Tuesday, June 8, 2010

Gold to Salt Price Ratio

It would seem the world does not have enough salt speculators.

The following chart shows the price of gold compared to the price of salt from 1913 to 2008.




I should also point out that the chart ends in 2008. The price of gold was $871 then. It is now over $1200. Gold is far into bubble territory compared to salt, just as it was compared to cattle, aluminum, and the precious metals found in the platinum group (see links below).



Which is really the safer store of value? I would claim that salt wins by a HUGE margin. It has tracked the CPI much better than gold over the last 100 years. Gold is all over the place. Fortunes were made and lost as speculators rushed in and rushed out. That's not my idea of safe. Further, gold was extremely expensive compared to salt in 2008. It's only gotten worse.

I know what you might be thinking. Yeah, but what if salt explodes higher in price due to all of this monetary printing press activity? Wouldn't the ratio look much better then?

1. Then buy salt! It is currently very cheap relative to gold.
2. Don't hold your breath.


May 25, 2010
Ministry plans massive salt purchase to prop up prices

VietNamNet Bridge – The Government has been asked to buy 200,000 tonnes of salt to help salt producers cope with the falling price.

May 17, 2010
Price, surplus hits salt firms

In the first four months of this year, the country produced 350,000 tonnes of salt, twice that during the same period last year, according to the Ministry of Agriculture and Rural Development.

Meanwhile, the salt import volume increased due to falling global prices. As a result, farmers sold salt at record lows of between VND200,000-VND500,000 (US$10.5-$26.3) per tonne in mid-March.


I have no interest in owning gold at these prices. I remain deflationary. There's no telling how much higher gold might go relative to the things I actually need though. More power to it. Just don't count on me supporting its price. I sold in 2006. I'm done.

Gold breaks $1,250

Gold prices hit a new record high of $1,254 an ounce as nervous investors piled into the precious metal.

If there is one thing the markets love to do, it is to eventually ruin the hopes and dreams of nervous investors.

See Also:
A Century of Gold Bubbles
Gold vs. The World's Oldest Money
Gold to Aluminum Price Ratio

Source Data:
USGS: Historical Mineral Prices

24 comments:

Stevie b. said...

Mark - crikey - I thought you were desperate before - but salt? There's more than a lot of it about, ready to be "mined" at the drop of a hat - or perhaps that should be drop in temperature.

Stagflationary Mark said...

Stevie b.,

"Mark - crikey - I thought you were desperate before - but salt?"

Contrary to "popular" opinion, and unlike gold, the human body would die without salt. My dad was actually told to take salt tablets at one point in his life (along with plenty of water while doing hard physical work).

I just keep picking other hard assets (pretty much at random) that actually have a use to me and compare them to the price of gold. I didn't know what the chart of salt would look like until I'd already headed down that path. I can tell you that based on the previous aluminum, cattle, and platinum comparisons the results didn't surprise me much. Soros didn't exactly call salt the "ultimate bubble".

Once again, how does that make me desperate though?

"There's more than a lot of it about, ready to be "mined" at the drop of a hat..."

And yet salt has tracked overall inflation better than gold over the last 100 years. Fewer wild swings. Fewer speculators "piling" in or "piling" out. More predictable pricing.

If what you say is true and salt is so plentiful and easily mined (much like aluminum), then I really shouldn't need to worry much about inflation.

I do worry about inflation. I'm even more worried about overpaying for supposedly "safe" stores of value though.

I'd much rather hoard the things I know I will need that have yet to go up in price than hoard the things that I don't really need that have risen in price 400% and have become a top investing topic on CNBC.

Stevie b. said...

"Once again,how does that make me desperate though?"

Well I do realise we need salt to survive, as well as a lot of other things too, but that's surely not the sole criterion for a good investment.

Once again, you seem to be fixated on what various, unrelated things have done for eons of time to try and prove a point about the overvaluation of another unrelated thing now. To me this proves nothing/zilch/nada.

For lack of a better analogy, it is false to compare apples with oranges.
The world is not the same place it was x/y/z years/decades/centuries ago. More people than ever are more inter-related than ever, with the result that economic excess becomes more extreme with more extreme results. I believe we are approaching that point of extreme excess with utterly unpredictable results. I'd really love to be wrong, but for now I have some gold just in case I'm right. And I reiterate, if I keep gold too long and it crashes, the money lost could not have been better spent.

Stagflationary Mark said...

Stevie b.,

"For lack of a better analogy, it is false to compare apples with oranges."

No offense intended, but if that's the best analogy you can think of then you will lose this debate.

I would most certainly compare the prices of apples over time with that of oranges over time. It would be perfectly logical to do so. I'd also compare both to the consumer price index to draw conclusions about long-term price stability. I could even draw conclusions about which fruit was a better food "value" for those on a fixed income.

