for a while, there it looked like maybe 2024 would be the year of reflation. Several critical signals, especially in the commodity markets, suggested that maybe demand was actually picking up, at least from one angle. Primary among them, Dr. Copper, one of the most widely followed commodity signals because of how crucial that is to the global economy. It has international components, building components, industrial components, everything you could want, and a signal about economic conditions. And for a little while there, starting in April and into May, it looked as if maybe with China's backing, the global economy was back in booming all over again. Copper prices absolutely surged from relatively low levels, about $4 a pound at the CME, all the way to a record high. While some people considered that to be reflationary signals, others said no, this is even worse, this is an inflation signal. Commodities are telling us things are now out of control, consumer prices aren't just sticky, they're actually accelerating. And it wasn't just copper either, aluminum another one. Aluminum had been stuck at a low level, and suddenly aluminum catches

an enormous bid. Silver prices silver went skyrocketing too, and around the same moment so it looked like maybe China was back in the game. Europe was recovering. The US, of course, strong and resilient as always. Look at these key industrial commodities and how they are absolutely soaring. But in just a matter of a couple of weeks, everything has changed. In fact, just today, copper prices are down huge to the lowest level they've been in since this all started. Copper's down big, way down from its record high. Aluminum has retreated, and even silver is having a bad day today too. It looked like that reflation trade that many people were pointing to was nothing more than another supply squeeze. Demand has not actually become resurgent. Demand never really changed, and if there is a change in demand, it's actually going in the wrong direction. So we look at the commodity markets. They looked really good for a little while there, but now overall they seem to be rolling over with a lot of everything else that we see across the US, Global, European.

economies everywhere else. So, Steve, Mr. Van Meter, let's get your take on what we're seeing in commodity market. Not just copper and silver or, you know, aluminum. There's quite a lot of commodities that are telling us this hope for reflationary period is not... It doesn't seem to be materializing. You're right, Jay, it isn't. And we kind of look back a couple months where all this started and what did we see in the PMI data at the factory level. We started to see some increasing numbers and that started to get the broad belief that this has to be the bottom. You know, the cycle is over. We've hit the bottom and now we're going to see demand surge. And you can kind of get the perspective of why people would believe this. The US equity market continues to be on a tear regardless of what the data suggests and all of a sudden you start to see some sort of revival. And it wasn't a big revival on the manufacturing sector but

enough that it got people excited that demand was just about to show up in a huge way. And next thing you know, prices get bit up. And as you suggested, prices went up, but there wasn't any demand to back it up. And that is the real underlying issue here. Is everybody wants the economy to Boom. Everybody wants to believe reflation or inflation, even down to the central Bankers. Everybody seemingly is convinced of this, except for people actually spending money every day. And they're saying prices are too high, I'm cutting my spending. We continue to see that happening all over the place. And with copper in particular, it turns out there was just U the Chinese were actually buying. So you could call that demand, but it was not really economic demand. They looked at the situation in Peru, for example, and said we better buy some copper because we're not really sure we're going to be able to acquire as much as we need. And so the Chinese actually were stockpiling massive amounts of copper. Meanwhile, it looked

like there was a pickup in demand. It was really just being cautious and prudent because supplies were threatened. Same thing with aluminum. Aluminum, there's all sorts of export bands, especially from Indonesia. And so the Chinese, once again, as well as you know other factors. Supply factors too, but they stockpiling metal because they're not really sure they can acquire it. So it looked like from a one perspective that demand was suddenly surging when it really was about supply all over again. But Steve, what you just said is absolutely, I mean it does make sense why people were thinking this would be a good year. It did look like for a time there that things that we have seen beaten down and stuck at lower levels for a long period of time, it looked like they maybe they were far they were starting to turn around, right? Manufacturing was a big one. Manufacturing has been in a recession for a couple years. It hasn't been a crash, it hasn't been a collapse, but it has been a recession, a very shallow.

steady protracted recession. And then all of a sudden, it looked like in the early part of 20124, things were picking up in Europe, in particular. Europe has been the worst case out of everyone else. Suddenly looked like some of the PMI data were looking a little bit better. Some other hard statistics suggested there may be an upturn. Even German industrial production actually had a couple months where it was positive. And so it was easy to say copper prices are going up, aluminum prices are going up. Some of these sentiment surveys are becoming more positive. But then you look at the other commodity oil, gasoline, and energy. And you said, okay, this is there's no way this is going to last because as much as you know it looked like there was a turnaround happening, we've seen this before. There are always fluctuations in the short run. And with Energy prices going up, particularly gasoline, it was only going to cause pain at in across in widespread fashion across the economy, meaning there was it was only a matter of time before do the the modest

manufacturing Revival turned out to be another false case. Yeah Jee and you start to look at, you know, Europe in particular as you mentioned the data was so bad that you some of those pmis were printing at bottom of recession level numbers. So if they start to go up, you have to believe at some level that maybe the bottom is in because if you don't believe that, then you means what's coming is going to be far worse. And so you start looking at the US. What have we been hearing here? The second half Revival, second half is going to Boom. This is just the first half of the Year slowdown and watch out and look what happened in the energy markets. Oil prices suddenly get bit up and everyone's looking. Hey, this is going to be great. Consumers are going to go out on vacation and spend huge amounts of money. But there's a problem that we look at the consumer space Jeff. What has actually changed? Is there something like our hours work suddenly jumping a lot or average hourly earnings jumping a lot?

