On Gold, Guns, Bread and Cadillacs…

Well, maybe not guns.  This isn’t that kind of post.  But I am going to talk about gold briefly.  One of the more interesting ways to think about the value of gold is its value in purchasing household items.  Because back in earlier times that was exactly how you paid for things.  Gold is money, after all.  Indeed, in the book “Hedgehogging” Barton Biggs refers to gold in such a manner:

The Old Testament recounts how, in 600 B.C., one ounce of gold bought 350 loaves of bread.  As of today, one ounce will still buy 350 loaves of bread in the United States.

Barton Biggs: Hedgehogging

In my area of the country in North Carolina, one ounce of gold will get you 446 loaves of bread.  So when measured in those terms, we’re overvalued even after the action we’ve seen over the past few months:

Today I heard it referred to in another way: gold vis-a-vis Cadillacs.  So first, I have to present to you the definitive video clip on Cadillacs…

And now back to the gold/Caddy ratio.  I stumbled across this post (hat tip: @hedgefundinvest and @FinanceTrends) that looked at the fact that in 1971 with gold pegged at $35 an ounce you needed about 11 pounds of gold to buy a ’71 Eldorado.  Take away the peg and it would’ve been much less gold (at $103 an ounce you need about 5 pounds).

Now?  You can get 2 Cadillac XLR-Vs for the same 11 pounds if you’re taking the $35 per ounce as your starting point.  If you used 5 pounds, well you’re out of luck because you won’t have enough based on Friday’s close at $1193.50.  So the starting point you choose is important.

But as for the overvaluation or lack thereof currently?  At these levels it may still be overbought even though we’ve seen a pretty sharp pullback from $1,250.  But I’d be wary about how much more of a decline we see here because volume has been higher even on up days and the revolt against central banks isn’t over by any stretch.

So in my mind, we’re in for more volatility not less.

Advertisements

10 Comments

Filed under finance, macro, Markets, risk management

10 responses to “On Gold, Guns, Bread and Cadillacs…

  1. Gold isn’t money.

    It’s gold.

    🙂

  2. Pingback: Tweets that mention On Gold, Guns, Bread and Cadillacs… « Deep Thoughts by Professor Pinch -- Topsy.com

  3. Pingback: Where can I find a pictures of Iron Man suit? | business suit

  4. Pingback: Is this alright to eat in a day? | tea house

  5. Pingback: The Lord Will Provide | tea house

  6. Andrew

    You’re exactly right. Gold is money. Cadillac is better than a Lincoln. Unfortunately, I have to agree with the first or second comments, the payment structure isn’t set up for gold and never will.

    It’d be impossible to go to a gold standard because of the huge quadrillion vortex hole we’ve created on this planet.

    We must realize, though, that everything we’ve created such as student loan bubbles, housing bubbles, dotcom bubbles, etc., is all due to fiat currency.

  7. Pingback: Where to find the gold jewelry or fashion jewelry? | business suit

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s