Deutsche Bank (NYSE:DB) has told clients to get out of commodities. The bank says China is slowing, oil will return to its “marginal cost of production” – somewhere between US$60 and $80 – and gold will settle around $650.

Dan Denning in The Daily Reckoning Australia says you have to take what analysts tell you with a fistful of salt. Most of the time they’re just morons who are making it up as they go along. The case for resource has yet to be disproven…

Remember, the world’s population has doubled since 1960, from three billion to well over six billion. The first two great periods of industrialization in Europe and North America brought more resources on-stream, and thus, lower prices for tangible goods.

There was a lot of coal in Newcastle and West Virginia, and a lot of farmland in Kansas. But now, the latest period of industrialization begins with more people than ever chasing scarce resources. China is not Kansas.

It could be that demand for resources will fall (as it appears to be doing simultaneously all over the planet). It could also be that in some sectors, supply will finally catch up (this appears to be what’s happened with base metals). But what’s really changed in the last month is that investors are simply demanding fewer resource shares. That’s it. It’s important to distinguish investment demand from real demand.

The trendy investors who want to own the latest “It” sector will be back. Let them go trawl for beaten down financials and retail stocks. If you missed out on the first phase of the boom, this will be your next best chance to get into long-term positions at much lower prices. Those prices may not go anywhere for a year, mind you. But at least it won’t be so crowded in the aisles while you browse through firms, projects, and management.

What we have in the commodity and credit markets now is what the geopolitical crowd calls a kind of “durable disorder.” Things can remain disorganized a lot longer than a neat freak would prefer. Replacing one global currency regime with another isn’t easy, is it? Yet we still believe that’s what you’re witnessing and living through: a grand changing of the economic guard.

Source: Deutsche Bank Tells Clients to Get Out of Commodities

The third-largest U.S. securities firm lost $1.96 billion, or $2.19 a share, compared to a $2.16 billion gain, or $2.26 a share, a year earlier.

Over the first quarter, the company recorded more than $9.5 billion in write-downs and losses on subprime mortgages and other risky assets. It also posted $2.9 billion in net revenues (a 69% drop) and $805 million in investment-banking fees (a 40% drop) in “this challenging market environment, which continued to deteriorate during the quarter,” according to the company’s earnings release.

Merrill’s earnings missed analysts’ already low expectations, and it may cost the already struggling financial firm.

Citing “deteriorating conditions in the mortgage market” and the potential for another $6 billion in write-downs, Moody’s Investors Service said it may cut Merrill’s credit rating, which would be the second time in six months. In October, Merrill’s rating was lowered one level to A1, the fifth highest of 10 investment ratings, Bloomberg reported.

And some top investors are demanding better performance.

“Merrill Lynch has to show profitability,” Ken Crawford, senior portfolio manager at Argent Capital Management in St. Louis, which owns about 160,000 Merrill shares, told Bloomberg. “They can’t have negative return-on-equity quarters and expect to make investors happy.”

The rest of this year will be a true test for Chairman and Chief Executive John Thain, who took over Stan O’Neal’s post Dec. 1 after leaving his CEO post at NYSE Euronext (NYX).

“Despite this quarter’s loss, Merrill Lynch’s underlying businesses produced solid results in a difficult market environment,” Thain said in the company statement. “… we remain well capitalized. In addition, our global franchise is positioned strongly for the future, and we continue to invest in key growth areas and regions.”

Though Merrill and many financial service companies are still struggling to rebound from the subprime-induced credit crisis, there’s a small group of peer companies that may have put the worst behind them.

Goldman Sachs Group, Inc. (GSC) Morgan Stanley (MS) and Lehman Bros. Holdings Inc. (LEH) all beat earnings estimates last month.

Citigroup Inc. (C) – one of the hardest-hit financials – reports its first-quarter earnings tomorrow (Friday).