$100 on the Ground

Tag: $100 on the Ground

Sour Grapes Make the Best W ine

Future shortages will continue to plague the world in the minds of the pundit class, with the latest being The Atlantic story on the great on-coming  wine “shortage.”

Citing Morgan-Stanley research they find:

Data suggests there may be insufficient supply to meet demand in coming years, as current vintages are released.

Now here’s the punchline: the piece features four graphics showing production and consumption data and zero containing price data.

My favorite is below.  It appears that they left out the “h” in wine.

global whine
The Grapes of Wrath?

I am going to go out on a professional limb here and predict that two years from now I will be able to stroll into a Wallgreens confident that I will be able to pick up a bottle of wine on the way to dinner.

The caveat, of course, is that it might be a bit pricier.

How much pricier, you ask?

A quick eyeball on this graph suggests that the production shortfall is about 10-15% lower relative to 2010, when production and consumption were somewhat equal.  So, of the few hundred wine elasticity estimates available, let’s assume a price elasticity of demand for wine in the -0.5 and -1 range.  This implies that a$10 bottle of wine will be going for $11-$13 when the “shortage” hits.

Of course, the higher prices are likely to induce either entry or expanded production, so I somehow doubt either the shortfall or the price increases will be long lived.  And, two years from now the wine shelf will look pretty much like it looks today.

What’s somewhat discouraging is that it took me about a minute to convince myself that there is no shortage in any true sense of the term looming.  Yet, pretty much every major news outlet has picked up the story and run with it.

Well, consider this another clear arbitrage opportunity!

Non-Random Walks

Speaking of thinking strategically, I was explaining to my kids why I prefer to drive on “walk to school” day — if everyone else walks to school, think of the great parking spot we’ll get!  It’s hard to imagine a situation where I can arbitrage relative price changes more beautifully, as the price changes are announced in advance.

Of course, the schools seem to have thought of this, too, and have come up with strategies to combat these gross relative price changes.  One strategy is to provide a “celebrity” escort, such as Mayor Tim Hanna seen here strolling through City Park with my wife and son.

Walk to School 1

What a swell guy.  I’ve also got a nice shot of my boy with the school principal and Mayor Hanna that I’m sure will be of interest to posterity.

There are only so many celebrities to go around, of course, so another favorite strategy is the outright bribe with food, especially when handed out by these fine Lawrence Hockey captains.  The captains here include the department’s own “Mr. Z”, and are pictured with Mayor Hanna.

Walk to School 2

Clearly, there are some problems with the latter strategy, as the captains didn’t seem to be discriminating between those who walked and those who were dropped off.  Secondly, it appears that some of the Captains are actually munching on the would-be handouts.

Nonetheless, it was a good show to see these gentlemen out handing out apples at 8 in the morning.