Market Connectivity

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Financial markets have become more and more correlated. Everything seems to be trading up or down based on what the overall market is doing.

The current market connectivity is bad for junior mining stocks. Copper risk/reward used to be separated from aluminum, but today aluminum, copper, and Greek credit default swaps move up or down together. Investors currently have many more liquid options to buy volatility, so money is flowing to other investments.

 

I personally do not want to trade Greek default risk via a junior copper stock. I can think of a hundred ways I would rather play U.S. interest rate games. I would also play copper supply and demand or project quality versus global market pricing.

I am an optimist, and I think the horrible thumbtacking of financial markets will end. When it does end, stock picking, asset picking, and commodity picking will matter more, but for the time being everyone’s number one driver is the overall market. Juniors may be taking a beating, but we’re all in it together.

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