Shortage Can Be Folly

Traders relish a shortage; investors should nod politely. A shortage of something, anything, suggests that prices will go up, at least for a flicker of time. But be weary of the shortage phenomena, however seductive the headlines. Consider lingering concerns about soaring vanilla prices due to bean-production problems in Madagascar. Indonesia harvests just as much vanilla and Mexico is a swing player. There are plenty of companies in the synthetic spice business looking to grow market share. Brace for a price collapse. Meanwhile, take time to read, or re-read, the 1841 investment classic, Extraordinary Popular Delusions and the Madness of Crowds.

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Image shows beans drying at vanilla cultivation farm. Credit: PierivB at Can Stock Photo Inc.