The Grand Angus Index

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–Uh oh. The price of your Grand Angus meal at Macdonald’s could be going up. It used to be that “The Big Mac Index” published by The Economist magazine measured currencies on a purchasing power parity basis. The more expensive the Big Mac, the lower your purchasing power. But when all paper money is declining in value relative to real things, the Big Mac Index isn’t as useful.

–In a world of competitive currency devaluations, we propose the Grand Angus Index, in which food increases in value relative to paper money are measured. According to today’s Wall Street Journal, “The United Nations Food and Agriculture Organization’s monthly food price index rose for the sixth consecutive month to 214.7, topping the previous peak, 213.5, reached in June 2008.” The U.S. dollar is also going down, in food terms.

–Food prices last spiked like this in 2008. That’s when the subprime compost really hit the fan in the financial world. At that time, it was a combination of bad harvests, bad weather, bad trade policy (export quotas) and bad monetary policy that drove the move. And the move drove people in the developing world – where food is a large part of what you spend your money on – into the streets with anger and, presumably, hunger.

–Food prices matter because they represent a kind of social limit on loose monetary policy. If low interest rates and money printing drive food prices up for people, that’s the bad kind of inflation. The good kind of inflation – a rising stock market and rising house prices – doesn’t make people angry or hungry. It appears to make them rich.

–But rising food and fuel prices are warning signs. Of what? Of the bear market in nearly all fiat money globally, not just the U.S. dollar. How do we know this? The chart below.

S&P GSCI Agricultural Index Spot Price
Click here to enlarge

–This is an expanded version of a chart we showed at the Gold Symposium in Sydney in November last year. And you’ll see that a green line has been added. That’s the U.S. dollar index. The black line is the Goldman Sachs Agricultural Index (spot prices). What does it tell you?

–Even after the bear market in stocks began in late 1999, the U.S. dollar stayed strong. It took two solid years of falling stock prices to reverse at least a little of the momentum from a 20-year bull market. But when the dollar fell, it fell hard.

–What’s interesting is that even though many major crops like wheat and corn and sugar and soybeans are priced in U.S. dollars, dollar weakness did not lead to surging food prices globally. In wasn’t until late 2007, in fact, that food prices (measure by the GSCI) really want stratospheric.

–Since then, you can see a pretty compelling correlation between dollar weakness and food strength. But the perplexing aspect of the chart is that the recent rally in the dollar index has been met by a new high in the Goldman Ag index. Food hasn’t fallen on dollar strength. It’s gone higher. Why?

–The dollar index measures the greenback versus other currencies. The green line tells you relative to other currencies, the dollar is trading a bit stronger now than it was in November (the Aussie dollar excepted). But here’s the important point: the dollar strength against other currencies has masked the decline of nearly all paper currencies against real goods like food.

–If we’re in a global bear market for fiat money – and not just a bear market but a kind of endgame for this kind of money – then real goods will continue to climb in value against government money, even if the U.S. dollar exhibits periodic strength relative to the Euro, the British Pound, or even commodity currencies like the Australian, New Zealand, and Canadian dollars.

–Is there an investment angle here? Well, even though they fell again yesterday, gold and silver are still handy tangible assets to own if we are indeed in a secular bear market for paper money. Lower prices are chances to lower your average purchase price and add to your position. This is a kind of “big picture” currency trade (paper for metal).

–But what about food? Well, if the food story is not really a story about shortages and droughts, and instead it’s a story about a global currency crisis, the investment angle is not as clear. You could keep it simple and invest, when possible, in arable land. In a world with six billion people and counting, food seems like it would a long-term winner.

–Yet as we’ve seen here in Australia with Timbercorp, straight-forward investments that correlate to higher food prices are few and far between. The idea seems simple. But if the investment vehicle isn’t properly structured, you can lose a lot of money. And even more straightforward angles like fertiliser and pesticides have been less than stellar over the last three years.

–The safest bet? Stock up on canned goods! And sugar and salt, which as you may know has been used as money in the past (a medium of exchange). Just keep it dry!

–Of course that recommendation that you exchange paper things for real things is part of the rough plan we have for 2011 to “definancialise” life. What it really means is to place reliance and confidence in the systems and axioms of wealth that have more or less worked for the adult life of the Baby Boomers.

–Modern portfolio theory…the efficient market theory….the stock market as savings account…the idea that over 20% of a nation’s population can spend a quarter of its adult life not producing anything…these are all unexamined assumptions about modern life that will turn out to be bogus in the next years.

