Friday was only a half-day on Wall Street. US stocks were flat.
But gold traders were active — selling gold!
The yellow metal lost nearly 1.8% of its value on Friday. And the big precious-metals miner stocks ETF, GDX, plummeted 8.7%.
Meanwhile, Thanksgiving was a success in the Bonner household. In Maryland, tobacco barns are falling down faster than World War II veterans. Your correspondent had planned to try to rescue one of them — using the strong backs of his sons, two of their friends visiting from France and our regular weekend helper, Fernando from Honduras.
We were all on the job Thursday morning.
Our old friend Tommy, who has made his living for the last 60 years in farming and earthmoving, stopped by to offer advice and encouragement.
‘You puttin’ the hurtin’ on ‘em now,’ he said, watching the young men with their shovels and post-hole diggers. ‘It’s good for them…toughen ‘em up.’
When the holes were prepared, we toted 300-lb treated poles and planted them around the inside perimeter.
The idea was simple: transform a frame barn into a pole barn, supplanting the regular foundation with stout poles. The old upright oak posts had rotted at the sill. So we bolted the new poles to them.
The project was a challenge. First, because management didn’t know what it was doing. Second, because…except for Fernando…labour had even less experience with labour. And third, because we were all lost in polyglot jargon of the building trades.
We barely know the difference between a joist, a sill and a stud in English. Trying to communicate in three languages added an extra complication. All considered, if someone had called our crew ‘unskilled labour’, we would have been flattered.
Nevertheless, by the time we settled into our chairs for Thanksgiving dinner we were feeling confident. The plan seemed to be working.
In the barn were the tools of the trade, abandoned decades ago.
‘This is an old hickory tobacco stick, split by hand,’ we explained to the Frenchmen.
‘The tobacco plants are hung on the stick for the leaves to dry. Then they are stripped off and wrapped into a “hand”. The hands are then placed in this… Well, I don’t remember what it is called — a basket, I guess.
‘The hands are then packed into these baskets, creating a “burthen” of tobacco. This would have been taken to the tobacco warehouse in Upper Marlboro and sold at auction.’
‘Is it still legal to grow tobacco?’ one asked.
‘Tobacco was always heavily regulated in France,’ he continued.
‘In the 18th century, you needed the permission of the king to grow it. I think you still need permission from the government. But if you got the permission you had a monopoly and you could make a lot of money.’
In America, tobacco got its start in Maryland early in the 17th century. The Virginian settlers brought it with them as they expanded up the Chesapeake Bay.
In a few years, it was a cash crop in the purest sense: It was used as a currency. Promissory notes and other contracts were settled in pounds of tobacco, rather than ounces of gold.
Gold is not perfect money. It is simply the best money we have found so far.
Tobacco was valuable. But as money it had two major problems: Supply could be increased quickly. Demand could fall quickly too. (Not to mention transportation, storage, durability…and so forth!)
Initially, tobacco use in Britain was limited to the rich; only they could afford it. But as more and more acreage was put into tobacco in the New World, prices in the Old World fell.
The common man quickly took up tobacco. By the mid-20th century, it was ubiquitous. Film stars smoked on, and off, the silver screen. Board meetings included ashtrays. Dying soldiers asked for cigarettes…at least in the movies.
In the 1950s, farm boys in the Chesapeake region drove brand-new Chevys or Fords. Typically, they were given an acre or two on which they could grow tobacco for their own accounts. By the time they turned 16 they had a pile of savings.
But by the 1970s, the feds…and competition…put the hurtin’ on Maryland’s tobacco industry.
Popular culture turned against smoking; it was blamed for serious illnesses. Smoking was banned from public places — even bars.
Smokers became pariahs. Fashionable people claimed they couldn’t stand the smell of cigarette smoke. A business may have a special entrance for cripples and a special room for those who want to lift weights; smokers stand outside even in the worst weather.
And now, investors are puttin’ the hurtin’ on gold and the gold miners…
That will be good for them too. It will toughen them up.
for The Daily Reckoning Australia