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Gold-plated arbitrage

October 14, 2010

Rocky found some fool’s gold buried in today’s Producer Price Index data.

The year-over-year change in “Karat Gold Jewelry Prices” was 12.1% Whereas the year-over-year change in “Costume Jewelry Prices” was a modest 0.9%.

According to Wikipedia, “Costume jewelry (also called fashion jewelry, junk jewelry, fake jewelry, or fallalery) is jewelry manufactured as ornamentation to complement a particular fashionable costume or garment.”

Since the Government sees fit to include the “all important” costume jewelry price in the PPI, Rocky smells an arbitrage for an upcoming Trophy Wife birthday present.

Rocky currently owns  gold in his investment portfolio, but this price discrepancy suggests that he should consider a “short gold / long fake gold” swap for Trophy Wife’s jewelry box portfolio.

[Disclosure: As they say on TV: “We’re trained professionals. Don’t try this yourselves at home!]

  1. October 15, 2010 at 12:33 am

    Interesting. Gold jewelry is up 12% in the last year. Gold bullion is up 30% in the last year. (http://goldprice.org/). Of course, gold jewelry may contain other stuff, like gems, besides gold, and there is a tremendous markup in jewelry in the first place. Somehow I would have expected jewelers to be taking advantage of the increase in the price of gold to justify huge increase in the price of their jewelry.

  2. masteroftheuniverse
    October 16, 2010 at 8:30 am

    Fake gold for the Trophy Wife=Kick in the butt for Rocky.

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