–Tomorrow, we’ll have a closer look at what ‘definancialisation’ means to Aussie banks. If they’re required to keep more of their balance sheet in high quality, liquid assets like, ahem, government bonds, what will it mean to their ability to expanding their balance sheet with new loans? If loan growth declines as capital requirements kick in, what will that mean to bank shares and to the economy?

–It’s quite a bit to ponder. We’ll go stock up on some calories and protein and think about it…before the Grand Angus meal gets more expensive.

Dan Denning
for The Daily Reckoning Australia

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.
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Nathan Chattaway
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How about definancialising into food by directly purchasing arable land and occupying it as your principal place of residence, then spending your spare time growing a variety of fresh and healthy fruit, veggies, nuts and (depending on space) annual grains and livestock? On a smaller scale, you can produce a surprising amount of good fruit and veg in your good old Aussie back yard. 300 – 500 square metres of garden space can get close to feeding a family of 4 or 5. If that’s not definancialising, I don’t know what is. This has got to be far more effective… Read more »
Nathan Chattaway
Guest

Also, I would think that in most “western” nations today, most adults spend most of their time not actually producing anything of value to support human life. How many of us directly labour to produce food and clean water? Compared to all the people employed in financial, beauty, entertainment, insurance, marketing services “industries”, it can’t be very many of us…

Biker Pete
Guest
“…directly purchasing arable land and occupying it as your principal place of residence…” By ’94, we’d set up sufficient infrastructure to achieve most of what you describe, Nathan. That includes 3km of drip retic, fed only by rainwater. By mid-2011 we’ll also produce all our own electricity. While we produce most of our fruit and some of our vegetables, we also trade with others. And because we enjoy seafood, our ability to meet our _real_ needs increases as our ‘leisure’ time increases. Not for everyone, but we enjoy a measure of independence and we ‘know’ our food’s history intimately. Still… Read more »
Richo
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Stocking up on canned goods is also stocking up on sugar and salt :-)

Nathan Chattaway
Guest

Hi Biker Pete,
Great to hear it! We’re only 10 months into our self sufficiency “definancialisation” journey. We’ve moved onto 50 acres and are implementing our permaculture design. I’m trying hard to get all the infrastructure purchases done quickly while things like 40mm poly, brass taps and windmill pumps are available.

Biker Pete
Guest

Go for levers, not wheel valves, Nathan. Lost count of those I’ve replaced. Also make sure you fit a little white sleeve to retain water on your mill’s uplift. Probably saved kilolitres since I fitted one.

Our main lines are 40mm to 19mm. We set it all up with little rubber saddles before 40mm-to-19mm junctions existed. Too much work!!~ Recent extensions have been a breeze. Hope you’re mounding your fruit trees. Don’t forget a tangelo or few. Gold!~

Not Fooled By property Spruikers Hype
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Not Fooled By property Spruikers Hype
Good Lord Biker … What a diverse character you are .. On the Perth Now site under the Round the World Traveller tag last year … you were a developer / builder one Day in Mexico next in Canada returning to Australia in March this year to knock up another 6 houses & now here you are spouting natural farming techniques … if your not careful they will make a action character of you ?? … Just wondering who looks after this farm of yours when your Building all these houses & traveling the world … Tell you what dont… Read more »
Ned S
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“you were a developer / builder” – A source on that from Perth Now would be nice. As I’ve never seen Biker claim to be a developer or a builder???

Ned S
Guest

Do you do sources when it comes to Biker, Not Fooled? – Or just drop in occasionally to chuck a bit of innuendo about? SOURCES! PLEASE!!! Because as much as it might surprise YOU(???), I’M not prepared to just take YOUR word for it when it comes to character assassination. SOURCES!!! PLEASE!

Lachlan
Guest
http://www.zerohedge.com/article/inflation-wins-tunisian-president-ben-ali-flees-country This one world idea just costs too much to work very long. Then again all systems eventually become overweight and fall apart. Bills “chislers” amongst other ensure that. BP I was a lever/ball valve man myself….well they’re quicker, don’t leak or fall apart as often. Although they are dearer and can be accidentally knocked on/off depending location. The first nursery I built was a zero tolerance for leaks type outfit. I collected all irrigation water off greenhouse roofs and growing surfaces and used drip and sub-irrigation in all growing systems to conserve water. Great fun. I do wonder though… Read more »
Lachlan
Guest

Live a suitable distance from cities/towns also.

Biker Pete
Guest

It’d difficult for a tosser like N Fool to imagine any kind of lifestyle outside a cubicle, Ned. He just doesn’t think outside the box. Ever.

