Onetime Wall Street darling Lehman Brothers (NYSE:LEH) has gone belly up, and it’s taking US stocks down with it. This morning, all but four of the Dow industrials are trading in the red.

There’s no two ways of looking at it. Wall Street is on its knees. If you have exposure to US stocks, you’ve probably been seriously burnt.

“But there’s one positive thing that you can say for commodity investors,” says Smart Commodities UK editor Garry White, “The dollar rally looks likely to run out of steam.”

This from British contrarian investing website Fleet Street Invest:

The main reason for the recent bear market in commodity process has been the resurgence of the dollar. Of course falling demand as the economy slows has contributed to this, but the main cause has been the dollar rally. This simply cannot last. The collapse of Lehman shows this.

The dollar is rising despite overwhelmingly negative fundamentals. Traders have been bullish on the dollar because they have taken the view that the eurozone is going to fall into a recession. The US started the downturn first, therefore it will recover first.

I am sceptical of this view.

The US is the nation worst affected by the credit crisis. This is plain to see.

One of the most important names in global investment banking has imploded under the weight of toxic debt. The name Merrill Lynch (NYSE:MER) is also set to disappear for good, as Bank of America (NYSE:BAC) moves in for the kill.

More banks will go the same way – and the precedent has been set with Lehman. The US government is prepared to let banks fail. This is the right thing to do.

Owner occupation of homes in the major economies of the eurozone is than in the UK or the US. Let’s take a look of the figures from 2007.

– UK 69.8%
– US 69%
– Australia 70%
– France 56%
– Germany 45%

This means that a housing market slump will hit us the UK, the US and Australia the hardest. France and German will escape relatively lightly.

The collapse of Lehman is likely to make a cut in US interest rates happen sooner rather than later. On Friday, US short-term interest rate moves to indicate a 34% chance of an interest rate cut by December, compared with the 28% chance seen on Thursday.

The American economy is also going to be hit hard by a rising dollar as its exports get more expensive. In fact, manufacturing for export has kept the US economy afloat for years because of its weak currency policy. A strong dollar will hit the only bright spot. It won’t last.

I have been slightly bemused by the rising dollar over the last few months. It appears to have defied logic. This dollar resurgence has hit commodities hard. But when the dollar starts falling again – as I believe it certainly will – commodities will snap back much better than equities, so it is important to hold your positions.

PS: Garry’s Smart Commodities UK newsletter concentrates on long-term plays in the commodities sector. Click here to discover more.

Source: Lehman’s Failure Is Positive for Commodities