Copper could be the "pin" that pops the China bubble

At the end of last year I made predictions (a total of 44) of what might come. So far I’ve got (at least) one right and other dead wrong. I’m worried about the one I'm wrong on.

Right

-Volatility is going up across the board. If you have the stomach for the swings that are coming across all markets there is a ton of money to be made; balls and timing are all that are necessary. The markets will create dozens of opportunities to make and lose.

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Wrong

-Copper will continue to rise. This metal will benefit as the poor man’s gold. Why buy an ounce of something for $1,600 when you can have a whole pound of something else for only $5? The logic is compelling only because there is no logic.

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Copper is looking very stinky on the charts.

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Does it matter if copper breaks down? In the normal course of things I would say no. The demand side is slipping on a global basis; there’s plenty of metal around, so lower prices are not much of a surprise. But there is a wild card on copper this time around. I’m wondering if the crap out in copper is going to bring indigestion to China.

Entities in China have been using copper warehouse stocks as collateral for financing all manner of things for the past two years (L/C backed financing). The estimates for how much has been done of this are not clear. The range is from $7-10 billion.

That China Inc. has been borrowing using copper collateralized debt is an old story. The following links discuss this in depth.