are we seen anything in the employment side other than Rising continued claims and initial claims that would suggest that consumers have more money but we're not and that's the danger here because everyone's buying into the US consumers spending big over the summer and what's going to happen as has happened of course over the last year every time Energy prices go up gas prices go up and consumer spending just grinds into an immediate halt but yet there's this belief that the commodity Market was so right about this reflation boo boom it's no surprise that we're starting to see prices drop like they are yeah but every time we see we go through this it's the supply side right that's why prices go up and you're right everybody I say everybody but a lot of people who are making comments on certainly social media and across the you know the media landscape continue to say every time a commodity goes up it's about demand when it's it's always about Supply oil is a perfect example what was oil doing

before the yeni rebels started hitting ships in the Red Sea again, oil was going down. It was heading into the lower 70s as everybody realized the demand statistics don't look all that good at all. And then oil starts going back up. Not because that demand has picked up, that's what everybody's interpreting the oil price move as, even though there's no evidence you should do so because every time we see oil prices go up, it's not because demand has picked up, it's because something happens around somewhere around the world. And all of these geopolitical conflicts are always seem to be located at choke points in oil Transit, but essentially that's what the story is for Commodities. And you hear a lot of this reflation that is it is over interpreting supply side mechanics in associating it with changes in demand that just isn't corroborated anywhere else. I mean we just talked about copper, copper prices are going lower because demand turned out it wasn't there suddenly as oil prices are picking up when we're hearing

demand is supposed to be there so we have even conflicting signals when it's not really conflicting at all. It's just again over interpreting the moves and commodities as something that they're actually not because you're right Steve. Even in the United States, the data we got just recently retail sales. Retail sales were incredibly weak well under expectations adjusted for prices. We're talking about negative sales for most of this year so consumers are proving that they're spending less. Consumer confidence is weighed down. There really isn't anything to suggest that demand has actually changed. You know that's what's interesting Jee you. You're absolutely right demand hasn't changed which you. You look at the weekly eia inventory data. It's almost becoming like an fomc press conference nowadays before people are getting nervous. Like are we going to see big draws because what are we looking for and the data something to validate that these higher prices are demand driven and they're not that's the issue because when we listen to Consumer surveys particularly like the University

of Michigan. We saw the preliminary data just floored, just dropped out of it. And what are consumers saying? We can't afford higher prices because if they did, companies like McDonald's wouldn't be putting out a $5 value meal. They'd say, Hey, you know what? We understand some people right now can't afford it, but demand is picking up so we don't need to do these things. But we continue to hear among different, of course, restaurant groups, demand is coming down. The question being, when are they going to cut prices? It's all because consumers are tapped out. These higher commodity prices, in fact, aren't helping consumers at all. The fact when we see this bump up in gasoline, you and I know exactly what's going to happen. Consumer spending is going to hit a wall once again, and prices are going to reverse in a big way. Well, Steve, isn't there always also a question about whether this there actually was a manufacturing turnaround to begin with? I mean, starting with the PMI statistics, they did get better, but when you interpret PMI statistics, a less

a less negative number, or a number that's less below 50 than before, doesn't actually mean that manufacturing can turn around. I mean, yes, a recovery in that sector would have to start somewhere, but to I mean, there wasn't a whole lot of data that suggested that there really was a recovery in manufacturing or that it was anything robust or something to build on to begin with. Then with a lot of these statistics, including European, the European PMIs, there has been this seasonal swing where they all look better in the early part of the year, even though none of the other data does. Suddenly we see these pickup, the pickup in PMIs, and then you get to April, May, and into June, and they start to turn over and roll over again, and everybody's like, well, what happened to the recovery, the revival that we were looking at? Um, there is, there seems to be an a, a measurement problem in certain, uh, certain numbers, especially those that people were looking at and thinking, this is it, this is this has to be the

turnaround because um it's been going for so long, and isn't that another factor too we should consider? That, you know, this has been going on for so long that people just expect it. Well, it can't go on any longer, can it? Manufacturing has been in a recession for two, two years, two years. It can't possibly go on for any longer. So even the slightest change or the slightest fluctuation in some of these statistics, it's like, okay, this has to be the bottom. And then you start looking at some, some looking around for other pieces of corroboration like oil prices or copper prices when they were going up or silver, whatever the case may be. And you start building a narrative out of this misbelief or out of this idea that, okay, it has to be turning around because it can't possibly go on any further. Yeah, absolutely, Jeff, that there is the whole narrative to that because look at the services sector. It hasn't dropped off yet, and maybe everyone was thinking, okay, you know what, summer is here, and you said before the

