General Interest News

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28 November 2017

Copper is an extremely attractive commodity.

A year ago, we outlined our Bullish Thesis for Copper. Here we build on that work by outlining why BHP remains committed to the pursuit of organic growth in the red metal.

Ten reasons why we like copper

The ten reasons put forward – five supply related, five demand related - range across all aspects of our proprietary framework for assessing the attractiveness of commodities.

The supply side

1. Systematic grade decline and resource depletion. Primary output from currently operating mines is reportedly likely to decline over the coming decade. This is due to the long-anticipated decline in grade that is endemic to the porphyry resource base that currently dominates global supply. That is a geological fact. The implication is that new mines will have to be developed to offset this decline and to meet rising demand.1 Our view is that this will be no easy or inexpensive matter.

2. Lack of big bang exploration success. Global copper mine output is currently built on a foundation of giant deposits with low operating costs that were discovered and developed decades ago. By major region, the discovery of metals deposits peaked in the following decades:

Europe and central Asia    1960s 
High income OECD            1980s
East Asia and Pacific          1980s
Latin America                      1990s
Sub-Saharan Africa            2000s
Source: Minex Consulting & the International Monetary Fund.

To confidently predict that the industry wide cost curve will not steepen as today’s giants age, one would need to have observed a portfolio of like-for-like deposits being discovered and developed on the required timeframe. The reality is that this has not been the case. Analysis2 shows that Tier-I discoveries across the minerals sphere have become scarce in the new millennium, with an additional slowdown post GFC. Copper is no exception. Our view is that it is extremely likely that the copper cost curve will steepen in the 2020s, as the absence of a significant new generation of Tier-I assets will leave lower quality and/or higher cost deposits to fill the looming gap. The expansion of Olympic Dam is a likely exception to this rule.

3. Above ground risk. In our discussion of exploration success above (or more correctly, the lack of it), we noted the volume of metal discoveries in the OECD countries, where ‘above ground risk’- or challenges associated with bringing a product to market - is relatively low, peaked in the 1980s. The only region where the rate of metals discoveries increased in the 2000s over the preceding decade was Sub-Saharan Africa, where above ground risk is relatively high. All other things being equal, the higher the level of above ground risk, the lower the probability of a discovery proceeding to development and, ultimately, contributing to global production. Above ground risk has been shown to act as a curb on exploration success. A recent study by the International Monetary Fund3concluded that improvements in political risk are a powerful driver of the rate of metal discoveries. In terms of today’s copper market and its expected development in the second half of the 2020s, and beyond, this has major implications. If the most prospective areas for copper exploration now are in regions where above ground risk is materially higher, on a weighted basis, than in the 1980s and 1990s, then it is likely the probability of discoveries is now much lower, and the probability of developing what is discovered has also fallen.

4. Water constraints. According to the CSIRO, around 1600 litres of water is required to produce the copper used in a conventional internal combustion engine vehicle.4 Regions that are either arid or are projected to suffer high water stress5 and are also important copper producing regions, include the Atacama region of Latin America; the south west of the United States; Central Asia and southern Africa. Desalination plants can help provide water security for individual operations, but they require large capital outlay to install and considerable energy to run. Where desalination solutions are not pursued, competing with other commercial users and the broader community for resources in water scarce regions can be extremely challenging. In copper, as in mining more generally, effective, ethical water stewardship is expected increasingly to emerge as a competitive advantage for those operators that get it right. For those that do not, their ability to maintain their social license to operate may come into question.

5. Rational market dynamics. The copper mining industry has shown itself to be a relatively rational dynamic engine when under stress. The 90th percentile on the cash cost curve has served as an effective floor for copper prices during cyclical downturns. Not all commodities exhibit such dynamics, with sticky uneconomic supply in some markets allowing prices to fall below the 90th percentile, and sustain there, for years at a time. Copper prices bounced off the 90th percentile in the recent downturn, illustrating that even in a world of zero interest rates, with sticky supply evident in a number of other commodities, dynamic rationality was the order of the day in copper.

