Guest Post: Finally A Bubble To Like

Submitted by Pater Tenebrarum of Acting-Man blog,

Breweries Galore

As Mark Perry reports at AEI, there is apparently an extended beer bull market in the US that hasn't been widely reported on. One could even call it a bubble – in breweries. Whereas in the 1970s, there were only 89 breweries in the US, this has increased to a new record high of 2,538 breweries in 2013, way above the previous record set 126 years ago. By the way, the last secular bear market in the brewery count only stopped when very strong support at zero was reached during the prohibition.


A new record high in independent US breweries - click to enlarge.

Gold for Beer

Meanwhile, our friends at Incrementum AG in Liechtenstein have updated their very important Gold/Oktoberfest Beer ratio. One often hears commonplaces regarding gold's long term purchasing power such as 'an ounce of gold will always buy a good suit'. Who cares? What people really want to know is of course how much beer it will buy!

Good news for gold bugs: at 101 liters of beer per ounce, the ratio remains well above the long term mean of 88 liters of beer per ounce in terms of Oktoberfest beer, which is among the priciest beers in the world (and probably also one of the fastest inflating beer prices).


Gold-beer ratio

The Gold-Oktoberfest Beer ratio – currently in a mid 70s style correction - click to enlarge.

As Incrementum writes:

“The purchasing power of gold should be especially appreciated in Bavaria. While one litre of beer at the Munich Oktoberfest cost an equivalent of EUR 0.82 in 1950, it will probably be EUR 9.70 in 2013. The annual increase in the price of beer since 1950 has been an average 4.1%. Relating the beer price to the price of gold, we find that one ounce of gold buys 101 litres of beer at the 2013 Oktoberfest in Munich. The historical mean is 88 litres, this means that the “beer purchasing power” of gold is relatively high. The all time high was 227 litres per ounce of gold in 1980. We think it is indeed possible that we will see these values again. Beer drinkers with gold in their portfolio should therefore look out for sparkling times and lots of fun at the Munich Oktoberfest.”

(emphasis added)

Well, what can one say, except:  Cheers!


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