The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
Bullion Bulls Canada
) -- With many investors now having descended back to full-fledged panic mode, it is obviously the perfect time to explain why 2011 could never be another event like the "Crash of '08." In distinguishing 2011 from 2008, many of the distinctions involve the degree of collapse which is possible/probable. Thus, I am not rejecting the suggestion that we are on the brink of another "crash," but rather pointing out that the nature of any such crash would be remarkably different.
While most sectors of the economy (and most markets) are in worse shape than when the Crash of '08 commenced, there are a couple of sectors which are quite clearly much stronger than in 2008. When we explore this dichotomy, it will quickly become obvious why events could not repeat the scripted "crash" of 2008.
Much less leverage in commodities:
Though there are many significant differences between 2011 and 2008, I will argue that none are as significant as the dramatically different dynamics which exist in commodities markets today versus the summer of 2008.
In 2008, commodities markets were more leveraged (on the "long" side) than at any other time in the history of the global economy (and by a wide margin). Not only is this (arguably) the largest/strongest "bull market" for commodities in the history of the global economy, but it is the first commodities boom since the explosion in the "hedge fund" gamblers. These reckless speculators amplify volatility, risk, and leverage in any/every market they touch.
It is important to understand that there was absolutely no reason for commodities markets to crash in 2008 (just as there is absolutely no reason today). There is no plausible economic scenario in the future where the world economy will have sufficient amounts of most commodities. We are headed unequivocally toward a future of chronic commodities shortages.
The collapse of commodities in 2008 was nothing less than an "assassination" -- an assassination which was only possible because of the unprecedented levels of leverage which existed in those markets. The obvious parallel is the silver market.
By any "fundamental" basis, the price of silver should
already be in excess of $100/oz today
. Yet in May, the anti-bullion cabal was able to manage
a ruthless and signficant take-down
of the silver market -- despite the fact that
inventories are exhausted
, "market sentiment" has never been more bullish, and silver was still grossly under-priced at $50/oz.