Resource Currencies: Gilt By Association?

Fewer topics in finance provide more fertile fields than spurious correlation. While the more doctrinaire behavioral analysts may weigh in with a different insight, I think most of these alleged relationships are born in a single Pavlovian instant. Once upon a time, gold rallied in response to every global hiccup -- the Russians invaded Afghanistan? Buy me some gold! -- and that led to years of one-day wonders in the gold market until people finally realized the trade simply had no merit.

My personal favorite trade of this class is the selloff in live cattle futures that often accompanies stock market swan dives. If anyone, anywhere, can demonstrate an instantaneous drop in beef consumption linked to a negative wealth effect linked to a selloff in the stock market not offset by that other knee-jerk reaction, a flight to quality in Treasury bonds, a lifetime subscription to The Journal of Irreproducible Results awaits. Or a sitcom scene: "No, Bobby, we're not having steak tonight, because your daddy (glaring) didn't know when to get out of Kodak."

Canada and Australia

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