OK - definitely not a small cap post, but just jotting down some thoughts on my perennial watch on commodities. (Not Held)

Recently, GS upgraded their likelihood that the US will tip into recession from 15% to 25% (recall last year they were as high as 35% ) I listened to a recent podcast that set out their analysis for why they believe US employment and consumer spending are still likely to hold-up. Who knows - macro forecasting is a dark art.

So I am eyeing $RIO - my preferred long term copper play (due to the planned ramp up of OT in Mongolia, and my bullish LONG TERM copper view, given the electrification of everything. Aluminium also part of this thematic) and recognising the criticality of Iron Ore and China as the current, dominant earnings contribution.

So, I'm looking at the following charts and wondering how far $RIO is for a nice entry point for a medium term play. Some charts to illustrate:

What this chart doesn't show is the structural long-term pressure on the copper cost curve, due to falling grades of the marginal producers and the long lead time to develop new resources. 2025-2026 onwards, we're likely to be well north of $5/LB.

Of course, all the "talking heads" have been hyped up on copper over the last year, with few seeming to recognise the difference between short term pricing dynamics (dominated by refined copper stocks, which China can influence through market action, and near term macro-uncertainty) and the longer-term price dynamics, governed by the fundamentals of supply and demand. The 2024 "oversupply" doesn't seem to have played out yet, and it is curious that so many have been a "buy" on copper, because all the decent research from last year indicated that as 2023 moved into 2024 the market would move from tightness to oversupply.

Of course, if you believe that a recession is still likely, then the medium-term play has to become a longer-term play, because the $RIO SP could still have a long way to fall, and you'd need to hold it through to the eventual recovery.

So, if I believe a recession will be avoided, we're probably at a good entry point - subject to monitoring the short term copper balance and China. But if a recession is coming, then that would of course provide a better entry point.

Most of the time, I can't resolve this uncertainty, and just sit on my hands. Afterall, I don't have to own it or anything else in this sector.

But mulling it over.