The concept of a sixty-plus-year-old having a few irons in the fire, being financially independent due to property, and being able to build a number of housing projects while travelling is _so far_ beyond his restricted, enclosed vision that it’s little wonder he posts this stuff. His total disbelief is quite delightful, in fact. It reassures us that we got most of it right…

Biker Pete
Guest
Thanks for those ideas, Lachlan. One thing we learned from our earlier experiences is that it’s worth paying for better-quality UV-resistant poly. The cheaper stuff broke down _wherever exposed,_ within a decade. Piping drip-line to chook water basins, so they’re ‘watered’ when gardens are, has meant great freedom. Our six-station switches on every second day, Nov 30th to 6th May. Think you’re right about the cost of poly rising… . Maybe I’ll buy a few hundred metres of 40mm and 19mm. The missus says we’ve already over-planted, but some extra poly as back up is a good idea. Once our… Read more »
Stillgotshoeson
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Comment by Biker Pete on 15 January 2011:

It’d difficult for a tosser like N Fool to imagine any kind of lifestyle outside a cubicle, Ned. [b]He just doesn’t think outside the box[/b]. Ever.

Funny I have the same thought about you, Example.. My many trips to the USA ..

Biker Pete replies “sure, sounds like hero worship”

You did not stop to think that most of the early trips were Dublin to USA, Not very far and not very expensive.. ;)

Biker
Guest

I’m interested in your destination choice, Shoes. Nothing more than that.
Expense never entered the equation.

There’s a lot more world than the US. I guess you look forward to the pat-down regime.

Surprised you’re communicating. Think my last comment to you queried your progress as property speculator, using your SMSF. How’s that progressing?

Stillgotshoeson
Guest

Have been to England, Scotland, Wales, France, Spain, Greek Islands, Turkey, Japan, New Zealand, Bali and Vietnam
Tasmania too :) that’s overseas ;) sure it is another country even.

Have flown “around” the world 3 times. This year will be my fourth.

Destinations are Canada (BC) USA (5 States, Cali, Washington (State not City) Nevada, Arizona, Arkansas. Ireland (relo run) England and Japan…

Auction on that house is in 2 hours.

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype
@ Comment by Ned S on 15 January 2011: Do you do sources when it comes to Biker, Not Fooled? – Or just drop in occasionally to chuck a bit of innuendo about? SOURCES! PLEASE!!! Because as much as it might surprise YOU(???), I’M not prepared to just take YOUR word for it when it comes to character assassination. SOURCES!!! PLEASE! & @ Comment by Ned S on 15 January 2011: “you were a developer / builder” – A source on that from Perth Now would be nice. As I’ve never seen Biker claim to be a developer or a… Read more »
Biker Pete
Guest

Tee Hee Hee? Who’s the girl here? ;)

(Very confused troll*… .)

*AKA The Punter of Mindarie, John of Dullsville Perth, etc.

Biker Pete
Guest

Your identification as Tasmania as another country is priceless, Shoes.
Better get your laces tied if you’re going to make that auction, son!~

Ned S
Guest

“being able to build a number of housing projects while travelling” – THAT does NOT make a bloke a builder Not Fooled! Or a developer!!! Unless you are just being plain difficult to get along with OR are just effing pig ignorant …

So give me your source from Perth Now where Biker ever claimed to be a developer. Or a builder. OR DON’T YOU UNDERSTAND WHAT THOSE WORDS MEAN???

Ned S
Guest

I know I’m not bright when it comes to finances, but sometimes I get the feeling I’m blogging with EFFING retards!

Not Fooled, I was married to a woman once who would twist words to suit her meaning. DON’T try that crap on me – I’m way too experienced now. So just be a good chap, and give me your source/s from Perth Now as requested please! Or in the DRA allowable version of the vernacular: ‘Poo or get off the pot’ … EFF, you are frustrating!!!

Ned S
Guest

“Auction on that house is in 2 hours.”

How did that pan out Shoes?

Biker Pete
Guest
Ned: “THAT does NOT make a bloke a builder Not Fooled! Or a developer!!!” Being cubicled means N Fool needs to compartmentalise, Ned. Hence, because we have two garden orchards of 300 trees, grow vegetables and run chooks, we’re ‘farmers’! Our ten acres is deemed ‘a farm’. Fidiot… . Our five most recent building projects in an eighteen-month period make us ‘builders and developers’. :D Utterly clueless… . N Fool is a serial nuisance. After posting years of anti-property hype, he has twice bleated to be left alone, following responses he could not begin to answer. Happy to post both… Read more »
Ned S
Guest

Drives a bloke nuts Biker. Just an effing time waster. I wouldn’t mind too much except he/she does actually seem to think he/she knows what a builder is? And what a developer is? AND fancies him/herself as some sort of property expert??? Which I sure don’t – Despite the fact I DO know what a builder is! And a developer!!!