You, on the other hand, continue to use the "it is different this time" argument. Gold is different. Gold is special. Under no circumstances should I ever attempt to compare its price to that of other hard assets.

The interesting part to me is that gold bugs seem to have no problem at all comparing the price of gold to that of oil though, even though gold is not an energy source and therefore cannot power our cars and TVs.

And let's face it, you are a gold bug whether you wish to admit it or not. I could do hundreds of charts showing that gold is very expensive to the things in my life that I actually use and need, and your faith in gold as the best and safest store of value (at any price) would remain a constant.

Stevie b. said...

Mark - well forgive me, but the general meaning of comparing apples and oranges is obvious to most I think - and forgive me again, but if you're going to be this pedantic there's no point in trying to have a constructive argument. I am not writing a magnum opus as I type here. Do you want me to compare a grain of sand with a whale? Is that better? Come-on!

People accuse me of not listening, but IMHO you need to take off the blinkers and insert the hearing aid! You are so besotted with your stategy that you seem senseless to any other argument.

I am not a gold bug!

Less than 5% of my total assets are in gold and less than 15% of my more liquid assets, which are spread in various areas, with cash equalling around 1/3rd of those more liquid assets. I do not have faith in gold. Period. But...I have less faith in alternatives for the amount of money involved. Simple.

Oh, and finally the "things in my life that I actually use and need" only make a dent in this money, and indeed you've admitted to something similar yourself re your stores of stuff in your home.

GawainsGhost said...

Actually, when the Visigoths sacked Rome, Alaric demanded a ransom to be paid in black pepper.

Spices have long been used as both a currency and a store of value. In fact, the spice trade was one of the pillars of the economy in antiquity.

Coffee and tea also. By the way, did you know that until the 1800s there was only one coffee plant outside of Arabia? It was in the Royal Garden in Paris. Some guy, I can't remember his name, climbed over the wall and stole some shavings, then brought them to the New World. Only one survived the journey. But from that one plant all the coffee plantations in North and South America descended. It's a fascinating history.

You should expand you study, Mark. Check the price of gold compared to pepper and other spices, and coffee.

Stagflationary Mark said...

Stevie b.,

Fair enough. I agree that there's little point in having further discussions with you concerning the value of gold vs. other hard assets. I'm done debating you.

Feel free to continue to post your thoughts though.

Stevie b. said...

Mark - you weren't debating.

Stagflationary Mark said...

GawainsGhost,

That is a fascinating story. I will sea what I can do to come up with some spice data.

As a side note, I believe that garlic prices went through the roof in China recently. Gold might even look fairly cheap compared to garlic.

That said, gold vs. spaghetti would probably be an ugly chart. As seen at Costco, spaghetti prices have actually fallen since I started hoarding.

Comparing gold to rice might also be interesting. Rice is a staple for the poor (and me), especially in China and India. Rice hoarding did hit hard a few years ago, to the point Costco ran out completely. Fortunately, it was one of my better hoarding decisions.

Stagflationary Mark said...

Stevie b.,

I tried to be civil even after we both know you think what I have to say is both "desperate" and "senseless", but enough is enough.

I'm now asking to stop posting on my blog.

Stevie b. said...

Mark - you really didn't need to ask

Stevie b. said...

By the way and finally, I quote you from a few days ago
"None of this is personal to me by the way. You are at zero risk of offending me."

Goodbye.

GawainsGhost said...

Yes, the history of coffee is fascinating. I first read that story in a pamphlet from Gevalia, which is my favorite coffee.

It's funny, because back when I graduated from college and started teaching, with my first paycheck I bought a Teladyne water massage (world's greatest invention). Apparently, they have some sort of association with Gevalia, as shortly thereafter I received a free sample of coffee in the mail. It was delicious, best I'd ever had, and I've been a loyal subscriber ever since, about 25 years now.

Coffee is big business. Just look at Starbucks. And the people who own coffee plantations are extremely wealthy.

I remember back in high school we read this short story about a guy travelling through Mexico. He got into a pepper eating contest with one of the rich locals. Both ate a pepper and whoever reached for a beer or tortilla first lost. Then another pepper, each one successfully hotter than the last. Until, at the end, the hottest pepper was brought out. The hero purposefully lost the contest, allowing the rich local to save face, and in return was given some of the last peppers. He brought them back to America, planted the seeds, grew a field, and built a pepper company, became rich. It was a good story.

The spice trade has a rich history, and a history of rich people. Coffee too.

Stagflationary Mark said...

Stevie b.,

Yeah, I did say that. I didn't really think at the time that you would make a habit of labeling me as "desperate" nor did I think you would go on a "hearing aid" and "senseless" tirade.

My mistake.

Further, I was even willing to let you have the last word. I blew that theory too, since I didn't expect you to post twice.

