Wikinvest Wire

Now that's really funny...

Wednesday, September 03, 2008

It it at times like this that you realize how difficult it would have been to just follow the simple investment advice of buying commodities in the '70s, then buying Japanese stocks in the '80s, then U.S. stocks in the '90s, and commodities again in the '00s.

We are probably only about half-way through the current secular bull market in commodities, yet with news of a high profile commodity hedge fund shutting down and twitchy traders exiting the natural resource sector en masse, you'd think it's the end of the world.

And the funny part about the recent slide in commodity prices is that much of the big move down is being attributed to a stronger dollar. The recent revelation that, during the summer of 2008, the U.S. dollar is not the worst paper money in the world has caused traders to salivate like Pavlov's dogs, pushing the sell button on all sorts of natural resource investments with no knowledge or care that underlying supply and demand fundamentals are still out-of-whack.

Of course, the current conventional wisdom is that the underlying imbalances are being corrected by "demand destruction" of biblical proportions. Despite the conventional wisdom of just a few months ago, emerging economies around the world aren't going to need all that extra energy, metal, and food after all.

They'll just go back to what they were doing in the 1980s.


That's a relief.

Problem solved.

It used to be that new supply coming onto the market would end commodity bull markets, but apparently, this time it's different.

Thank goodness.

We've all had about enough of that $4 a gallon gasoline!

But, by far, the funniest part about the latest conventional wisdom that "a global economic recession will lead to $50 oil" is the underlying assumption that governments around the world, who have already proven to be quite adept at printing up more paper money as the need arises, are going to just sit idly by and watch things deteriorate into a 1930s style jobless rate and bread lines photographed in black-and-white to better capture the mood.

With the power to print as much money as they want to in order to try to solve as many economic problems as they can, governments around the world will simply watch as the entire planet (and nearby solar systems) slides into an economic abyss.

Now that's really funny...

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Anonymous said...

What's even funnier is that some 'serious' gold analysts have taken to bashing conspiracy theorists. I don't know if I'm a believer and some of the theories are certainly flimsy. But if you're in gold, you have to respect the possibility that it exists. What I find noteworthy, however, is people like Nadler at Kitco devoting some effort to refute conspiracy claims and to explain retail physical shortages.

Tim said...

Jon Nadler is on my must read list - I look forward to being on a panel with him next Tuesday in Las Vegas.

isharpe100 said...

I to am surprised much much time Nadler spends on refute the gold bug's arguements. Why would he repond to wacky theories? It only seems to give them some validity.

NMMM.NU said...

And what is really funny is - what kind of fund manager will manage commodities and will be scared from just 38% down.

From the other side is strange how they did that much - Oil is just 28% down, gold about 20%.

Anonymous said...

Your premise, that the theories are "wacky", hasn't been proven. Hence the need to refute them.

Logic 101.

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