Tim Seymour: Copper markets have a deficit dynamic with really tight supply

Speaker 1 00:00.430

will this rally continue into the new year let's ask tim seymour he's the CIO of seymour asset management a CNBC contributor and you have some kind of clever ways for those who don't want to have to make a call on this one way or the other one of your stocks in particular am i

Speaker 1 00:13.990

going to if i am i jumping ahead here

Speaker 2 00:15.590

we talk about rio jump anywhere you want you want

Speaker 1 00:17.390

to start with just the metals and

Speaker 2 00:18.670

i'm i'm thinking about it it's christmas eve and we got burl ives going silver and gold over and over you could yes

Speaker 1 00:24.670

we are this is we were talking about

Speaker 2 00:26.150

when they quit your day job don't quit your day

Speaker 1 00:28.110

job but i i liked also what we heard last hour where they were talking about look gold might have strong fundamentals in the case of central bank buying and jeff curry last hour was last week was saying look he thinks a lot of these metal trades are going to ultimately play

Speaker 1 00:40.630

catch up to establish their historical ratios he likes platinum he said that also the EU is relaxing it's kind of switch over to away from combustion engines that will favor so do you think everything else plays catch up to gold do you think the whole thing needs to take a pause

Speaker 1 00:54.510

here is silver more speculative or is it does it have a better usage case i'm just curious

Speaker 2 00:58.430

so it has industrial use but i love gold i think gold six thousand by twenty eight if not before we know the central bank narrative we know the asset class narrative morgan stanley out there saying it could be up to twenty percent you know i don't know i i do know that the

Speaker 2 01:11.350

deficit side of gold is also not as understood a fun fact that many people maybe have heard you've probably heard this but all the gold ever mined could fit on a football field two to three feet high that's it and and there's not new supply new mines take six to nine years we

Speaker 2 01:26.830

love to talk about that we'll probably talk about copper and so we'll talk about copper it's it's all on some level there is an industrial metal story that follows some of this is fed driven some of this is deficit story some of this is is kind of central bank dynamics i think

Speaker 2 01:40.430

as you get into copper it's it's a case where there really is a deficit dynamic we heard this morning from antigua anto gefasta which is one of the largest latin american copper producers in their sales to china that they're the processing fee they've cut that to zero you only

Speaker 2 01:54.630

do that when there's really tight supply so what's going on in copper combine that with some global cyclicality that i think is probably better than people had expected yeah i think copper and i think industrial metals are following and yes silver has industrial use but i think

Speaker 2 02:08.750

some of this is just a silver catch up trade to relative historical

Speaker 1 02:11.470

so you think it keeps going let's move that along then to your nice and naughty lesson on the nicest one of the names is rio tinto it's up thirty six percent this year i mean it's not as good as silver and gold but it's something

Speaker 2 02:22.760

like it's it's it it's it's like you kelly nice this year probably you'll be nice next year that's where you are i i i think rio the story is coming around both in terms of the copper production this was at one point fifteen percent of the top line it's probably going to be

Speaker 2 02:37.470

closer to forty out a couple years they have the fastest copper growth of the integrated miners i think if you look at also just where they are selling iron ore and some of the core other parts of the bulks that they're involved in this is a company that i think is is almost

Speaker 2 02:52.470

intrinsically cheap to the underlying

Speaker 1 02:54.350

we've heard of people making the for freeport i don't know if you would say yeah one or the other if you feel more strongly about rio

Speaker 2 02:59.310

or i feel very strongly about freeport too i'm long freeport you can get the copper miners ETF cop X and if you look at that's a great looking chart for the reasons we're talking about i like freeport also freeport has gold exposure as well what i like about rio is it pays a

Speaker 2 03:14.630

really nice division which isn't a reason to buy a stock but the capital discipline for them is extraordinary i think you have upside optionality on china if you get anything in terms of an uplift in the macro in china this has always been a big part of the story but more

Speaker 2 03:28.190

importantly this is actually a balance sheet that's never been better and i think it's the best of the diversified this

Speaker 1 03:33.670

is right i do wonder about inflation next year but that's a side note the one more stock on your nice list than the naughty one makes me laugh so i want to get to that but UPS is one that you like for next year again talk about that one kind of a not a great look it's down

Speaker 1 03:46.070

twenty percent

Speaker 2 03:46.790

yeah this is kind of like this is the story of my life like naughty to nice like i was definitely at one point you know and i think this is a case where UPS is about relative improvement in their core business what we just saw in their third quarter numbers where first of all

Speaker 2 04:01.190

they beat consensus they upgraded their four Q but actually US margins are going a little bit higher even at a time when year over year US volumes are going down that never happens and it's and it's it's telling you that they're running this company better it's certainly to

Speaker 2 04:15.310

itself you're also paid a decent division again not a reason i go out and buy companies i am long this one but i do think this is about also a macro story look at the chart on fedex i was

Speaker 1 04:25.030

going to ask and i do that one too

Speaker 2 04:26.670

well i think it's getting pulled higher because i think the story around transports remains very constructive but this is one that really was naughty and it was about showing the operational improvement and i think we're there