It's tough to imagine. Junior resource companies have been...

It's tough to imagine. Junior resource companies have been falling for two and a half years now, and have lost over 70% on average.
Small Resources Index - a World of Pain


Source: Bell Potter

The worry now is that in the last month the small resources index has crashed through the level set in the GFC. This means it's now at nine year lows.

Right now it's hard to think we have seen the worst of it. Until recently, I've been pretty bullish. The thing is even just talk of the Federal Reserve dialling back on the current $85 billion buying program caused the market to crash - even while the Fed is merrily still buying $85 billion each month.

If global markets are falling simply in anticipation of tapering, what will happen when tapering actually happens?

In yesterday's Money Morning I explained how the Bank of International Settlements (BIS) is pressuring all central banks to step off the gas and tighten up monetary policy.

They may be getting their way. It's not just the Fed talking about it, but China seems to be actually tightening already. This could have a major effect on commodities and resources in particular. Marc Faber reckons commodities look 'horrible'.

A mining exec I was in touch with recently said, 'It will be interesting to see how the next 12 months plays out. I think there will be a lot of blood on the floor.'

This strain is showing up in more than just stock prices. Brokers are leaving the industry each month in large numbers. The Aussie financial services sector has now shrunk by around 10% from its recent peak.

Everyone is having a tough time. As a measure of retail investor activity, the web-traffic for the stock forums has more than halved in the last six months.

You can understand why. Even last year's hot trotters are turning into this year's dog food. Sirius (SIR), the rags-to-riches nickel explorer with the dream project, has fallen 70% in a few months from $5.00 to as low as $1.56 yesterday. Another recent market darling, Linc Energy (LNC), has crashed from $3.00 to $0.78 as of yesterday. There are many more with similar charts.