Wednesday, November 01, 2006

Commodities, which looked more than promising, are facing hard times; but things may not remain the same

IIPM PUBLICATION
One might argue that with Dow Jones Industrial Index testing its all time high, Amaranth – which fell prey to it’s over exposure in commodities – should have done a better job. But then, wasn’t everybody gung ho about commodities? Wasn’t the Chinese boom supposed to last a bit longer? Wasn’t gold supposed to embellish portfolios for years to come? Well, of late, and to the surprise of many, the commodity juggernaut has slipped off its axis and has sparked doubts over the sustainability of commodities.

The Reuters/Jefferies CRB (Commodities Research Bureau) Index, one of the most credible commodity indexes, changed its course and sank through the up-trend line for the first time since this Bull Run took off almost half a decade back. The total returns for Reuters/Jeffries CRB Index (see chart) has taken a nosedive, contrary to what we have seen in recent past. Commodity prices are now 15% off their highs and are trading 5% below the last year levels.

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Source :
IIPM Editorial, 2006, Arindam Chaudhuri's Initiative

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