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Fast Money HomeFast Money Rapid RecapAbout Fast MoneyFast Money BiosFast Money Web ExtraFast Money Disclaimer
Text Size
Sep.02
5:50 PM ET
Tuesday, 2 Sep 2008
Has Commodity Bubble Popped?
Posted By:Lee Brodie
Sectors:Oil and Gas

STOCKS GIVE UP GAINS

The Dow [.DJIA  Loading...      ()   ] fell on Tuesday, despite a steep decline in the price of oil. Investors hammered energy and materials companies while tech shares fell amid jitters over a global economic slowdown.


OIL PLUNGES AFTER GUSTAV PASSES



The news: A plunge in crude prices [US@CL.1  Loading...      ()   ] on Tuesday tempered global inflation fears and drove the U.S. dollar to its highest level in 10 months. Commodities like corn and cotton fell in tandem with oil while gold slid under $800 an ounce and copper, another key commodity indicator, hit 7-month lows in U.S. futures trade.

The plays: This is a bear market, says Jeff Macke. There’s one trade that’s worked all year and that’s sell.

And know your entry and exit points, add Pete Najarian. That’s very important in this environment.

Stay with what works, exclaims Guy Adami. I like Johnson & Johnson [JNJ  Loading...      ()   ] and Church & Dwight [CHD  Loading...      ()   ].


----------------------------------

HAS THE COMMODITY BUBBLE POPPED?

The news: Corn futures fell over 3 percent to their lowest levels in two weeks on Tuesday, as a $4 plunge in oil prices pushed the dollar to 2008 highs, triggering a broad sell-off in commodities.

The sell-off in turn hurt shares of major U.S. coal producers on Tuesday sending Arch Coal [ACI  Loading...      ()   ], Peabody Energy [BTU  Loading...      ()   ] and Consol Energy [CNX  Loading...      ()   ] all lower.

Also gold slid under $800 an ounce and copper, another key commodity indicator, hit 7-month lows in U.S. futures trade.

What’s going on?

“The game has changed for the dollar and since the game has changed for the dollar it has changed for the commodity markets … all of them,” says strategic investor Dennis Gartman on Fast Money.

”The game changed two months ago when US Steel [X  Loading...      ()   ] began to falter and then it was made all the clearer when the fertilizer stocks began to follow. The collapse of crude oil and nat-gas is not the precursor of commodity market weakness; rather it is merely symptomatic. The energy markets are simply following the lead that steel and fertilizer set up.”

”If the US dollar is now embarking upon a multi-year bull move, we may well be surprised how far the dollar could run.  Is 1.2500 vs. the EUR out of the question?  Of course not; indeed, that might only be a year or so away,” he says.

----------------------------------

DOW'S BEST: GM

The news: Despite saying August was a tough month, shares of General Motors [GM  Loading...      ()   ] jumped on Tuesday; the automaker was the best performing stock in the Dow.

The plays: I can’t imagine how it gets worse for General Motors, says Jeff Macke. I would not get short GM. It seems like a stock that can work for a trade if you can catch it.

As a trade the airlines [XAL  Loading...      ()   ] have been a great proxy for oil, adds Pete Najarian

------(scroll down for more trades)-------



HOUSING MARKET STABILIZING?

The news: Housing-related stocks [XHB  Loading...      ()   ] jumped Tuesday due to oil’s march lower. Meanwhile Goldman Sachs upgraded Lowe's [LOW  Loading...      ()   ] to "buy" from "neutral," citing in part a stabilizing housing market.

The plays: Home Depot [HD  Loading...