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Whatever happened to the commodities market?

Today's Financial News - Posted December 12, 2008

The commodities market is taking a strong hit today. The news from Washington was more than enough to scare any potential investors back to the sidelines. Take this opportunity to invest in funds that have the potential to make strong, steady gains over the next few months.

By Andrew Snyder, TodaysFinancialNews.com

Baltimore – (TFN): It has been a while since most investors paid any attention to the commodities markets, outside of crude futures. With the global economy in flux, few folks really cared about what palladium or pork belly futures were doing. Keeping their job and their homes was understandably more important.

But now that we have had a pretty big economic event take place in Washington today, it would be wise to see where the commodities markets stand.

Here is what we know. Congress did not hand Detroit a bailout, but somebody, somewhere in Washington certainly will. It could be Bush. It could be Paulson. It could even be Obama. What really matters is Wall Street remained rather upbeat today, even after this morning’s hectic open.

The commodities market is not fairing quite as well. The Detroit shakeup forced investors to realize the sudden turnaround in the American economy created by wave after wave of bailouts and stimulus packages may not be so sudden. We still have a lot of hurdles to overcome.

With those thoughts, much of the equities market has taken a jump to the downside today.

Gold prices, after making strong climbs this week, are down slightly. Oil futures are down by nearly $3. Copper is down by nearly 6%. Natural gas is down by 2.5%. And silver and platinum are down by 2% and 3%, respectively. Those are pretty strong declines after a string of already weak activity, especially when the equities market remains upbeat.

Rebuilding the bubble?

So what does all this mean for investors? Well, there are two stories here. The first is one of a drastically slowing global economy. Things may seem slightly better at home, but China announced some rough economic figures this week and many other countries are in dire situations. Russia is the first to come to mind.

The second story ties in with today’s announcement regarding the nation’s wholesale prices. The Producer Price Index dropped by a larger-than-expected 2.2% last month. Falling commodity prices and strongly reduced “back-lot” inventories can get the credit for the decline. With consumer spending down 1.8% during the same time frame, businesses are slashing prices in order to reduce inventories.

As long as this does not turn into a long-term trend, this is going to be an investing opportunity for savvy investors. This so-called “cleansing” of the economy is exactly what we need to eradicate any remnants of a commodities bubble.

There are many ways to take advantage of the situation. But for you folks that believe commodity prices have reached a bottom and additional economic-stimulus plans will give prices a boost, take a look at playing exchange-traded funds like Proshares DB Commodity Index Tracking Fund (NYSE:DBC). The fund gives average investors a shot at making money through the futures markets for liquid commodities like crude, aluminum, gold, corn and even wheat.

Instead of picking one or two stocks and hoping they have the cash and credit to survive the current crisis, this fund gives investors a chance to invest in tangible goods that will never go out of business.

There are some interesting investment choices available right now, but going back to basics like commodities may not be a bad idea. Take a look and see what you think.


Next Article: The gold debate heats up

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Posted by Andrew Snyder · Filed Under Gold and Resources 

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