Freeport's Energy Deal: the Real Reason Behind It

Tickers in this article: FCX

No one is more scornful of the limited intellectual prowess of the Corporate Media than myself. However, we know that this oligopoly understands hedging strategies, because when they attempt to justify the grossly disproportionate short position of JPMorgan in the silver market, these talking heads use the word "hedging" about six times per paragraph.

It is simply beyond credulity that no one in the Corporate Media oligopoly understands that when some of the world's most energy-intensive industrialists begin buying up energy assets that this is a hedging strategy. So what is really going on here with this farcical propaganda?

Disinformation. The Corporate Media pieces to which I've referred are riddled with anti-commodities messages, while scrupulously avoiding the obvious bullish implications for commodities that this deal signifies. "Copper's prospects are waning." A major commodity producer will "lose its status as a pure play."

Missing from this disinformation are two hugely important (and related) messages. Due to the nature of their operations, all mining companies must be long-term planners. The moves by these multinational mining companies to scoop up oil and gas assets for themselves -- as part of a global rush to secure energy assets -- directly implies much higher oil prices in the future.

Similarly, the clear evidence that oil prices are going much higher and many large, industrial corporations are going to become more energy-intensive in the future, rather than less so, implies much higher prices for any/every commodity for which energy is a major component of production costs.

At the top of the list here is agriculture. From fertilizer to farm machinery to transportation, agriculture soaks up energy the way their crops soak up the rain. The Corporate Media has primary responsibility for peddling the mythology of Western governments that "inflation is under control," while Asian governments panic over the "global food-price crisis."

This means perverting any and every news item that carries the clear message that commodities prices are going higher. So a story about an energy-intensive copper producer spending $9 billion to hedge against soaring energy costs is transformed into "a bold bid to diversify into the U.S. energy sector."

This leaves still one question unanswered for inquiring minds. If this was actually a prudent, logical move by Freeport; why did its share price immediately get hammered after the announcement of this deal? One could offer at least two alternatives to the drivel presented by the Corporate Media.

At the top of the list is simple manipulation. Between Wall Street's abominable trading algorithms and Washington's Plunge Protection Team, if the Powers That Be decide that a certain stock listing should be driven down (or up) over any short-term period, it's simply a matter of picking a number, and then point-and-click.