After any major market move, I like to say “everybody is a smart guy now.”  With major commodities in price free fall over the last few weeks, its like everybody’s coming out of the woodwork to say, I told you so.  The next thing we’ll hear is oil going back to $30/barrel.

Of course I don’t think anybody reading this thinks that is going to happen.  If it did, it would make most of us “analysts” seem like schoolboys.  Whatever happened to this demand driven world where commodities were so hot, nobody could get enough of them?  Now, despite the fact oil is still very high at $115/barrel, it would seem everybody’s got off the commodity bandwagon.

Getting sideswiped in this commodity meltdown is our Canadian loonie.  The loonie closed at 93.69 cents US last Friday, which is a whole 16.41 cents, less than it was last November 7th.  It is like the sky is falling.  However, if you ask the average Canadian man on the street what the value of the loonie is they’d likely say it’s about par with the US greenback.

In short, getting used to catching up with our American friends felt so good, most of us don’t want to admit that once again the loonie is significantly below it.  What once was very bad for the Canadian manufacturing and agricultural sector is now getting better.  With our currency slipping, it’s a great tonic for those sectors of the Canadian economy.

We need that as the dollar swooned on the jobs news of last Friday.  Statistics Canada announced that the Canadian economy shed 55,200 jobs in July when most economists had expected job gains.  This comes after a net loss of 5000 jobs in June.  So compared to the last few years the Canadian economy definitely isn’t on a winning streak.  Maybe it’s a bizarre economic anomaly, which will correct itself next month.  However, it hasn’t stopped currency traders shedding loonies and looking for a better place to invest.  The significance of our currency decline should not be ignored.

When you think about these things you have to be careful, because there is a certain amount of hype to being caught up “in the market.”  For instance last fall when the loonie was pushing skyward we heard a lot about the loonie being a “petro-currency”.  With oil being sexy, it made the loonie sexy and everybody wants to be sexy.  Now that it’s backed off 16 cents it doesn’t seem so sexy.  However, the truth is the loonie’s value was probably over hyped when it broke through record levels.  The same type of mentality takes place with oil.  Remember $100 oil?  Remember the projections for $200 oil?  A little bit of hype can go a long way.

I’m no better at it than anybody.  Heck, I actually produce commodities for a living.  The difference is as a farmer; we love our commodities, almost to the extent where we have an emotional attachment to them.  I know it’s hard for the rest of you to understand.  However, there is an emotional attachment to the land and what it produces.  Call me crazy.

However, there is one thing that I know.  The price of commodities represents the value, which they move at whether it is oil, gold, soybeans, corn or pork bellies.  The difference over the last two years has been the degree in which mutual funds; hedge funds, index funds and the resident corporate dogcatchers have had their positions within the commodity markets.  Simply put, when they turn and head in one direction, its like a trap door has opened up and everybody falls.  There is no emotional attachment to that.

Yes, the cold hard truth can be harsh.  One recipient of some added strength has been the US greenback.  It was only a few short weeks ago I wrote about the weakness in the greenback.  It’s still weak historically, but on closer reflection it’s up 6% since earlier this year.  So when you add 6% to the world’s default currency, its like everybody except the Americans just got a price increase.

Going forward I’m at a loss of where the commodity complex is going.  The smart money has always been China and India driving this commodity boom.  However, while this was happening the whole world has “geared up” to meet that challenge raising production levels in places like Brazil, Eastern Europe and Russia.  So measuring how the commodity boom and the recent commodity meltdown will affect us becomes very difficult.

Nevertheless, for the 55,200 Canadian who lost there jobs last month, it gives them no solace.  Something happened and surely the commodity meltdown had something to do with it.  Let’s hope it’s a blip.  Another few months of this wouldn’t be for the feint of heart