The demand side – traditional arguments

6. Chinese consumers. The increasing importance of household consumption in the Chinese economy should provide a boost to copper demand across a range of end-use sectors, including autos, technology products (e.g. smart devices), and household durable goods (e.g. air conditioners). While the residents of China’s Tier-I and Tier-II cities are already established in an urban consumer lifestyle, residents of lower tier cities (the vast majority of the ~53% of the population already living in urban areas) and the ~47% of the population still residing in the countryside, have a great deal further to go in this regard. Furthermore, the process of upgrading the quality of the urban dwelling stock is not just about raw living space - it is about wiring that space to best effect.

7. India rising. The development trajectory of India is expected to be a major boon for copper demand. India’s urban consumers are decades behind their Chinese counterparts in terms of all key end-use sectors important to copper (with the exception of televisions). The urban population share itself is also still low. Additionally, where India’s infrastructure endowment is concerned, both quantity and quality gaps abound. The long run demand opportunity presented by a successful development drive in India is huge in aggregate and broad based by sector.

The demand side – technological mega-trends

8. The electrification of energy demand. Our projections assume that the demand for electricity will outstrip the growth in total primary energy demand between now and mid-century. The production, distribution and transmission of all that power will require a great deal of copper.

9. The electrification of transport. The mega-trend within the mega-trend. As a battery powered electric vehicle (EV) contains four times as much copper as a conventional medium sized car (around 80kg versus around 20kg), the red metal is expected to be a big winner from the electrification of the light duty vehicle fleet. Among the range of possibilities that we consider, our mid case estimate is the EV fleet6 rises towards 230 million in 2035 and around three quarters of a billion in 2050 (i.e. roughly half of the fleet). Under a green scenario enabled by more rapid technological progress and an even more supportive policy environment, it is possible that we could hit half a billion EVs by 2035 and move well beyond the one billion mark by mid-century. And as EVs move into more and more segments of the light duty vehicle market, and those EVs carry more and more sophisticated onboard computer systems, it is unlikely that the current assumption of 80kg of copper per car will continue to hold, and the direction of change will be upwards. Indeed, researchers at UBS already put the figure at 90kg.7

10. Wind and solar. The growth of both wind and solar power generation capacity since the turn of the century has been nothing short of spectacular. So too have been the reductions in hardware cost associated with the rapid building up of new manufacturing capacity. Wind and solar are rapidly closing the unsubsidised cost competitiveness gap with traditional power generation across the world’s major markets. Attractive long run economics, plus the important role that renewables will need to play in the decarbonisation of the world economy, promise a sustained high growth path for wind and solar. From a copper point of view, the per megawatt hour demand coefficient associated with offshore wind generation is almost five times that associated with coal generation. For solar, the coefficient is around two and a half. Fast growing and copper hungry - that makes the wind and solar revolution a worthy conclusion to our catalogue of reasons to like copper.


1. In addition to new primary mine supply, we acknowledge that increased scrap supply is expected to play a role in meeting demand for copper semis and offsetting grade decline, with increased availability of secondary supply in China, the shadow of the copper intensive boom of the first decade of this century, the major force.
5. For more details, see The World Resources Institute’s Aqueduct database 
6. Here we use the EV definition as battery powered vehicles plus plug-in hybrids. The battery powered share of the 230 million is around 140 million, as indicated here
7.UBS Global Research, 29 August 2017, “Copper: Electric Vehicles & Charging Infrastructure to Accelerate Demand”, p. 2

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Broadcom has proposed to buy its rival Qualcomm in a semiconductor deal that would be the largest-ever takeover in tech.

In a statement Monday, Broadcom said it offered Qualcomm shareholders $60 in cash and $10 a share in Broadcom shares. The offer represents a 28% premium to Qualcomm's closing price of $54.85 on Thursday, before initial reports of deal talks sent Qualcomm shares up 12% on Friday. It was valued at about $130 billion on a pro forma basis, including $25 billion of net debt.

From Business Insider / written by Akin Oyedele


In the past and for many years, Qualcomm had been one of our favorite stock in the US stock universe.

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                                                       bitcoin image

  • History teaches such speculation rarely leads to ‘happy end’
  • Says people buy bitcoin only to make money, no inherent value
Bitcoin: What’s Coming in the Year Ahead
The speculation around bitcoin is the “very definition of a bubble, "Credit Suisse Group AG” Chief Executive Officer Tidjane Thiam said as the currency exceeded $7,000 for the first time.

