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Top 15 For 2008 (No. 10): Commodity Train Wreck

January 6, 2009 1:58 PM EST
StreetInsider.com has put together its 'Top 15 For 2008' which chronicles our view of the most significant news on Wall Street during the tumultuous year.

Number 10: Commodity Train Wreck

The wild ride in commodities and commodity related stocks - from record highs in the early part of the year to the crash at the end of the year - was a major story for 2008.

Commodities and companies that produced them were riding high at the beginning part of 2008 on the view that emerging markets, like China and India, would continue to grow and will buy up all the available resources no matter what the price. The 'decoupling theory', a theory which suggests that emerging markets can be self-sustaining, or decouple themselves from the U.S. and other Western Countries, was the driving thesis. It was considered a sure bet by hedge funds and other investors to be involved with BRIC investments, which is an acronym for the economies of Brazil, Russia, India and China. More and more money followed these supposed 'sure bets' and the stocks and underlying commodities were in hyper-drive.

As the credit crisis played out and economies around the world came to a screeching halt during the 2nd half of the year, it became apparent that the view about commodities was overstated. Investors went running for the exits and commodities and commodity related stocks crashed. Over-leverage appeared to be the driving factor for the historic run-up in commodities and now with banks freezing lending the party was over.

Below are some of the notable downside moves in underlying commodities in 2008:

Brent Crude Down 63% on the year
RBOB Gasoline Down 63% on the year
Lead Down 61% on the year
Nickel Down 58% on the year
Zinc Down 53% on the year
Cotton Down 49% on the year
Crude Oil Down 48% on the year
Heating Oil Down 47% on the year
Copper Down 47% on the year

Below are some of the notable downside moves in commodity related stocks in 2008:

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX) down 77% on the year.
United States Steel Corp. (NYSE: X) down 69% on the year.
Potash Corp. of Saskatchewan, Inc. (NYSE: POT) down 49% on the year
Alcoa, Inc. (NYSE: AA) down 70% on the year
Cliffs Natural Resources Inc. (NYSE: CLF) down 51% on the year
Rio Tinto plc (NYSE: RTP) down 79% on the year
Caterpillar Inc. (NYSE: CAT) down 39% on the year
Chesapeake Energy (NYSE: CHK) down 59% on the year
Bucyrus International Inc. (Nasdaq: BUCY) down 63% on the year
Vale (NYSE: RIO) down 64% on the year.

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