Originally published Thursday, April 3, 2008 at 12:00 AM
Analysis
Air leaks from commodities' bubble
Commodities were up to the same old tricks for most of the first quarter, rising to new records as global stock markets struggled. But the sector hit...
The Associated Press
Commodities were up to the same old tricks for most of the first quarter, rising to new records as global stock markets struggled.
But the sector hit a big bump in mid-March. The dip, followed by heavy selling on the last day of the quarter, raised concerns that a multiyear bull market might end soon.
The Dow Jones-AIG commodity index, which tracks precious and industrial metals, energy and agricultural futures, has climbed 14 percent this year through March 18.
After the Federal Reserve cut its benchmark funds' rate target by a less-than-expected 0.75 percentage point that day, the index lost 6 percent during the next two days. It still ended the quarter up 9 percent.
"The idea of bubbles bursting is well known, but determining the moment when the mind-set changes seems near impossible," writes Citi Investment Research strategist Tobias M. Levkovich.
"Indeed, many money managers were aware of the unfathomable dot-com valuations or the unsustainable home-price appreciation, but participated in their stock price momentum for some time," he says, citing other bubbles.
Global economic growth — a key driver of commodities gains — is moderating, notes MF Global analyst Edward Meir.
Another driver, inflation worries — hard assets are seen as a hedge — could be easing, too. Higher U.S. job losses may keep prices in check by reducing demand, writes Levkovich.
Also, large institutions' investments, often using debt, fueled commodity gains. As hedge funds and other entities unwind these investments amid tight credit conditions, commodity prices could fall further, writes Meir.
Not all analysts think the run is over. Barclays analyst Gayle Berry still sees gains, particularly for oil and agricultural commodities, due to low supply and high demand.
Copyright © 2008 The Seattle Times Company
Microsoft's news at CES not so new
As stores close, Starbucks buys a jet
UPDATE - 09:38 AM
Boeing jet deliveries fall 15% in 2008
UPDATE - 09:00 AM
Continuing jobless claims rise more than expected
UPDATE - 11:03 AM
Obama warns of dire consequences without stimulus

Snoqualmie flooding
Early flooding in the Snoqualmie Valley from the Snoqualmie and Tolt Rivers.
AP's News Minute
All of today's news in one minute.
nwautos

Choosing a new truck? Weigh the impact of your choice on your wallet and on the planet.
Post a comment
nwhomes

Find a new home or condo that fits your lifestyle.
Search New Developments
Builder Directory
- Pelicans fall out of sky from Mexico to Ore.
- 11 gay bars get letters threatening ricin attacks
- 20 miles of I-5 closed in Lewis County; possible closure near Fife
- Steve Kelley | UW football is "a sleeping giant" and Nick Holt plans to inject adrenaline
- Issaquah Creek spills onto streets
- Enumclaw-area animal-sex case investigated
- As stores close, Starbucks buys a jet
- Federal racketeering trial begins for Washington Hells Angels
- UW Basketball | Players, coaches move beyond Caleb Forrest incident
- Eating certain foods together helps with nutrient absorption
- Israeli forces bisect Gaza, surround biggest city
542 - 11 gay bars get letters threatening ricin attacks
187 - 2009 starts...slowly
94 - Did Holt make a difference on USC defense?
82 - UW football is "a sleeping giant" and Nick Holt plans to inject adrenaline
72 - The great divide
55 - Donatell to USC? More Wednesday morning links
49 - Flood danger rising with warm rain
38 - Wednesday night notes
35 - As stores close, Starbucks buys a jet
35
- 11 gay bars get letters threatening ricin attacks
- Pelicans fall out of sky from Mexico to Ore.
- Homemade version of Buffalo Chicken Wings saves on calories, not on taste
- Happy Hour | A taste of Hawaii on Queen Anne at Genki Sushi
- Eating certain foods together helps with nutrient absorption
- As stores close, Starbucks buys a jet
- Washout: Unprecedented flooding forces evacuations, closes highways
- 20 miles of I-5 closed in Lewis County; possible closure near Fife
- Divorcing husband wants kidney back
- Steve Kelley | UW football is "a sleeping giant" and Nick Holt plans to inject adrenaline