“From what we can identify, the only reason today to buy or sell bitcoin is to make money, which is the very definition of speculation and the very definition of a bubble,” he said at a news conference in Zurich Thursday. He added that in the history of finance, such speculation has “rarely led to a happy end.”

The digital currency got new impetusthis week after CME Group Inc., the world’s largest exchange owner, said it plans to introduce bitcoin futures by the end of the year, citing pent-up demand from clients. That pushes bitcoin closer to the mainstream by making it easier to trade without the hassles of owning bitcoin directly. 

Other bankers are also sounding warnings about the currency. JPMorgan Chase & Co Chief Executive Officer Jamie Dimon has called bitcoin “a fraud” that will eventually blow up. UBS Group AG Chairman Axel Weber said last month that bitcoin has no “intrinsic value” because it’s not secured by underlying assets.

Bankers also are steering clear of bitcoin for fear that criminals could use its anonymity to hide their activities, Thiam said. Bitcoin’s meteoric rise is attracting a ton of attention. Is it ready for the mainstream?

“Most banks in the current state of regulation have little or no appetite to get involved in a currency which has such anti-money laundering challenges,” he said.

While bitcoin remains a no-go with the industry, banks are racing to develop blockchain, the technology underpinning the currency. Thiam said blockchain may have many applications in banking. Credit Suisse is among more than 100 banks are working within the R3, a consortium created to find ways to use blockchain as to track money transfers and other transactions.


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                                                                                   precious metals picture

Bitcoin gold launched following hard fork

A new cryptocurrency called bitcoin gold was launched on Tuesday as a hard fork was completed following block 491,407 on the bitcoin blockchain, creating a new one incompatible with the existing chain. All bitcoin owners will receive the new digital currency at a 1:1 ratio.

Bitcoin gold aims to change the mining algorithm by implementing the Equihash algorithm in an effort to bring back greater decentralization to the mining community. The project was proposed by Jack Liao, CEO of LightningASIC, a Hong-Kong-based company that produces cryptocurrency hardware.

The last hard fork occurred in August, when bitcoin cash was created, which resulted in bitcoin owners earning over 20% of the dollar value they had in bitcoin at the time. During the pre-launch, bitcoin gold was worth $397.22, while the trading volume in the past 24 hours was almost $9 million.

October 24th, 2017

From Teletrader News

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On August 7th on the Swiss ProfilInvest Web site, visitors could read the French article "Twilight over the markets": 

Today, August 29th, it seems that we have begun the consolidation :


Stocks slumped around the world and havens including gold jumped after North Korea fired a ballistic missile over Japan, rattling markets from New York to London to Sydney. Gasoline climbed as energy companies braced for another hit from Tropical Storm Harvey.


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blue flower

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Entête lettres Logo SPI 11.2016

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Above you will find the graph of Sotheby's shares compared to the S&P 500 indice. 

What do you see?

1. Sotheby's share price makes long-term cycles. These cycles depends on auctions sales and profits reflecting the most wealthy clients' will to save a part of their fortune through the purchase of art works.

2. The overextension of Sotheby's share price compared to the S&P 500 indice tends to validate an end-of-cycle or a correction in stock markets (1999 and then 2007, 2011, and 2013).

3. During the last move from 2016 to 2017, Sotheby's share price has risen strongly but has not shown a speculative extension of its rise versus its indice yet. Then, it seems that the upside phase might continue a couple of months, though it might become more speculative. And we cannot exclude a short-term correction.

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Written by Jean-Pierre Riepe on July 27th, 2017 


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Stocks to Commodities Ratio

Sometimes a picture shows much more than 1000 words.

What can we conclude ?

  • either commodities are undervalued
  • either shares are overpriced
  • or both have reached extremes and should reduce the gap  to reach the median line.

Please feel free to send a message to This email address is being protected from spambots. You need JavaScript enabled to view it. if you need more information or wish to know which commodity is the favorite one.

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1286619 74215091


• The UBS Swiss Real Estate Bubble Index remained in the risk zone at 1.39 points in the first quarter of 2017 following a moderate increase.

• The increase in home prices outpaced the increase in rents and income.

• Demand for buy-to-let investments also rose, in spite of heightened market risks.

