Prices of copper – the industrial metal used to make everything from cars to houses – have declined this week to a near-four-year low. The slide began as reports detailed how the bulk of China's copper imports are used as collateral, coming at a time when China's government looks increasingly likely to allow more defaults. A loan default would therefore liquidate the copper stash, flooding the market with more of the metal, and prices have been sent lower in anticipation.
Investors who believe copper's recent price decline is limited to China are on the "path to ruin", warned Albert Edwards, Societe Generale's uber-bearish strategist.
"The creaks and groans in the copper price reflect the sound of the tunnel supports giving way," he wrote in his latest research note on Thursday.
Edwards went on to warn that central bank liquidity won't come to the rescue of any foolhardy equity bulls.
It's not the first time that Edwards has made bearish predictions on the global economy. In September 2012, he said the U.S. had already entered a recession and it wouldn't be long before the equity market reacts. He also warned about the "ultimate" death cross for the S&P 500—where the 50-month moving average falls below the 200-month moving average. Since that call, the S&P 500 has risen around 38 percent.
It's not the first time that Edwards has made bearish predictions on the global economy. In September 2012, he said the U.S. had already entered a recession and it wouldn't be long before the equity market reacts. He also warned about the "ultimate" death cross for the S&P 500—where the 50-month moving average falls below the 200-month moving average. Since that call, the S&P 500 has risen around 38 percent.