As Sir Charles Barkley would say.
Crude tried to rally off a bullish stocks build, puked. Stocks- Dow tried leading stocks higher off merger news, same result.
Even with dollar down not much bid across the comms with even gold unable to get much going.
It'll be over when its over but for now that's the default direction for stuff.
I can make a technical case for some fair bottoms in grains but don't think they're going much of anywhere under this broader trend.
An opinion that further yuan devaluation would be a bigger deal than Fed tightening.
As far as chinese overcapacity, it seems to fairly well believed (and I agree, for what that's worth) that it doesn't extend to food and feed. So presumably any effects would be knockoff from general commodity weakness.
We're heading to a point where the pendulum of everyone wanting commodities in their portfolio by 2008 seems to be swinging to the opposite extreme.
BTW, talk is that chiese oil storage is pretty much topped off but there's some new storage coming on line early next year. Although a 200 M barrels would only absorb current production excess for 60-90 days. And they're not known for chasing markets higher but would put a bid under it anyway.
Crude went down at sniffed at the Tues lows this morning and then backed away. Haven't a clue what it does today or tomorrow but the trend seems pretty clear until otherwise indicated.
Along with the semi-direct impact on other comms, there's a third order effect as, despite the "cheap gas is good" meme, financial markets are getting a bit nervous about the imminent prospect of maybe half of the $350B in energy junk bonds defaulting.
Part editorial and part thinking aloud. Junk bonds have played a role in all of the fiancial crisis since the S and L debacle in the 80s.
In this iteration and the immediate previous big one, there was an element of historically low interest rates forcing a lot to chase yield, even at the cost of assuming risk.
Stock indexes look to return about 0% on the year at this point (a bit of dividend on the big caps). High grade bonds about the same with lost value vs. coupon. Junk is losing.
There are innumerable insurance companies, pension funds held by companies, states, municipalities that operate under the assumption of historic long term returns.
I'm thinking this is how the next phase of financial crisis happens, maybe. With a whimper rather than a bang, at least to start.