Sunday, March 18, 2012

Gold vs. Toilet Paper

Click to enlarge.

I'm using the consumer price index for household paper products to determine the inflation adjusted price of GLD (gold fund). As you can see, GLD is growing at a rate far in excess of household paper products.

When gold crossed $1,000 an ounce in nominal terms (October 2009) I felt that toilet paper offered a much better value. I still do.

I now offer a bone to the gold bugs. I will concede, contrary to the opinion of the media, that GLD is sitting right on its trend line. I see little evidence here that this is its last hurrah.

Can't say this was one of my better calls, at least so far. Fortunately, I never short things I personally see little value in. I'd rather own things I do.

As has been often said, there is inflation in the things we need and deflation in the things we want. So the question becomes, is gold a need or a want? In my opinion, it is a want. At these prices I'd much rather own household paper products, canned goods, and other things that I can personally use. In the opinion of many others, gold is apparently a need. To each his own.

That said, I expect the "tide" to go out at some point. Literally. The 15.8% (exponential) growth rate compared to household paper products is a bit much. No tree grows to the moon.

March 14, 2012
Watching the Tide go out: Thieves are stealing detergent, using it as currency in drug deals

WASHINGTON — When police in suburban Washington raided the home of a suspected drug dealer last fall, they found the cocaine, all right, but also something unusual on the man’s shelves: nearly 20 large bottles of liquid Tide laundry detergent.

It turns out his customers were paying for drugs not with cash but with stolen Tide, police said.

And they said household products would never become a modern currency. What do they know! ;)

For a variety of reasons, the detergent in the familiar flame-orange bottle is well-suited for resale on the black market: Everybody needs laundry detergent, and Tide is the nation’s most popular brand. It’s expensive, selling for up to $20 for a large bottle at stores. And it doesn’t spoil.

Hat tip to a friend who called me today to tell me about the Tide story. Amazing.

Source Data:
BLS: CPI Databases
Yahoo: GLD


Stagflationary Mark said...

Once again, I am not offering an opinion about gold priced in dollars. I have no opinion what the nominal price of gold should be.

I do have an opinion about toilet paper priced in gold though. It is amazingly cheap.

And when I say amazingly, I mean that an ounce of gold will now buy a lifetime supply (if purchased at Costco). You won't even need to ration it more than likely.

Troy said...

I would assume SNAP/EBT aid doesn't pay for detergent. . .

As for future demand for TP this century . . .

Stagflationary Mark said...


He doesn't know how to use the three seashells.


And you know it is sincere based on how little I use that acronym. :)