I’m tired. And when I’m tired my tolerance level for idiots lowers VERY significantly. :(

Lachlan
Guest

Just on the survival topic..
Some basic food storage which could be not too costly/difficult and would be very effective in a crisis. Storage of wheat rather than flour is a longer term solution. Flour only keeps about a year or so.

http://ambilac-uk.tripod.com/longtermsurvival/wheat.html

” For example; wheat (Kamut seeds) discovered in the Egyptian Pyramids and excavated bakeries was found to be edible even after the passing of Millenia.”

Maybe grow a little wheat around the place too BP. They can keep their wheat juice drinks but ;)
http://www.wheat-grass-seeds.com/
Poor Job ;)

Stillgotshoeson
Guest
Comment by Biker Pete on 15 January 2011: Your identification as Tasmania as another country is priceless, Shoes. Probably should have said another world ;) Not strictly true though, I found Tasmania to very similiar in many respects to the South Island of New Zealand. Comment by Ned S on 15 January 2011: “Auction on that house is in 2 hours.” How did that pan out Shoes? Was withdrawn from auction, reason not given. I am sure I will find out… Omitted Russia as a country I have visited as well… Only been to Moscow.. Dated a girl from Kharkov… Read more »
Not Fooled By property Spruikers Hype
Guest
Not Fooled By property Spruikers Hype

@ Ned

Harden up Princess …

@ Travs / Biker Pete

Happy to post both those bleats … Go on do it ?

The two of you just Blow smoke at each other post after post

Biker Pete
Guest
“Harden up, Princess”… and… “OXYGEN Thief” are his two frequent PerthNow responses when he has nothing else, Ned. These smartarse quips are levelled at numerous folk who effectively disagree with him. His two PerthNow bleats: “Go away and don’t reply to anything I post from here on in and I promise to leave you alone as well.” October 14, 2009…. Then, over a year later: “Hey Travs forget about me it is not about me …. why make me the centre of your focus …” December 04, 2010. The issues he has major difficulty responding to include * No CGT… Read more »
Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype
Oh Dear Travs using Big Boy Words on this site to try & look like you had a education past 3 Rd Year High School? … Effeminate ?? Why not just say Feminine Little Roach? …. Think you look smarter when in fact it is pretty stupid to address your message at a higher level than your audience? What a Dipstick!! Pinhead Wages went up 38% & House prices 185% between 2000 & 2010 I understand the Person on $100K in 2000 is now earning $138K so his house is now more affordable… However when they need to sell to… Read more »
Biker Pete
Guest
“…a education” ? Your lack of mathematics also lets you down again, effeminate roach. Not only does the worker on $100K now earn $38K more, but he’s repaying 100c dollars with 60c ones, due to a decade’s inflation. Try to grasp the meaning of it all. It has been explained and re-explained, not just by me, but by several others. Try to master grammar and maths, before you commence Year Eleven economics, windbag. ;) Quotes out of context? Mate, you’re _wriggling_ on the hook. You said it, wear it. :D How many times can you copy and paste that Gene… Read more »
Biker Pete
Guest

That Ex Wife crack remind you of anyone, Ned?

Not Fooled By property Spruikers Hype
Guest
Not Fooled By property Spruikers Hype

You cant put my quote up in full because it would expose you copy / pasting / cutting so that it is out of context …

You cant post it in full can you? Farmer Pete?

Your 100c / 60 cents is VOODOO … Tut Tut Tut Primary school logic

Chris in IT
Guest
“300 trees, grow vegetables and run chooks, we’re ‘farmers’! Our ten acres is deemed ‘a farm’. Fidiot… .” For a general guide by a farming mate… <25 acres is classed as rural residential. ~100 acres is classed as 'small farm' ~500 acres is a 'farm' "Not only does the worker on $100K now earn $38K more, but he's repaying 100c dollars with 60c ones, due to a decade's inflation" After talking to quite a lot of people in Sydney's mortgage belt I get the impression that they are NOT having a lot more in their pockets. Cost of living is… Read more »
Chris in IT
Guest
Back in about April(I think) I suggested that I won’t buy a house in Haberfield 4br, no garage unrenovated 100 year old ish federation of 1.5mil. I stand by that. With the world as it is, and with Australia being so sensitive to foreign problems I cannot in good faith decide that I can commit to a 30 year contract, buying at near double historical average (wage to value of 5:1). Someone else will have to hold the bag during this risky period. One thought… unlike the US where this is no recourse for banks to borrowers excess capital after… Read more »
Chris in IT
Guest

Oh, and a not to all the other would be farmers… Chicken manure smell is impossibly hard to get out of your hands! Dammit! I stink!

