Agoracom

Found this one a little while ago. Have a read.

Hot Commodities! The Only Game Left in Town

My, my! How the mighty are falling!

The collapse of the U.S. economy continued apace on Friday, with selloffs in Lehman Brothers (LEH), Citigroup (C), Bank of America (BAC), Wachovia (WB), Fannie Mae (FNM) and Freddie Mac (FRE) leading the plunge.

At the same time, gold surged to $964 an ounce and oil topped $146 a barrel.

The correlation between the weak U.S. dollar and the strong price of gold is confirmed on such volatile days, but what is the broader implication for emerging exploration companies going forward? As these metrics unfold, the TSX Venture is off 5 points, while the TSX senior board is up 75 points led by gold miners Goldcorp (GG) and Kinross (KGC).

Fannie Mae and Freddie Mac are on the ropes. Ambac's (ABK) share price is crumbling, though its sure looks like they've got enough in 'em to go a few more rounds. Lehman Brothers is wounded and bleeding…but IndyMac Bank (IMB) of California is out cold, ko'ed by a run on the bank reminiscent of the Northern Rock debacle in England.

IndyMac had 32 billion dollars in assets, but on Friday, all of its 33 branches closed 3 hours early to stave off a bloodletting that has essentially eviscerated the country's second largest savings bank. The financial magnitude of this "thrift" bank's demise is historically topped only by the 1984 toppling of Continental Illinois National Bank and Trust.

In the case of Fannie Mae or Freddie Mac, any terminal meltdown in those companies' ability to service ongoing obligations would collectively vaporize $5 trillion in mortgage obligations, which is over half the mortgages in America.

Carnage everywhere! Where can we invest our dough with a sufficient level of risk that we can at least hope to eak out a few ducats more than the growing rate of inflation threatens to devour?

Once again, we in the trenches of the commodities business can only shout out about the merits of owning gold, silver, oil, copper, zinc and nickel, potash, wheat and soy!

But never mind trading in just the actual commodities. If you can't read the writing on the wall, which is admittedly faint from all the whitewashing going on in the broader market, let me read it to you.

When the dust settles from all the collapsing, and when the smoke clears from the burned backsides of millions of investors around the globe, and when the writedowns and bailouts and foreclosures finally reach an end (which they surely must), there's going to be one place and one place only for investors to put their money where its value can be trusted to outperform the Dow, the S&P 500, and NASDAQ combined.

And that place, my friends, is in emerging resource stocks.

That's right, folks. Step right up to the TSX Venture Exchange, the one place where companies exploring for and developing deposits of gold and silver, oil and gas, nickel and copper and zinc, are all boot-strapped and incubated, lovingly nurtured until ready for consumption by major producers.

Consider the chart below, with lines representative of TSX Venture, S&P500, and Dow Jones and NYSE relative performance respectively over the last 10 months.