Monday, September 08, 2008
OK, it's official. The current correction in commodities, which some continue to insist on calling something other than a correction, has now exceeded the 2006 correction - by a whopping two percentage points.
Based on Friday's closing data and as indicated below, the 2008 plunge from 471 in early-July to just 368 last week works out to be a 22 percent decline for the venerable CRB Index while the 2006 tumble from 361 to 290 yields a result of only minus 20 percent.
Of course, there's no comparison in the swiftness of the two declines - the 2006 drop took a full five months to make a final bottom whereas it has been only two months for the current move down.
It's not likely that we would have reached a bottom so soon this time, however, between geopolitical events, weather, and the ongoing credit crisis highlighted by the nationalization of Fannie Mae and Freddie Mac, you never, know.
Since traders insist on pushing commodity prices in the direction opposite that of the dollar, a sudden reversal of fortune for the greenback (which might be understandable now that the U.S. government is going to add one more, possibly very large, line item to its next fiscal budget) may make this a "V" shaped recovery, the sort of recovery that is so desperately sought for the U.S. economy and ailing housing market.