Commodity Stocks Getting Creamed

[Maddy]

Anyone want to hazard a guess as to what caused the carnage in commodity stocks today? Lordy.

I used to belong to a number of trading-related discussion forums where I benefitted greatly from reading the market commentary in "real time." I no longer even remember their names. Are there any good ones around?

[dockinGA]

Anyone want to hazard a guess as to what caused the carnage in commodity stocks today? Lordy.

I used to belong to a number of trading-related discussion forums where I benefitted greatly from reading the market commentary in "real time." I no longer even remember their names. Are there any good ones around?

Seems to me just fears of a massive global slowdown. I had some VDE (Vanguard energy ETF) up until mid June. Luckily I sold near the top.

[I Shrugged]

My guess would be Powell’s comments about being willing to send us into recession.

[Kbg]

The signs are we are headed to recession. It appears the Fed is quite done with easy money. Wall Street was late to believing it. Normally the FFR needs to exceed inflation to tame it. Whether we repeat the 70s or inflation turns down to meet the FFR we shall see.

[Maddy]

And commodity stocks in particular--why?

This has the feel of 2007-08 all over again, when I was deeply into commodity stocks and took a severe beating that ultimately was the "come to Jesus meeting" that brought me to the PP. To this day, I have a number of those stocks (actually mostly ETFs, such as FCG and GDXJ) that got pummeled so badly that it made no sense to sell. Anyway, I recall that it was commodity stocks that took the earliest and hardest hit back then. At least at first, the rationale was that commodity stocks were being liquidated to meet margin calls--although I never did understand why, again, it was commodities that were the piggy bank that got raided. So much I don't understand.

[dockinGA]

And commodity stocks in particular--why?

This has the feel of 2007-08 all over again, when I was deeply into commodity stocks and took a severe beating that ultimately was the "come to Jesus meeting" that brought me to the PP. To this day, I have a number of those stocks (actually mostly ETFs, such as FCG and GDXJ) that got pummeled so badly that it made no sense to sell. Anyway, I recall that it was commodity stocks that took the earliest and hardest hit back then. At least at first, the rationale was that commodity stocks were being liquidated to meet margin calls--although I never did understand why, again, it was commodities that were the piggy bank that got raided. So much I don't understand.

My understanding is that commodities take a hit due to the expectations of drastically reduced demand in the future, or perhaps they are the first place for telltale signs of economic distress to show up because companies need to place raw material orders far in advance? I'm no expert so probably way off base.

Regardless, I echo your concerns about similarities to 2008. In fact, I'm afraid this could even be worse. The crisis started with ridiculously high equity valuations and bond yielding nothing. At least 2008 was a little better in that respect

[yankees60]

And commodity stocks in particular--why?

This has the feel of 2007-08 all over again, when I was deeply into commodity stocks and took a severe beating that ultimately was the "come to Jesus meeting" that brought me to the PP. To this day, I have a number of those stocks (actually mostly ETFs, such as FCG and GDXJ) that got pummeled so badly that it made no sense to sell. Anyway, I recall that it was commodity stocks that took the earliest and hardest hit back then. At least at first, the rationale was that commodity stocks were being liquidated to meet margin calls--although I never did understand why, again, it was commodities that were the piggy bank that got raided. So much I don't understand.

That is because no one else understands! Including the rest of us and all else who make big $$$$$ for purportedly understanding.

[Kbg]

Follow the commodities themselves...the two will track, not perfectly but certainly. Many commodity funds due to the indexes they follow tend to be heavy on oil...and oil is down almost a third in a very short time period.

[Dieter]

Commodities really spiked last, what, 6+ months?

I’m sure lots of chasing returns

Then, as folks say, market expectations going south

Is more production coming online than expected?

That Norway to Poland gas pipeline opened a couple months early

Did demand decrease because of the high prices?

These sure are interesting times

(I prefer a little more boredom, thank you very much)

[Kbg]

I think we've been going through a "Come to Jesus" experience on supply chains which is the largest factor along with coming out of the Covid slump.

Turns out just in time foreign sourcing depends on a lot of assumptions that aren't holding up.