show Steve some of these numbers are seasonal adjustments because everyone's hyped up about the suburb. It makes perfect sense. You come back to the consumer, we look around the world. Yes, there are parts of the world where we're seeing, you know, minimum wages go up or people have a little bit more money and how is that transmitting into the real economy. Well, usually about two months, not much but we look broadly speaking what has changed. If companies started saying, hey, we're going to lay off less people, we're going to give people bigger wages, are we going to increase our hours. We're seeing absolutely none of that. We're not seeing savings rates go up. We're not seeing interest rates or cost on debts going down. We're seeing nothing that would materially change where consumers are getting their money other than, yes, maybe they have a little bit of savings saved up or maybe they have a little a little more limit on their credit cards and they're going to come out and spend it to do some sort of travel or holiday but at least what I've

noticed here Jeff being that I live in the vacation destination of the world is we're seeing people numbers are down a little bit, but one thing I've noted is spending is dropping. People in the services sector that work at restaurants and bars are telling me, hey, it's not good, spending is down, tips are lower, everybody, they're they're coming, they're just looking for a deal, they're not staying long, they're not spending, and that is a big indicator to me that people still want to get away while they can and just don't want to open their wallets. What was the term that the Federal Reserve used before? Was price sensitivity, right? That's what you're really talking about. What they're saying is that incomes aren't keeping up with prices, and now that prices aren't coming down or, in the case of gasoline earlier in the year, they were going way up too far beyond people's ability to pay for them, they become price sensitive. And of course the other term everybody uses discretionary, right? They consumers

are increasingly price-sensitive, and they're increasingly um having to adjust their discretionary budgets. They can't do what they want to do, and you're that's exactly what you're talking about. Everybody wants to go on vacation, especially over the last couple of years. However, they're becoming very cautious about how they do it and when they go on vacation. They're being very careful, and we've seen that in a lot of different statistics that tell us that consumers don't really have any other options other than sitting home and doing nothing. But you know, modern Americans don't save money and tighten their belts. That's not what we do. So instead, we go out on vacation and just try to find as many deals as we possibly can to make it as least costly as possible. But that's a reflection on what we're talking about is demand, but that's a reflection on the labor market because that's the thing that continues to come. We keep coming back to what has changed this year, say compared to last

year. Well, consumer prices and consumer price rates and growth and increases were much worse last year than they are this year. And yet, consumer behavior is increasingly changing this year compared to last year. And why is that? Why must that be? It's because they're looking at the labor market, saying there are no jobs available. If I get laid off, that's a big problem. I don't like the job that I'm at. It's not paying me enough to maintain my spending, but I can't go anywhere. Nobody's hiring. Plus, we're starting to get all sorts of indications that some companies are cutting hours and maybe even laying a few people off. It's not a good time for demand to be suddenly picking up simply because J. Paul says at some point this year he might actually cut rates. You know, Jee, it's interesting because we talked about in May how something fundamentally changed with the consumer. We saw all of a sudden everyone was hyped up about how they were going to spend big, and all of a sudden it was

like wow, that's disappointing that data didn't come out the way we thought. And look at the peak in copper late May. You start looking at these Commodities. It's all of a sudden, like, you know, we see the commodity Market starting to suggest that this demand, this rebound, this boom, even in the services sector, which I don't think is that big of a deal. We know it lags in manufacturing CCT at some point. Maybe it'll be mid, maybe it be late summer. It'll turn around because everybody was gearing up and hoping for something that just isn't materializing. And as we've said, there isn't anything that fundamentally changed about the consumer. In fact, their position's gotten even worse. We talked about how those for pay, those buy now pay later loans, what happened. People are already delinquent on them. They haven't even hardly had any payments, and they're behind. The delinquency rates on credit cards, we're hearing this from the major Banks, they're going up. We're seeing this start problem all across the board. So if

you're delinquent on your credit. Well, that means you're not going to get more credit to go spend, and certainly doesn't mean you're going to dip into what little savings you have. It starts to make sense that the commodity market is starting to figure out that there isn't a big consumer revival here. Yeah, when you look past all the supply factors and what's left over is not something that's increasing, not something like demand that's resurgent around the world. It may have looked good in some of these certain from certain angles and certain data points, but again, we've seen this behavior last year, the year before, where it looks better in the springtime, everybody gets loaded up for summer, and then what summer comes, it's okay, it's just another big disappointment, and then everything starts to go lower for the second half when, as you said, it's supposed to be picking up into the second half. And that's there's no reason to expect that demand is actually doing that. In fact, we continue to get

evidence that shows the opposite, including all of these reflationary Commodities that are no longer reflationary. Surprise, it only took a couple weeks for them to turn around too, which is another thing to really consider and Factor. Yeah, it's interesting Jee how odd is it that you can think Comm Rising commodity prices should be inflationary, well they're actually going to turn out to be disinflationary. Oh jeez, no, but how many people have said that too oils back up because this Summer's going to be huge in the US. Oh, huge, huge, biggest demand ever. It's not because of rebels in Yemen firing missiles.

Copper's Latest Move Has The Market Freaking Out

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