Stagflationary Mark said...

GawainsGhost,

"The spice trade has a rich history, and a history of rich people. Coffee too."

You are full of intersing anecdotes!

http://www.seattledining.com/ARCHIVE/restaurants/dixies.htm

I have a spice story. Dixie's served up "The Man" and we ate there a lot. I was too chicken to ever try that hot sauce though. I'm a believer in no pain, no pain.

One day I saw a business woman accept "The Man" on her sandwich. She took one bite and there was no reaction at all. She continued to talk to her coworkers (clients?) as if nothing at all had happened. I watched in amazement. Moments later, het left hand took a utensil and began to scape "The Man" off of that sandwich. It did this for a LONG time as she continued to speak. She was cool as a cucumber though. I'm probably the only one who noticed, lol.

Stagflationary Mark said...

My typing leaves much to be desired this evening/morning. I've clearly stayed up too late.

GawainsGhost said...

Well, believe it or not, but the hottest jalapeno I ever ate was in a Kentucky Fried Chicken at the mall. That pepper made me sweat, literally.

I like spicey food. But then I'm used to it.

On a funny side note, when I was a senior and my brother was a freshman, the first day of class I took him on a tour of the school. Went into the storage room of the biology department and showed him some intestinal worms. He freaked.

Then he became obsessed with the idea that he had a worm. It was bizarre. At dinner, he would shriek and say that the worm had climbed up his throat and taken food out of his mouth! He even gave it a name, Albert.

One day I came home and there was my brother sitting at the table, eating a gallon jar of jalapenos.

"What are you doing?"

"I'm killing Albert."

He ate that whole jar. No, really, I am not making this up. He ate a gallon of jalapenos, one after another.

Later that night, around 3:00 AM, I was awakened by a blood curdling scream. "YEEEAAAUUUGGGHHH!" I jumped out of bed, ran out of my room, and there in the bathroom, sitting on the commode with tears streaming down his face, was my brother.

I told him, "If it burns going in, it burns going out, doesn't it."

True story.

Stagflationary Mark said...

GawainsGhost,

"If it burns going in, it burns going out, doesn't it."

I'm laughing but it is a very nervous laugh as I cringe, lol.

Stagflationary Mark said...

GawainsGhost,

Your tea comments led me to this.

http://www.2basnob.com/tea-history-timeline.html

1850

• Londoners get their first peak at a U.S. clipper ship when one arrives from Hong Kong full of China tea.
• U.S. clipper ships soon desert China trade for the more profitable work of taking gold seekers to California.

1850 was quite a year.

GawainsGhost said...

Yes, well, I did a little research before I head out.

http://en.wikipedia.org/wiki/History_of_coffee

It appears that my timeline was off by about 200 years. But, in my defense, it was a long time ago that I first read about how coffee came to the New World.

To me this is incredibly interesting. Spices, peppers, coffee, tea. The history of it all and the vast fortunes that were made.

I believe the smartest man who ever lived was the first Cromagnon who put salt on meat. Think about it. That guy changed the world.

But it's the same with coffee. I couldn't live without it. Who would have imagined the Juan Valdez never would have had a job if not for some guy who climbed a wall at the Royal Garden in Paris?

By the way, Mark, did you know that primitive man was making beer out of grain before he was making bread? Now that's a story. Salt on meat, beer. Where would we be without that?

Anyway, I'm out of here. Lot of work to do this fine day. I've finished my pot of coffee, and I'm gone.

Stagflationary Mark said...

GawainsGhost,

"I believe the smartest man who ever lived was the first Cromagnon who put salt on meat. Think about it. That guy changed the world."

Salt-cured meat

Salted meat was a staple of the mariner's diet in the Age of Sail. It was stored in barrels, and often had to last for months spent out of sight of land. The basic Royal Navy diet consisted of salted beef, salted pork, ship's biscuit, and oatmeal, supplemented with smaller quantities of peas, cheese and butter. Even in 1938, Eric Newby found the diet on the tall ship Moshulu to consist almost entirely of salted meat. Moshulu's lack of refrigeration left little choice as the ship made voyages which could exceed 100 days passage between ports.

For those who are convinced that the global economy will completely and utterly collapse (I'm not one of them), there are probably worse things to hoard than salt.

GawainsGhost said...

Exactly, salted meats made long range travel possible.

The spice trade is a fertile ground for study. The next time you're at the grocery store, take a look at the prices on the spice rack. That's a lot of money right there.

Money and spices go way back. The reason why Alaric demanded ransom paid in black pepper is because at the time it was more valuable than gold and gems.

Stagflationary Mark said...

GawainsGhost,

"Gems" led me to a new post idea!

Pete said...

Salt is looking extra cheap compared to gold now.

I wonder where I will store it all?