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The countercyclical asset, a continuing series
Nicer than tasers:
Mr. Borg, past president of the North American Securities Administrators Association, adds that in past market downturns he saw people turn to chinchillas, worm farms and super-breeds of rabbits. Emus, too, were big. "Eventually, people got tired of them and just let them go," he says. "To this day, you'll be in West Texas and a big emu running wild will just come up next to your car."
Here is the link and thanks to John De Palma for the pointer. The National Alpaca Registry is doing well:
Peggy Parks, a 49-year-old auditor in Johnstown, Pa., turned to an unusual farm animal. "I've lost a fortune in stocks, and my 401(k) is falling through the floor. I feel comfortable in alpacas," she says. She invested $56,000 in a small herd that she believes has a better outlook than most mutual funds because of the animals' breeding potential.
Posted by Tyler Cowen on October 4, 2008 at 07:19 AM in Current Affairs | Permalink
Comments
Next up, feral alpacas!
Posted by: at Oct 4, 2008 7:58:09 AM
Is anyone else bothered that an "auditor" "feels comfortable" investing in alpacas? Please don't let us find out that she works for Fannie or Freddie....
Posted by: at Oct 4, 2008 8:03:54 AM
Nicer than tasers:
Except you don't have to feed a taser.
Posted by: at Oct 4, 2008 8:05:28 AM
Let's think about this for a second. Alpaca investing is advertised on late-night TV. If you call the number, you have to pay something like $100 for the how-to book. Also, alpacas have little intrinsic value -- their wool is not very desirable for clothes, no one wants to eat alpaca meat or drink alpaca milk -- so their only utility is in their ability to produce more alpacas. As someone else on the internet says, "Because when the only profit comes from selling to others, whose only profit will come from selling to yet another person, alpaca breeding sounds less like a business and more like a multi-level marketing scheme."
Posted by: Kyle S at Oct 4, 2008 8:52:30 AM
Gorgeous animals.
Posted by: Melpomene at Oct 4, 2008 8:55:58 AM
You know, there's a bit of a black market in alpacas.
http://www.american.edu/ted/alpaca.htm
Posted by: Xmas at Oct 4, 2008 9:03:36 AM
Welcome to the next bubble.
Posted by: at Oct 4, 2008 9:08:08 AM
Kind of like a big poodle. Is the toy dog bubble about to burst?
Posted by: Andrew at Oct 4, 2008 9:19:01 AM
wow, I've never thought that economic slowdown could trigger evolutional regression like this -- urban dwellers are turning into nomads.
Posted by: Yan Li at Oct 4, 2008 10:26:46 AM
Above -- I meant *evolutionary* regression.
To revert the trend, I will consider investing into large grains.
Posted by: Yan Li at Oct 4, 2008 10:30:08 AM
"...their wool is not very desirable for clothes"
Ahem... do tell.
Posted by: Affe at Oct 4, 2008 10:49:32 AM
Supporting Affe's rather calm response...
As far as I can tell, Alpacas have some of the nicest wool anywhere. Alpaca yarn is universally lusted after by knitters, and the clothing created is fabulous. I would not be shocked by a revelation that a spinner could make a net profit over the 5 years after buying a few Alpaca by just selling yarn.
Posted by: Kyle at Oct 4, 2008 11:38:01 AM
I have actually looked quite seriously into alpaca breeding as an investment. As of right now, it looks like an amazing investment. But it also exhibits a lot of symptoms of economic bubbles. Right now, the cost to buy a new alpaca that is breeder worthy outstrips the value of its wool multiple times over. The wool is fairly valuable, but the rising prices of the animals I believe will eventually lead to overbreeding, a significant decline in alpaca wool prices, and a huge drop in the market.
Speaking from my own non-economist brain, when the price of an asset is the only redeeming quality of an asset, watch out. When an investment home could no longer find renters and provide rental income, we saw the housing market collapse. When people finally realized that buying EVERYTHING online was not in their future, the dotcom bubble burst. There will be a point where wool prices will drop so low that nobody will be able to recoup their investment without selling the asset, and alpacas will become pets...pets that happen to be more expensive than horses. And you can't ride them.
Posted by: Danny Toone at Oct 4, 2008 11:41:23 AM
Okay, I'll take it as given that Alpaca sweaters are the greatest thing since sliced bread (but why do no major high-end retailers sell them?). Even if that's true, they cost tens of thousands of dollars each in America and roughly $500 in Peru. Unless you believe that Americans' newfound love of Alpaca clothing will extend only to American-bred alpacas, it's still a crappy investment opportunity.
Posted by: Kyle S at Oct 4, 2008 11:55:37 AM
It's claimed in Britain that you should keep a couple of alpacas, or llamas, with your flock of sheep, because they are good at chasing away foxes and dogs.
Posted by: dearieme at Oct 4, 2008 2:30:02 PM
Llamas also calm down goats, during those times that goats need calming.
Posted by: friend of a goat herder at Oct 4, 2008 4:00:20 PM
"Llamas also calm down goats, during those times that goats need calming."
Kinky... I like it.
Posted by: Affe at Oct 4, 2008 4:24:11 PM
LOL, hey Danny Toone: who says you can't ride an alpaca?
Posted by: angus at Oct 4, 2008 6:05:22 PM
I owe Tyler $5 for the laugh I got off this sole alpaca picture. The comedy, however, is coupled with Napolean Dynamite, so maybe I owe them a bit too. Next time you're on the 4th floor at Merc, Tyler, come down to 433m to collect your $5.
Posted by: shawn at Oct 4, 2008 6:06:19 PM
Kyle S: Alpaca wool is extremely soft; baby alpaca (the first shearing) is even softer and sells for a substantial premium. The reason you don't find alpaca wool sweaters for sale is because by the time you pay for the alpaca wool, it doesn't make sense to machine-knit it. Twould be like putting fine wine in beer bottles. And then when you hand-knit with alpaca wool, you end up with a product that is so expensive that nobody can afford to stock it, much less buy it.
My wife knits.
Posted by: Russell Nelson at Oct 5, 2008 3:30:41 AM
If you think things could go really, really wrong with the economy, there's something to be said for assets that you can eat and wear.
Posted by: Thelonious_Nick at Oct 6, 2008 12:37:42 PM
One of my law school prof.'s raised alpaca's in her "spare" time. I don't have anymore to say.
Posted by: Steve at Oct 6, 2008 2:47:57 PM
