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Copper futures are reached 3-month highs today as the anticipation of increased infrastructure spending in new Chinese stimulus measures. We have been watching copper closely since the beginning of the year as the signals of increasing demand have become more pronounced. For those of you who listened to our morning call yesterday, we indicated that copper had broken out quantitatively and we saw serious follow through today.

As we position ourselves for the re-flation trade it’s important to keep in mind that the increased buying by Chinese industrials that we noted this morning in our PMI post is just the tip of the iceberg. Although it will be months before ground is broken on the major projects in the interior and there is a lot that can happen between now and then, but the Chinese government has already signaled a willingness to hold hard assets in lieu of Treasuries and these infrastructure projects will need much in the way of basic materials. If things play out in China like we suspect, this could only be the beginning of the move for the good Dr. Copper.

Daryl G. Jones
Managing Director

Andrew Barber