Biker Pete
Guest

Second time today one of my posts has been blocked. You’re running scared when you censor responses.

Biker
Guest

Let’s try again: Not Fooled, you poor careless sod, you’ve admitted you’re The Punter of Mindarie. Dogman figured the October 14th quote was yours.
You’ve confirmed it. :D

Ned S
Guest

Didn’t see a Perth Now quote in any of that where Biker says he’s a builder/developer? Until I do see one, Not Fooled remains on Princess’s windbag list! :D

Withdrawn Shoes. We’re getting a bit of that lately I think?

Biker Pete
Guest
“How many of use feel the confidence we had back in early 2007? Yeah… me neither…” Different picture over here, Chris. WA property has been even flatter for the last three years (providing some good buying for us) but things are lifting. I rarely attempt to predict any short-term movement online, but I think our market is ready to jump. So does our builder. “…a 400k buy price in that area is all the market can bare… ” Our last few projects all came in around that figure. In a beach setting, we think there’ll be more activity at that… Read more »
Stillgotshoeson
Guest
Comment by Ned S on 17 January 2011: Withdrawn Shoes. We’re getting a bit of that lately I think? Does seem to be a little bit more of those occurring. 18 months or so ago I was at one of my sons friends house having coffee with his parents (I had only known them a short time) while the boys played and we were talking about houses, the divorce situation and the kids etc, all the usual crap. I had said in that conversation that I was in no hurry to buy a house as a) my investments were outperforming… Read more »
Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Ned SMELL THE COFFEE … Farmer Pete has conceded the point that he dabbles in Building developments …” Our last few projects all came in around that figure. ” …. Move on Mr Irrelevent…

BTW Farmer Pete … DR blocks your Posts & Perth Now Blocks your posts …but I have never experienced this once? …
Could it be you?

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype

Farmer Pete …. “Let’s try again: Not Fooled, you poor careless sod, you’ve admitted you’re The Punter of Mindarie. Dogman figured the October 14th quote was yours.
You’ve confirmed it.”

Are you in therapy?

You do know the people on this site have no idea who The Punter of Mindarie is or Dogman for that matter& the relevance?

BTW Post where is said what you claimed & give a link? … No cant making things up as we go again …

Biker
Guest

Blocked response… again… :D

Biker
Guest

What’s up, DRA? Don’t like watching Your Boy get slapped around?

Biker Pete
Guest

For the record, five consecutive attempts to post a response. All blocked.
You’re right about this crew, Ned. (Smell the fear… :D )

Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype
Farmer Pete … What can I say ? … Try writing in coherent sentences ? I bet I can even get the moderator to Post a song I wrote about property? Here we go …. Spruikers Song …. (Sung to 9-5) Tumble outta bed And stumble to the kitchen Pour myself a cup of ambition Yawning, stretching, try to come to life, Jump in the shower And my Heart Starts THUMPING Out on the streets PROPERTY IS SLUMPING And folks like me in a Job from 9 to 5, Workin 9 to 5 in a RUT to make a livin…… Read more »
Biker Pete
Guest

Don’t quit your day job, Punter of Mindarie. ;)

Ned S
Guest
Post a link where Biker says he’s a developer/builder please Windbag … Spent last night painting a toilet! And hanging three curtains – From the multitude I have to choose from. Plus started on replacing two broken louvre blades (one in toilet and one in laundry – the bastard in the loo is a fixed one held in by timber strips!) . Plus moved a few light fittings around. And today I’ve arranged for a larger glazing job to be done, plus spoken to a sparky about installing some ceiling fans, arranged for some roofing to be replaced and …… Read more »
Not Fooled By Property Spruikers Hype
Guest
Not Fooled By Property Spruikers Hype
Ned … Pinhead …. Just look at this Period>>>> Comment by Biker Pete on 17 January 2011: “How many of use feel the confidence we had back in early 2007? Yeah… me neither…” Different picture over here, Chris. WA property has been even flatter for the last three years (providing some good buying for us) but things are lifting. I rarely attempt to predict any short-term movement online, but I think our market is ready to jump. So does our builder. “…a 400k buy price in that area is all the market can bare… ” Our last few projects all… Read more »
Biker Pete
Guest

Comprehension skills, Not Fool of Mindarie?

Biker: “So does our builder…”

So, you figure we’re developers?!~ Bwahahaha!

I take it you think Shoes is a _broker_ and Dan’s a _goldsmith_?

We are INVESTORS, dimwit… property investors… Get it?

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