Wouldn’t it be convenient if we could find a Joseph (preferably with a coat of many colours rather than an amazing technicolour dreamcoat - that way we wouldn’t have to listen to the music of Rice and Lloyd-Webber)? Then maybe we could use him to give us a clue as to how long the current flat economy, and, more specifically, the current dull metal prices were going to last.
Just to recap the story, Joseph was a Jewish slave of the Pharaoh in Egypt, and the latter discovered he had wondrous powers. The Pharaoh was plagued by dreams that he couldn’t understand, and his regular interpreters of dreams were stumped as to the meaning of the nocturnal recesses of their master’s mind. Cue Joseph - who was already developing a bit of a reputation as more than a regular slave - to the rescue. The Pharaoh described his dreams and Joseph was able to explain them to his master’s satisfaction, thus further boosting his own position and handing the Pharaoh a handy policy proposition, if he chose to use it.
The particular dream I have in mind here is the one where the Pharaoh saw seven fat cows emerge, followed swiftly by seven lean ones. Joseph immediately explained the meaning: the kingdom was going to experience seven years of plenty, followed by seven years of famine. The smart policy, obviously, was to store more grain in the years of plenty, to feed the populace during the succeeding lean years. Now, I’m sure we all remember the bit at school where Geography merged briefly with Religious Studies, and we had to look at the flooding patterns and the fertility cycle of the lower Nile and the Delta. Maybe it was just part of a regular sequence of events that Joseph was drawing attention to; maybe there was no divine being guiding him. Who knows? The important bit was the result - the understanding that there was a cyclicality to events which, if heeded, could be harnessed.
Fast forward a few thousand years, to our era. We’ve certainly had the years of plenty in the metal markets, the period roughly from the beginning of the century until the real fall-out from the financial crash hit, when it was difficult to be involved in metals and not make some healthy profits. Now, I would suggest, we are immersed in the lean years as no part of the global economy seems able to take the lead in getting those cows fattened.
The analogy stops working now, because the remedy for the Ancient Egyptians was to store grain from times of plenty to satisfy hunger in times of scarcity. But when we look at the metal markets, it doesn’t quite work that way. Storing the product in this case is making the bad years worse, because it sits there like an extra supply source. No, it’s the other way around. In the good years, we need more production and in the bad years less, in order to clear the market at an appropriate price. When the world’s economy is healthy, broadly we need more metals, whereas when it’s not, we need less, because end-products are not selling so well. And if you’ve decided that encouraging production by boosting the storage market is a sensible economic decision to take, then the lean years will in all probability last longer.
What are you Dreaming?
At the moment, very many of the analysts I read are keen to get to a position where they can call the bottom of the market and look for an upswing. Nothing wrong with that - it’s what we all want to see. But it looks more like whistling in the dark than anything else. Perhaps rather than all that earnest quantitative and academic analysis we need to ask Ivan, Mick, Sam et al what they’re dreaming. Then all we need is someone with a dreamcoat.