Bacon prices go up and down (at the same time)
Rocky occasionally speculates in frozen Pork Belly Futures. (That’s the bacon, in a bacon, lettuce, and tomato sandwich.)
Something happened today which Rocky has never seen before in nearly three decades of trading. The front (August 2009) contract went limit DOWN, at the same time that the next month (February 2010) contract went limit UP. And the spread then stopped trading at more than a 3-sigma differential (February over August).
Rocky was ready to rent a freezer truck, fill it with frozen pork bellies, and park it in his front yard for six months to exploit the 50%+ price differential. Unfortunately, the commodity exchange does not permit “last year’s” bacon to be sold as “next year’s” bacon, so the arbitrage cannot be exploited.
More importantly, Trophy Wife was none too happy about the prospects of an eighteen-wheeler loaded with tons of unkosher, artery-clogging vittles driving over her petunias.
So…Rocky has no “belly” position, the bizarre mispricing remains — and bacon lovers should get ready to stock up their home freezers, as supermarket bacon prices will probably be much higher next spring.
I much prefer turkey bacon, perhaps Trophy Wife would let you store that? I wonder what the correlation between turkey bacon and pork belly prices is?
I saw that belly action and that reminded me why I avoid the bellies like the plague. The belly traders used to go to Alcotts in the morning and “discuss” the direction of the market and that was good enough for me to stay away.
Jeff
Turkey bacon is an abomination! As is margarine, which we now know is worse than butter so I praise the buffet gods I never switched. I can’t see scampi or crab legs in margarine…yecch! Moderation is they key!
Spencercourt: Thank you for your words of wisdom. Rocky agrees that in most things, moderation is key.
An exception, however, is that based on the latest scientific research, for adults with triple digit IQ’s: reading Rocky’s blog, and posting comments in response, can lower blood pressure, reduce serum chloresterol levels, and extend life expectancy by as much as 3.1415%.