Commodities Still Well Shy of 2006 Correction

For all the gnashing of teeth amongst commodity bulls, there is one important point that has been routinely ignored by nearly everyone with an opinion on this matter.

The current bloodbath in the natural resource sector, though alarming in its suddenness and severity, is still well shy of the 2006 correction, a period when many naysayers were also heralding the bursting of what has turned out to be quite a pesky bubble.

Based on the CRB Index shown above, the May to October move down in 2006 - from 366 to 293 - works out to a 19.9 percent decline.

The plunge from early July to Friday morning - from 473 to 393 - totals only 16.9 percent.

That's not to say that the CRB won't go even lower from its current levels, momentum is now clearly working against it, but it's not as if a decline of the current magnitude is unprecedented - it happened just two years ago.

Comments

[CLH:]

Good graph Tim. However, you cant compare the 2006 correction to the 2008 correction. In 2006 we were correcting from a normal incline before that, but in 2007 and 2008 we went into a bubble incline. This correction will be MUCH worse. (50% if we dont have a recession or 80% if we do)

2008 Aug 10 10:36 AM

[Urbane Gori...:]

Oddly enough, if you draw a trend line off the tops of all the peaks, the last peak is pretty much where you'd expect it to be... I'll try to be out next time we get a hot on that trend-line again..

jegan ;-)

2008 Aug 10 02:37 PM

[MarkMedayski:]

In the last big CRB Index rally that started in the early 1970's index increased 70% in 8-9 years.
Now we are in the increase that started in 2001 that took CRB Index up 300%.
The time frame is the same if one considers we are on the top and are headed for big fall.Maybe.
But I belong to realists camp and can somebody of you count how many barrels of oil,natural gas equivalent,tons of coal,copper, metric meters of lumber,tons of aluminium,gold,platinu... etc., we have consumed since last CRB Index rally ended in 1980.
Do we have more available resources today or all of them become more depleted and where we will get new ones?
The planet earth is not a magic ball and can not give more than it has.In this perspective we are on the fair valuations for all of the CRB Index components.
Looking at Fibonacci ascending numbers I found number 610 (last CRB peak) followed by 987.
I believe we are headed for another decade of increasing CRB at least till 987 and then who knows how many commodities will be available in the quantities we need.

2008 Aug 10 03:01 PM

[Chalfont1979:]

Monsanto has corrected 29% off it's June high and from January of "08 to March of '08 Monsanto correct 29.99%.

CRB index is something to look at but Monsanto is at or near it's bottom.

2008 Aug 10 06:08 PM