Ziggy, Poker and Bellwethers

Ground control to Major Tom. You’ve really made the grade.

Globally, how long does an average buyer hold his stock?

Circuit breakers kicked in to stop the avalanche of selling on the Chinese stock market. Traders left with nothing to do just played cards on the trade-floor of the Chinese Stock Exchange. Is this a proper stock-exchange? More like a gambling casino with stop-losses imposed by the State. It is a mystery why some see this Oriental bazaar as a bellwether for future metal consumption.

The average time a buyer holds a stock is 22 seconds. Strobe trading and flash crashes. Chickens on crack. Hopefully there are some outlier investors who see as far as the horizon. The flash traders at least provide liquidity. Only a handful of zinc mines have gone from discovery hole to production in under ten years. It is hard to grasp the time-span of attention necessary to develop this handful: Century, Lisheen, Cannington, Louvicourt or Campo Morado. Some 300 million seconds or 14 million times the average holding period for a stock.

We came back after Christmas. A time for reflection with surely a broader longer term view to start the New Year. Myopic fear returned. It was the worst start for global stock markets since 1994. Some $2.3 trillion dollars wiped off the value of global stocks. So we started 2016 with a shudder and a quake and the lemmings with bifocals once again rushed for the cliff.

Too much information to consume on the world-wide-net. Big data stressing us out as we try to understand this complex financial world – maybe the stress comes from trying to control it. What do the statistics and metrics and ratios all mean if we could rely on them and interpret them properly.  The outcome of a poker game in China surely predicts the future demand for zinc.

Will China’s metal consumption drop in the shift from a manufacturing to services based economy? You hear these gurus saying this but they do not say how long it will take which might be important for an investor. How long did it take metal consumption to recover after the crash? In 2007 before the financial crash the USA consumed 3.6 kilogrammes of zinc per capita. It was 2.5 in the UK and 6.6 in Germany where they still have a proportionally strong manufacturing base. By 2011 these consumption levels had recovered to 3.2, 1.9 and 6.2 respectively. So it was not the end of the world. For the first time in 2000 China started to consume more that a kilogram of zinc per capita. Already by 2010 China’s zinc consumption had more than tripled to 3.5 Kg per capita on the back of building new cities and major infrastructural projects – the super-cycle, or so we thought.

In 2000 zinc consumption in sophisticated service economies like the US and UK was 4.8 and 3.6 respectively. So even if China eventually evolves into a much more sophisticated economy like the US and its population does not grow metal consumption should increase.

As for currency fluctuations and a weaker Chinese Yuan? Between 1975 and 2007 US per capita zinc consumption never moved out of a range between 3.4 and 4.9 without a trend over time. It averaged 4.2Kg per capita per annum – lots of currency fluctuations during that time.

Zinc is a base metal. A base metal is a common and inexpensive metal, as opposed to a precious metal such as gold or silver. It is the 24th most abundant element in the earth’s crust so based on this it is base. But finding zinc in concentrations which can be mined is rare and precious and that is valuable. The response in sometimes why explore when you can buy zinc in the ground for less than the cost of discovery. But beware that some of these lbs of zinc in the ground are worthless as they will never be mined.

Ziggy Stardust has passed. An icon sprinkled across the heavens. At least we are left with his music. His tunes punctuated the soundtrack of our lives. He was a gentle and kind man, pushed boundaries, a psychedelic and androgynous rock icon, a special talent if not a genius. R.I.P.

 

 

I laughed and shook his hand

And made my way back home,

I searched for form and land,

For years and years I roamed.

I gazed a gazley stare at all the millions here:

“We must have died alone, A long long time ago.”

 

Lyrics by David Bowie from the Man Who Sold the World