The SHI – 8/17/2016

As mentioned previously, our Steak House Index (SHI) is the little brother of “The Big Mac Index” (BMI), invented by The Economist magazine in 1986.   The lighthearted objective of the BMI is to see if currencies around the globe are at their “correct” level.

Per The Economist, “Burgernomics was never intended as a precise gauge of currency misalignment, merely a tool to make exchange-rate theory more digestible. Yet the Big Mac index has become a global standard, included in several economic textbooks and the subject of at least 20 academic studies.”  Impressive!

Will the SHI have the same staying power?   Can steakonomics remain a delectable financial tidbit for weeks, months, and years to come?   Or will our desire for a Ruths Chris 300 degree, hot-off-the-grill, 11-ounce filet cool?

Why You Should Care:   Look, whether or not the SHI has staying power, this beautiful steak might be on the endangered species list!

About a week ago, the Guardian reported that “the California Air Resources Board (ARB) has set a goal of slashing methane emissions by 40% by 2030, from 2013 levels, and has targeted the belching and farting – known as “enteric fermentation” – of California’s 5.5 million beef and dairy cows, as well as the manure they create.”

Apparently California state legislators are considering a bill to, well, reduce the gas output!

Something Anja Raudabaugh, CEO of Western United Dairymen, is not happy about.  “The focus here is to highlight ARB’s efforts at over-regulating the dairy industry.   By nature’s design, (cows) pass lots of gas. Quite frankly, we want them to expel gas so they don’t explode.”

Exploding cows?    Egads!   Anja would have us believe this might happen if the ARB has its way!   Hold it in, Guernsey!   Hold it in, Danish Jersey!    It’s the law!

Or, alternatively, California could simply ban cows from the state.  Yep.    Which begs the question:  Could we all become <GASP> vegetarians?

Or maybe we’ll follow Argentina’s lead.   Our southern neighbor has engineered large ‘backpacks‘ to strap onto their cows to trap methane and turn it into green energy:

Taking Action:  Does this cow look happy to you?

Seriously, we need to do something!   If you love your steaks, contact your CA state representative, expend some hot air of your own, and tell them to vote “NO!”   We don’t want exploding cows!   And keep your hands off our filets!

The BLOG:   Sorry…I take my filet mignon very seriously.   I digress.   🙂    If you want to revisit last week’s blog and get a more serious look at this topic, here’s a link:

Steak House Index Update – 8/10/16

OK…without further ado, let’s head to the steakhouse and order up the latest entree.   Business is brisk at Mastros!   This week, you’ll have to wait until 9:30 to get a table there.  And the other three?  Not much is different this week.  Last week our SHI was zero; this week, a minus -1.

Once again, steady as she goes.  According to the SHI, our economy remains on simmer.

Here are our chart and trend since SHI inception back on 3/2/16:

And here’s the SHI graph.   Note the trendline (in red below) remains positive:

Before I finish for the day, permit me a quick, serious comment on the Big Mac Index and currency valuations.   Using the Big Mac as their constant, the BMI measures the currency of 56 countries (including the Euro area) against the dollar to determine if the country’s currency is over- or under-valued when compared to the USD.   In July, only three (Switzerland, Norway and Sweden) were ‘over-valued.’    The other 53 were under.  I’ll leave you with these thoughts:

Are they truly under-valued?   Or, in the alternative, might the USD itself actually be overvalued?  Could the continuous talk around an imminent FED rate increase be keeping the USD artificially high, when measured against other currencies?

Interesting questions.

• Terry Liebman