When will the Bubble burst?

Almost all commodities are having a very good year so far with prices skyrocketing even to their highest ever for some. But despite their lucrative opportunity of profit taking, this phenomena can burst in any moment. 

In September 2008 just before Lehman Brothers filed their bankruptcy, commodities are doing fairly well just like today. But then, after the global meltdown wave has rippled, the prices tanked in a very short time. Rubber for instance, lost more than half of its September value by December. The steep price drop help to worsen the global crisis impact with many companies who are dependent on those commodities having to write off much of their inventory value and selling in a way lower price then several months earlier.  

Today, the bubble is getting bigger and bigger. To minimize the impact, we need to analyze the real cause of the price trend. Is it legitimate short of supply and abundant demand, or is it mostly speculatives in nature. We can be rest assured if demand is actually increasing and it drives the price up, because it will keep going up for another while. But if it is mostly speculatives, we need to pay special attention to our portfolio, cause it can burst at any moment.

This is Commodities Risk Management.   

Pircture courtesy of jgreghenderson.com.