Commodities markets hit investors hard

Amy Scott Sep 3, 2008
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Commodities markets hit investors hard

Amy Scott Sep 3, 2008
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KAI RYSSDAL: Oil fell again today. That’s five off days in a row for crude, in case you’re counting. Corn dropped. Soybeans are off. Copper’s down more than 7 percent over the past week. So you imagine it’s a tricky time for investors who are loaded down with commodities — and for companies that run those kinds of investments.

Companies like Ospraie Management. It’s a hedge-fund manager in New York. This week it said it’s going to close down one of its flagship funds after some big bets on the commodities market went very bad.

Marketplace’s Amy Scott has more on the long rise and quick fall.


AMY SCOTT: The demise of a commodities hedge fund isn’t exactly kitchen table news for most people. But analyst Edward Meir with MF Global says investors of all stripes should take note. Commodities are a volatile business.

EDWARD MEIR: It was all the rage earlier this year. Everybody was saying you had to buy commodities or commodity-related investments. And I think it just got ahead of itself.

The recent declines may hurt investors who got caught up in the frenzy. The Ospraie fund lost 27 percent of its value in August.

But the sharp retreat of commodity prices should spell some relief for those of us who buy everything from gasoline to food to razor blades. You’ve already seen that at the gas pump.

Analyst Ali Dibadj follows consumer products companies for Sanford Bernstein. He says mostly because of higher oil and materials prices, consumers are paying about 14 percent more for household products than they were a few years ago. But he doesn’t expect prices to come down anytime soon.

Ali Dibadj: Part of the reason is just the uncertainty in the marketplace right now about oil prices. It’s very volatile, and I’m not sure manufacturers want to, frankly, put themselves at risk. Nor do retailers want to, if the volatility of the oil prices push it up or down in any one direction at this point.

Eventually, economists say lower commodity prices will take a bite out of inflation. But the forces behind the declines could hurt consumers in other ways.

Demand is falling, in part, because of the global economic slowdown. And that could continue to hit U.S. jobs and incomes.

In New York, I’m Amy Scott for Marketplace.

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