Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Stocks Correct into Bitcoin Happy Thanks Halving - Earnings Season Buying Opps - 4th July 24
24 Hours Until Clown Rishi Sunak is Booted Out of Number 10 - UIK General Election 2024 - 4th July 24
Clown Rishi Delivers Tory Election Bloodbath, Labour 400+ Seat Landslide - 1st July 24
Bitcoin Happy Thanks Halving - Crypto's Exist Strategy - 30th June 24
Is a China-Taiwan Conflict Likely? Watch the Region's Stock Market Indexes - 30th June 24
Gold Mining Stocks Record Quarter - 30th June 24
Could Low PCE Inflation Take Gold to the Moon? - 30th June 24
UK General Election 2024 Result Forecast - 26th June 24
AI Stocks Portfolio Accumulate and Distribute - 26th June 24
Gold Stocks Reloading - 26th June 24
Gold Price Completely Unsurprising Reversal and Next Steps - 26th June 24
Inflation – How It Started And Where We Are Now - 26th June 24
Can Stock Market Bad Breadth Be Good? - 26th June 24
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What the “Steak Bandit” Says About Asset Values

Stock-Markets / Financial Markets 2014 Jul 30, 2014 - 10:41 AM GMT

By: Money_Morning

Stock-Markets

Dr. Kent Moors writes: Just stay with me here. This is a story about energy – especially oil.

It begins last Saturday. On a trip to the local supermarket, I saw something you just don’t see every day.

You see, I always do the grocery run. It is one of several clauses that have appeared over time in my marriage contract (no doubt about it, this is one document you need to read before signing!).


As I left the store, a crowd had formed outside. There were police all around and the parking lot had been sealed shut.

It turns out a fellow had shoved some steaks down his pants and made a dash for it.

By the time all of us had stretched our necks to see what was going on, the suspect was just sitting… in a car that wouldn’t start… with the doors locked… and the windows up… in 90-degree heat.

All in all, he couldn’t have been having a very good day.

Maybe he was that hungry. Or maybe he forgot his wallet at home and was late for a party. I’m not sure.

Either way, he was bound for the Allegheny County Jail.

(By the way, the jail is the impressive newer-looking building by the Monongahela River in downtown Pittsburgh. You can’t miss it. It looks like an upscale Holiday Inn.)

But I digress; back to the steaks.

Even though I must admit, for awhile at least, there will be a question in the back of my mind every time I go to a barbecue. Like, “Any idea where that meat has been recently?”

However, aside from a possible commentary on the plight of some people in the current economy, the episode with the “steak bandit” brought back a memory, along with a broader implication for the energy sector.

Here’s the memory and how it relates to energy…

Moving to a Better Monetary Standard

More than forty years ago, during another bout with a sputtering economy and a declining dollar, I made a remark that drew a fair amount of attention. At the time, I had my own radio talk show in Chicago.

In response to a caller’s criticism of the Fed and the declining value of the dollar, I made a suggestion (somewhat tongue in cheek) that was then embellished for several days.

“Why worry about shoring up the dollar,” I said, “when what we ought to do is move to a better monetary standard.”

My suggestion was we use something everybody thought was valuable – steak.

Well, the “steak standard” made the rounds, got mentioned in the local press, and landed me some interviews. There was a more serious point behind all the fun, of course, but it was lost in translation.

My point was this. Throughout history, money has had three primary functions. It serves as a form of exchange; it allows us to price very different articles and commodities; and it provides a way to store value.

By itself, a dollar or a euro or a ruble or a yuan is literally not worth the paper it is printed on.

Of course, these days, there are other ways to complete an exchange without the use of money as such. And the bitcoin revolution (if it is one and not the latest version of a Ponzi scheme) indicates we may have other pricing alternatives.

That leaves us with just the value storage function of money, which often turns into a discussion about whether or not we ought to return the gold standard.

While it has provided the convenience of a common venue of measurement for centuries, the gold standard has always been a very artificial thing. There are, after all, very few real uses for gold. For example, unlike steak you can’t eat it.

Whatever storage value gold has comes from what governments, central banks, and traders give it. There is little utility in the metal itself.

Which finally brings us back to energy and its role in the economy…

Oil is the New Gold Standard

As I have discussed several times in OEI before, crude oil is replacing gold as a more accurate storage of value in the economy as a whole.

Unlike gold, the value of oil is essentially measured by what we use it for. Oil, and by extension natural gas and electricity, comprises an essential and inescapable underpinning for every economic function.

Energy generally increases in price as economies improve because demand for it increases. On the other hand, in an economic downturn, energy prices tend to suffer a contraction.

But unlike a gold standard, which represents an official value declared by fiat, energy prices actually tell us something about the economic undercurrents.

For this reason, I continue to argue that the price of crude oil futures contracts are a better gauge of value stored than gold. Meanwhile, futures contracts for both natural gas and electricity are coming to occupy similar positions.

That doesn’t mean we should start printing “In drilling rigs we trust” on our currency. But it does mean that energy has become the better barometer against which to value genuine assets.

Energy also has another advantage, unlike the opinions expressed by certain Middle America talk show hosts years ago.

You can’t just shove it down your pants and make a beeline to the parking lot.

Source : http://oilandenergyinvestor.com/2014/07/steak-bandit-says-asset-values/

Money Morning/The Money Map Report

©2014 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in