COMMODITIES INVESTING
on that much weight right after you bought them. the corporate, financial, and sovereign
However rose-tinted the perspective, the fact remains that much equivalents of those who took out – as
precious capital has been needlessly wasted during the boom and well as those who looked like geniuses
since the accumulation of productive capital is the only means by for extending – larger and larger chunks
which we can ever improve our general standard of living, that loss of ‘NINJA’ loans [No Income, No Job or
cannot fail to be a meaningful one, even if its effects can only be Assets], even as the ship was visibly
reckoned by way of a counterfactual narrative of ‘what ifs’. heading for the rocks.
As it becomes daily more undeniable that the credit cycle really has These are obviously the most likely
turned here, we must do some hard thinking about what lies in store casualties of the bust. If among them
as we try to extricate ourselves from under the falling masonry of you can discern any inordinately large
financial foolhardiness. We must ask ourselves which company, or contribution to last few years’ rise in
indeed which resource, has received the greatest and least sustain- the price of any particular resource,
able short-term boost from the recent asset inflation, therefore mak- this, in turn, will be the one to avoid.
ing it the most over-extended and vulnerable to its subsequent evap- That is, until human cupidity, institu-
oration. In commodities, the candidates surely lie among the metals. tional moral hazard and a flawed,
Conversely, we must also try to identify those entrepreneurs who inflationary monetary system launch
have been conservative or canny enough not to be caught out, or for the next boom amid the ashes of the
which resource we will still find the matching of physical supply to present one
•
genuine, end demand a considerable challenge. For these will be the
ones best placed to weather the onrushing tempest and to offer real,
Sean Corrigan is Chief Investment
long-term value, no matter how beaten down the traded price
Strategist at Diapason Commodities
becomes in the interim. At present, foodstuffs seem the best candi-
Management, Lausanne & London.
dates, to be joined – after a further period of liquidation-driven
E: sean.corrigan@diapason–cm.com
retracement – by energy.
Footnotes
1. Fernand Braudel (1902-1985), the most celebrated French historian
One Final Thought of the postwar era. Works include, “A History of Civilizations”, “On
In trying to visualise what the economic landscape will look like
History”, “The Structures of Everyday Life”, “The Wheels of Commerce”.
after this hurricane of deleverage has finally dissipated itself, we
2. “Putting the Hayekian Horse Before the Keynesian Cart”,
suggest you draw the lesson from subprime and start by looking for Sean Corrigan, March 2007. [ The Ludwig von Mises Institute].
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