Postcards from the florida republic
An independent and profitable state of mind.
My computer has a sticker of actor Jeff Daniels playing Joshua Chamberlain in the Civil War epic Gettysburg. Chamberlain was a Union officer in the Civil War who gained fame for his defense of Little Round Top at Gettysburg.
The 20th Maine Infantry was trying to hold the high ground, and the 15th Alabama Infantry Regiment stormed up the hill three times, trying to maneuver around them. We'd have seen a much different outcome if Chamberlain's men hadn't managed to hold their position.
The film, Gettysburg, depicts this critical "battle within the battle." After the third charge and retreat by the Confederate soldiers, Chamberlain's men were running very low on ammunition.
So – he did the only logical thing that came to him.
He told his men to fix their bayonets… and charge downhill at the scrambling enemy. It caught the Confederates entirely by surprise. Many surrendered. Many just ran away.
"Bayonets!" has long been one of my own personal rallying cries, a way I handle business. And how I approach life…
I'm currently dealing with writer's block – a non-lethal condition but a stifling one. When I feel unproductive, I must fight my way out of it.
The only thing I can do… is charge forward.
Pick up your pen, and march down the damn hill.
As Mike Ward would say – this is too much warmup copy. But we're still getting to know each other, and I want to be as transparent about myself as I can.
So let's charge into the thick of the markets…
There's Trouble in Food
As you know, I went to Indiana University to study agribusiness and to Purdue to study agricultural economics. Those schools are Big Ten blood rivals, so technically, I don't like myself.
But there was a critical lesson from those schools. An odd little fact that I remember more than anything else of my time with those great professors.
It's about a subject known as "substitution."
And it's a signal that Americans are in much worse shape than whatever Joy Behar is talking about on The View or whatever it is that passes as news at CNN, NBC, or the New York Times.
Americans are struggling for one reason: pork.
There was a VERY bad signal today.
As we all know, the economy is "strong as hell."
But there was something that suggests the American consumer isn't in great shape, the reason being substitution.
In economics, substitution refers to the concept of consumers or producers switching between different goods or factors of production in response to changes in relative prices, availability, or other economic conditions.
Now – let me get technical. It's very closely linked to the law of demand and the principle of diminishing marginal utility.
Wait… what?
Okay, when the price of a good rises, consumers look for a substitute with a similar or substitute good that offers a better value for the money.
This is a fundamental concept in the theory of consumer behavior.
Here, consumers aim to maximize their "utility" due to their budget constraints. So, when they have less money or inflation kicks in, they'll buy something cheaper but with a similar value.
A great example of this is in the world of spices. McCormick is the biggest player in the global spice business. But, when consumers are strapped, they might buy the private label or "store brand" spices of Target or Walmart.
Sure, McCormick might make actually make the private label products, too, but they're not going to achieve the margin that their branded products offer.
That's one form of substitution - where someone buys the same type of product but turns away from the more expensive brands.
The other type of substitution is more concerning. That's where people stop buying one product and substitute for a different form. And in the case of what we saw today, that form is the type of protein that Americans are consuming.
Instead of buying beef or pork, Americans are turning to chicken. This might not seem like a huge deal initially, but when you see the swing in the amount they buy, it signals that budgets are stressed.
Here are the numbers from protein producer Tyson Foods' (TSN) earnings report.
- Beef sales volume -5.3% vs, est -2%
- Pork sales volume -1.8% vs, est +1.5%
- Chicken sales volume +2.8% vs. -2.1% y/y
Beef sales are falling off a cliff. Pork – usually a stable substitute – is down.
Chicken is up, which makes sense because it's cheaper to produce now. That said, I can't sit here and say that we should happily be eating it.
This is not a good sign for the U.S. economy. It feels like these morons in charge of this economy are trying to make us vegetarians out of necessity, thanks to inflation. Bill Gates is trying to get us to eat egg substitutes…
I am on the record that cattle will be a luxury. Not because there is a shortage of them but because this is the path that people at the World Economic Forum want us to travel.
While I look at this data and worry, they look at it and scream: Mission Accomplished.
Stay positive,
Garrett Baldwin
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.