The UBS Swiss Real Estate Bubble Index remained in the risk zone in Q1_2017 at 1.39 index points. The index increased moderately over the slightly revised figure for the previous quarter. The rise was driven mainly by a slight acceleration in nominal price increases for owner-occupied homes amid stagnant rents and income. Demand for buy-to-let investments rose as well. Buy-rent ratio deteriorates further Stagnant rents caused the buy-rent ratio to deteriorate for the tenth time in a row in Q1 2017. At the same time, the percentage of loan applications received by UBS for properties not intended for personal use experienced another slight increase. This can be explained by the fact that buy-to-let investments can produce high returns on equity if they are highly leveraged. Given the continued large number of building permits, it seems likely that construction activity will remain (too) strong in this current year. We estimate that the construction of new apartments will exceed the additional demand for apartments by approximately five to ten thousand units this year. This should keep rents on a downward trajectory, particularly for new apartments. In other words, life is about to get even more difficult for landlords. Investor demand for owner-occupied homes is primarily attributable to the entrenched expectation that interest rates will remain low. However, a rate increase would most likely bring strong demand for buy-to-let investments to an abrupt halt.

Regional analysis The Geneva, Nyon and Morges regions are in a correction phase. Local owner-occupied housing markets have already cooled in these regions. In the past three years, price corrections in Valais, Bernese Oberland and parts of Grisons mean that there are no longer tourist regions on the risk map. The regional risk focus is gradually shifting from Lake Geneva to the regions of Zurich and Central Switzerland.

Methodology The regional risk map shows those regions posing the greatest macroeconomic risks in the event of a Swiss-wide correction. The analysis is based on the population size, the price level and the price behavior for owneroccupied homes.

Chief Investment Office WM | 5 May 2017 | Translation: Matthias Holzhey, economist, Claudio Saputelli, economist, Maciej Skoczek, CFA, economist, Source UBS.

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Interest on sight deposits at the Swiss National Bank remains at 0.75% below zero, policymakers said on Thursday. They also decided to leave the target range for the three-month Libor (London Interbank Offered Rate) unchanged at between 1.25% and 0.25% under the neutral level. The central bank reiterated it will "remain active in the foreign exchange market as necessary," willing to intervene to ease upward pressure on the franc.

The inflation outlook was slightly dampened. After 0.3% this year, the main gauge is expected in 2018 at 0.3% or 0.1 percentage points less than what was estimated in March. The rate-setters took the forecasted rate also 0.1 points lower for the year after that, to 1%. Growth in 2017 is still expected to reach 1.5%.

"In the first quarter, growth in mortgage lending remained constant at a relatively low level, and momentum in residential real estate prices continued at a measured pace. At the same time, owing to developments in fundamentals and the generally subdued activity on the mortgage and residential real estate markets, imbalances have fallen slightly in recent quarters. Nevertheless, they are still just as pronounced as they were in 2014, when the sectoral countercyclical capital buffer was set at 2%," the statement said.

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Would you invest in a US biotech company... ?

- with a 2017E P/E of 6.4x and a debt/equity ratio of 1,29

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- its EBIT margin at 58 % and net margin at 44 %

- its cash-flow and its free cash-flow are largely positive


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Two articles about demography.

The prime working age population peaked in 2007, and bottomed at the end of 2012. As of May 2017, there were still fewer people in the 25 to 54 age group than in 2007.

At the beginning of this year - based on demographics - it looked like the prime working age (25 to 54) would probably hit a new peak in 2017.  

However, since the beginning of the year, the prime working age population has declined slightly.

Changes in demographics are an important determinant of economic growth, and although most people focus on the aging of the "baby boomer" generation, the movement of younger cohorts into the prime working age is another key story. Here is a graph of the prime working age population (25 to 54 years old) from 1948 through May 2017.

Note: This is population, not work force.

Prime Working Age Populaton

There was a huge surge in the prime working age population in the '70s, '80s and '90s.

The prime working age labor force grew even quicker than the population in the '70s and '80s due to the increase in participation of women. In fact, the prime working age labor force was increasing 3%+ per year in the '80s!

So when we compare economic growth to the '70s, '80, or 90's we have to remember this difference in demographics (the '60s saw solid economic growth as near-prime age groups increased sharply).

The good news is the prime working age group should start growing at 0.5% per year - and this should boost economic activity.  


By: Calculated Risk | Wednesday, June 7, 2017 at 03:59 pm EST


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