Sunday, July 24, 2011

Peak Hamburger Prosperity (July 1999)


Click to enlarge.

I've adjusted the uncooked ground beef price index by the overall price index so that you can see a few long-term trends.

First the good news. Over the long-term ground beef prices have fallen compared to most items. See the red linear trend line. That's great if you like hamburger. It's still a relative bargain to what it was in the late 1940s and the 1970s.

Now the bad news. The cheapest relative point for ground beef was hit in July 1999. The trend since then has not been our friend. Ground beef prices have risen 46% since the bottom (in real inflation adjusted terms). That's an average of 3.2% per year above and beyond the rate of overall inflation.

There were few commodity speculators in 1999. That's no longer true.


July 24, 2011
Investors Raise Bullish Commodity Bets by Most in Year as Economy Expands

Funds boosted bets on rising commodity prices by the most in almost a year on speculation that the global economic recovery will prove resilient.

I don't share the optimism that the global economic recovery will prove resilient. I therefore don't trust commodity prices at these levels.

That said, I do think hamburger prosperity (or the lack thereof) has been tracking our overall prosperity fairly well for the last 30 years. Should the trend in hamburger prosperity since 1999 continue (which I do think is likely), then I would argue that it will not bode well for our future.

Using hindsight, here's what the so called financial "experts" were saying at about the time we hit peak hamburger prosperity.

February 29, 2000
The Winners of the New World (Jim Cramer)

First, any company that is a commodity producer simply can't be owned, no matter what.

April 17, 2000
Suze Orman Offers Straight Talk on the Stock Market

KING: You ever recommend commodities?
ORMAN: Never.
KING: Never?
ORMAN: Never.


Forehead. Desk. Whack. Whack. Whack.



Source Data:
BLS: CPI
St. Louis Fed: CPI

8 comments:

mab said...

Stag,

I never tire of Jim Cramer or Suze Orman heckling. Ever! It's not even remotely sporting, but it's fun nonetheless.

I'm lost for words to describe the "brilliance" of Cramer's "winners of the new world" article so here's a graphic:

http://research.stlouisfed.org/fred2/series/CWUR0000SEEE01?cid=32421

Sell, Sell, Sell!

It's a cook book! They're entertainers!

Stagflationary Mark said...

mab,

It's almost like personal computers have been commoditized!

Behold the power of modern one night stands!

Before indoor flushing toilets became commonplace, the main function of a nightstand was to contain a chamber pot.

It's the true winner of the new world. Always safe. No protection needed.

getyourselfconnected said...

I have no idea where you get your ideas! Good post.

mab said...

It's almost like personal computers have been commoditized!
Stag,

Yeah, that's been really tough on the budget. I guess we can take some CONsolation in the fact that oil has been de-commoditized. If we can do the same with food, prosperity is surely in our financially intermediated-future.

The sky is the (debt ceiling) limit!

Word ver: "squatoon"! Exactly how the hell did the word verification system get the "u" to follow the "q"? Nobody could have seen it coming. Nobody.

Anonymous said...

I am wondering what the BLS will use if substituting steak with hamburger won't make a difference any more.

Will our CPI diet be moved to pig ear burger?

Stagflationary Mark said...

GYSC,

"I have no idea where you get your ideas!"

I roundup all the ideas, earmark the good ones, and then steer them onto my blog. Yee haw! :)

Stagflationary Mark said...

mab,

Word ver: "squatoon"!

Squatoon rights sounds like what a bankrupt army would do.

Stagflationary Mark said...

Anonymous,

Pig ears! Yum!