Friday, November 26, 2010

Gold/Cow (or steer) ratio

Here is a data point that, I think, supports my "own livestock over gold" position.

It wasn't always that way. Texas had been known as the "Longhorns" for years, but before a group of students dragged a gaunt, frightened steer onto the field at halftime of Texas' Thanksgiving Day game against A&M College of Texas in 1916, the preferred mascot was a dog. UT alum Stephen Pinckney had spotted the orange-tinged longhorn on a cattle raid in Laredo and bought him with $1 contributions from 124 fellow alumni. It arrived just in time for the A&M game on a boxcar with no food or water.

Steer prices in the early 1900's were 10 to 15 cents per pound, live weight.  The steer in question here was likely a 1000 lbs, give or take, and went for $124.  Gold at the time (let's use the entire decade's range) was $15 to $35, ergo the gold/steer ratio was 3.5/1 giver or take... today it is roughly 1/1.  While this is by no means a perfect metric, if you have significant assets my bet is 1,000 head of cattle and pasture land will be a far better investment (if MANAGED) then would be 1,000 ounces of gold.

In my opinion.... either Gold comes in or food prices leave 100 million "food insecure" here in America because food prices, especially meat, milk and perhaps even eggs, would need to rise a great deal to high support corn, wheat, rice... which in turn have helped drive gold through by signaling inflation... and I really don't think producers are in ANY POSITION to pass costs on to consumers... you can draw your own conclusions.

Oil is still the $64,000 question.

6 comments:

PioneerPreppy said...

1000 head is alot I mean ALOT of pasture which would increase your risk. Not to mention vet bills, grain feeding the last few weeks to months and overall time invested. That is assuming a milder climate like you or I have the further North one goes the more pasture and time expense.

From a doom scenario outlook that many cattle would be hard to hide and easily confiscated or randomly shot or stolen.

Dan said...

Reminds me of the cattle rustler we had a few years ago. He and a buddy would back a semi up to the fence then cut it and load all the cattle they could and beat feet. I reckon you could hire someone to patrol at night.

bureaucrat said...

I'm no vegan but it's interesting you posted that clip, about the obvious abuse in those days of a "gaunt, frightened steer" that was "dragged" out onto the football field, after having been shipped "a boxcar with no food or water."

You seem to have missed the point of the article clip, farmer. :) No wonder we all left the farms 100 years ago.

Crybaby said...

Gold is due for a big move downward. It was a good buy ten years ago, but since the market is now controlled by exchange traded funds. It is in a similar situation to the Nasdaq at 4000. Alot of people kept shorting it and got squeezed up to 5000 but ultimately the bubble burst - alot of money was lost on internet stocks that is never coming back.Gold could go down as fast as oil went from $147 to under $50 a few years ago if people start liquidating ETFs.

Watch the employment report on Friday. The dollar has been moving higher on the anti-euro sentiment, but if we start seeing consistent job growth and lower unemployment then the dollar will start rising on its own fundamentals. This would be the catalyst for a major gold drop. Oil is another story - I can't make a call there that would be anything other than a guess.

Greg T. Jeffers said...

The point is the that the food/gold ratio is pretty extended... and by extension... so might be silver...

Joseph said...

Greg, you believe both industries have had the same level of efficiencies in the last 100 years?