The carnage on Wall Street can be put down to two toxins: leverage and greed. This was the view of Bank of America (NYSE:BAC) chief Ken Lewis, speaking on CNBC yesterday.

In other words, says Eric Fry at Rude Awakening, Wall Street could have avoided the whole mess by applying some restraint and foresight. It didn’t.

The lesson to be learned from Wall Street’s hubris, says Eric, is that although stocks can be ruined by over zealous management, commodities cannot. Stupidity is not a risk factor in the commodities sector. And this makes them attractive despite their recent selloff.  

More from Eric:

What separates an epic financial crisis from a merely ordinary one is the scale of the resulting destruction. The current credit crisis is epic in almost every imaginable way. Very few investors have managed to escape its fury.

For most of the last 14 months, some wary investors managed to escape harm, simply by avoiding financial stocks…and/or by hiding out in the commodity sector. But as the crisis has intensified, reliable hiding places have all-but-disappeared. In fact, many hiding places are starting to feel a bit like tombs.

As recently as the end of August, many commodity-focused investors were savoring modest gains for the year-to-date. But the first two weeks of September have demolished those gains, along with the comfortable illusion that commodities would provide a reliable hedge against stock market losses. Even gold has failed to provide any refuge – slumping more than 5% in September alone.

Therefore, many of us resource investors are feeling more chagrin than satisfaction. We sidestepped the financial sector 18-wheeler, only to step in front of the commodity sector bus. But at least we’re still flinching on the pavement…unlike our bank-stock-investing counterparts. We should remember that Merrill Lynch stock has delivered a total return of MINUS 45% during the last 10 years! Commodity prices have nearly doubled over the same timeframe. So all of you commodity investor who gravitate toward self-flagellation might want swing the whip a little more gently. Your misery is not entirely your fault. These are very unusual times in the financial markets.

Typically, stocks and commodities move in opposite directions. Therefore, the investor who feared a selloff in the stock market could usually protect himself by loading up on commodities. But not in September of 2008! During the recent stock market selloff, commodities have provided no protection whatsoever. In fact, they have performed even worse than stocks.

A hypothetical portfolio that contained half S&P 500 stocks and half commodities would have lost 9.75% during the month of September, so far. That performance would rank as the fourth worst monthly performance of the last 50 years. In other words, these are strange times indeed.

But even though commodity prices have retreated substantially from their all-time highs, they will rebound eventually. By contrast, the financial sector has wiped out more than one trillion dollars of investor wealth…and that wealth is gone for good.

So at the risk of repeating ourselves, we will repeat ourselves anyway: we like commodities, at least for the long haul, if not also for the short haul. We like commodities because supplies are limited and demand is not. But we also like commodities because they lack CEOs and executive management teams. We like commodities because greed and stupidity cannot destroy their value.

Source: Bonus Envy