COMMODITIES INVESTING
churn, cannot fail to impinge on the efforts being made by the civil- tion. There were elevated sentiment
ians of the real world simply trying to make a living. readings; record high margin longs on
We say this because, as Austrians we believe the business cycle the NYSE; record low mutual fund liquid
itself arises from no other source than the instabilities inherent in our asset percentage holdings; a major turn
whole system of ‘elastic’ credit. Though often overlooked, the nexus in the breadth of the market (that for
between Wall St. and Main St., between the screen-slaves in the the Nasdaq has, indeed, since hit multi-
City’s shiny, Fosterian egoplexes and the steel workers in the strip- year new lows); and volatility indices
mills of South Wales, runs both ways. Financial conditions, currency were climbing with (rather than
rates, and asset prices not only impact the NAV, but also the navvy. against) the rise in stocks.
It is now clear that the sense of invin-
... no investor in commodities should be ignorant of
cibility displayed by so many players
was singularly ill-judged. Far fromthe implications that the stomach churning events
forming a ‘permanently high plateau’,
in the credit markets carry for the prices of resources
the early summer seems to have
On that basis, though it may seem a long way from the subprime marked nothing less than the nose-
Badlands of Middle America to the oil sands of Alberta or the plat- bleedingly vertiginous pinnacle of
inum reefs of the Witwatersrand, no investor in commodities should what has arguably been the most spec-
be ignorant of the implications that the stomach churning events in tacular mass hysteria in the whole his-
the credit markets carry for the prices of resources – whether through tory of financial market manias – the
their impact on producers’ finances or due to the more worrying pos- multi-trillion Ponzi scheme of credit we
sibility that a serious recession might be the result of the ongoing have created since the collapse of the
implosion of leverage. technology frenzy.
Right up to the second half of July, not only were commodity mar- We have long told anyone arguing
kets strong, but world equities were still raging ahead in utter denial that commodities have occasionally dis-
of the spreading cracks in the credit boom. Both the S&P and the played bubble-like behaviour that they
emerging markets indices were making new highs. This is despite the were no more susceptible to this kind of
fact that the technicals were uniformly signalling the need for cau- infection than any of a number of other
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