The commodity madness

In this weekend news, the price of rice has increased substantially recently. The commodity madness finally hit the rice, the food staple of Asia people. The risk is high, because this is one of the basic item in people's life. Experts have warned that by converting food crop to fuel, we run the risk of further reduce of food supply which is already very tight. I guess we might be reaching the tipping point where everything should unwind accordingly.

High oil price -> Food price increase -> Hurt spending -> Reduce spending -> Correction

There are too much excess built up over the years, especially the liquidity and popularity of hedge fund these years. More derivative and more alternate investment were being sold to investor. Warren Buffett said derivatives are financial weapons of mass destruction.

Read this from The Edge, from the Bloomberg. Paul Touradji says a "buying orgy" in commodities had inflated prices and increased risks of a collapse. "Commodities have never been, are not now and will never be a 'safe haven'".

I think we just have to embrace the risk created by these excess.