Friday, August 16, 2013

Gold vs. Crude Foodstuffs & Feedstuffs

In theory, how far could gold drop in price relative to the basic necessity of food?

In the following chart, I'm adjusting the price of gold for inflation but instead of using the CPI I'm using the producer price index for crude foodstuffs and feedstuffs (which has doubled since 2000).

Click to enlarge.

It appears to me that gold could drop quite a bit more (relative to crude foodstuffs and feedstuffs). The exponential trend in blue has failed and the median is a long ways away. That doesn't mean that gold will drop of course. I'm simply saying that it could.

How to Live on a Deserted Island

5. Find food sources. The ocean is filled with life. Try constructing a low V shaped wall out of stones at low tide, with the point of the V pointing out to the sea. At high tide, fish should swim inside but become trapped as the tide flows out.

12. Find food... There are lots of edible roots and berries, but watch out! Some are poisonous. Only eat them if you are sure they are safe. The best, and most reliable source of food is bugs. Yes, bugs. They are everywhere and an excellent source of protein. If deciding to fish with the bugs instead, a hook can be fashioned by carving out a stick into a hook shape and putting a barb on it. Tie string to it and you're in business.

Note that there is no mention of borrowing money to buy gold.

Monex: How to Buy Gold

Or, you may elect financing of your precious metals, using as little as a 25% down payment and taking advantage of investment leverage of as much as 4-to-1, through our exclusive Atlas Account program.

I love the term "exclusive" to describe the account. Who would Monex exclude? Investors who would fold under the massive weight of a margin call?

As of 2006, I no longer own gold nor do I have any desire to buy it back at these prices (relative to the price of toilet paper anyway). That said, I figure it never hurts to buy a few extra large bags of rice at Costco though. Things happen.

In my opinion, we've replaced risk-free investments with risky free lunch investments. I'm not referring to gold specifically. I'm referring to the entire system. For example, here's another exponential trend failure. Check out dividends compared to crude foodstuffs and feedstuffs. Kind of ominous don't you think? That one definitely requires its own post. Coming soon to a blog near you! (Well, within 24 hours more than likely anyway.)

There is no safe store of value. - Alan Greenspan (1966)

We live in an era of epic exponential trend failures. Be careful out there. This is not investment advice.

Source Data:
St. Louis Fed: Custom Chart


Troy said...

my bag of costco rise got rice bugs in it!

I actually went through scoop-by-scoop and repacked the rice in 1 gallon water jugs.

More convenient that way, too. When I buy my next bag, it's going in the 1 gallon jugs immediately.

Same risk with toilet paper, oddly enough. Carpet beetles love that stuff.

That's the big beauty of gold, no insects want to "share the wealth" with you.

Plus $1000 production's worth of gold is pretty portable. Then again so is a debit card, LOL.

Debit card hooked up to GLD in a brokerage account FTW!

Stagflationary Mark said...


my bag of costco rise got rice bugs in it!


Plus $1000 production's worth of gold is pretty portable.

And if it was in a serious bubble that drove its price up to $100,000, then that's 100x more portable!

That's the beauty of it. The higher the price goes, the more portable it becomes. And the more portable it becomes, the more it is worth! Virtuous cycle!

At some point, the poorest will be able to hide all their gold within a single acne scar undetectable by airport security. Yes!

Now I'm just being silly, but you get my point, lol. ;)