topic

for them. And look, that's a business issue for them too, that if people feel like Facebook is this terrible place where I just um here people rant about you know, Donald Trump, about Hillary Clinton, and then they don't like to use Facebook as much. Right, that has business implications for Facebook. I was gonna say, then they just go use Instagram or what's app? Right, Facebook properties, right, I mean, this is the sort of power of Facebook. You know.

Here's the example that I carry around in my head today. Boeing, which we talked about earlier on in the program, has a market cap of a hundred and forty billion dollars. If Boeing is something happens to Boeing and they stopped making plans, everybody will feel it. If someone pulled the plug on Facebook, I'm not sure everyone would feel it. There'd be another competitor that's got a five billion dollar

market cap. I mean, it's a very fair point that you, right, the different Facebook does not make the most essential things in the world, but it has two billion users, So there's people who get a lot of value out of those. Airlines are going to probably advertise exactly and right then that it has millions of advertisers who tried to reach customers on Facebook, including right. Problem with Boeing and customers.

I mean, conceivably you could make the argument that Amazon doesn't produce much, although they do now and create their increasingly producing more and more products. Uh, now this company is going to report earnings and expectations are extremely high. What could cause people some concern that Amazon is not going to crush everything in its sight, which is basically

what it's done so far. I'm very confused about how investors think about Amazon these days, because you see this kind of back and forth where people Amazon has been saying for about a year now that it's investing very heavily in its future, in things like warehouses where it's stores inventory, and in buying movies and television shows for its video service, expanding in places like India, which is going to be this huge e commerce market in coming years.

And investors at times seem cool with that, and at times they freak out that profits are crimped because Amazon is spending a lot on these investments. So I'm not actually sure what will happen on Thursday when Amazon reports earnings. Well, I mean, just looking at their shares, they are up more than so far this year, and it's just like, yes, I mean, and you have to wonder how much is this allway just moving moving together? I mean, how much do these companies get sort of washed up in the

technological revolution, right rather than their individual strengths. I mean that that has been the sort of anxiety from that we saw in June about tech stocks, right, is that all of these tech stocks are a little bit crowded, that everybody's investing in the same handful of giant tech companies, and maybe there's a risk of kind of overcrowding pushing up these stock prices to unsustainable levels and valuations. Amazon is one of these companies that whose share value makes

no sense on any kind of logical basis. That's trades. It's something like sixty times forward earnings or whatever, so that is not logical. But it has been that way for a very long time, and the company, yes a company for a long time. Therefore it should be fine. It should be fine, or maybe it won't be fine. I don't know. Well, he you know, he's just a little factoid, right, you know, anniversary this year for Amazon

going public. They went public of May. The price was eighteen dollars a share, and today the shares of Amazon are one thousand, fifty dollars, up more than ten and a half bucks. Again, not a bad little business. And the Jeff Bezos has filled for himself. Twitter, Can you just give us a hint about what we should look for with Twitter? Are they actually figuring out how to make money that they're not figuring out how to make money? It was pretty quick. Twitter right now is in basically

a canyon of sadness of its own making. So it's it's stuck in this rut where it sort of stagnated on the number of people using Twitter and only recently has sort of slowly started to add more people who are using Twitter. The problem is that has coincided with a pretty dramatic decline in the company's revenue from advertising, and the company has basically said that's not going to get better, probably until next year at the earliest. So you have the situation where, uh, this is a company

that is adding users, but not that quickly. Uh, it's top line is shrinking, it has it is unprofitable and continues to be unprofitable. And so you know, right now Twitter seems kind of stuck. Well maybe they'll be left off the tech train in of sadness. Yeah, Shira Ovida, thank you so much for joining us for this canyon of sadness on this Wednesday. Sierra Ovid is a technology columnist for Bloomberg gad Fly. You can find her work on and I gad Fly on the Bloomberg as well

as Bloomberg dot com slash gad Fly. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo wits one. Before the podcast, you can always catch us worldwide on Bloomberg Radio