The Market's Fine Print

Whatever you think of Paul Manafort, Donald Trump's former campaign manager who was recently convicted on eight tax fraud and bank fraud charges, I think we can all agree that here is a man who does not start each morning with the old Shaker hymn "Tis A Gift To Be Simple" rising from his pampered lips.

Indeed, the whole world learned in the opening days of the federal trial that Mr. Manafort's preferred lifestyle was one of money-be-damned excess. From a $19,000 ostrich coat to a $21,000 watch to a warehouse full of $1000 suits, the high-rolling political operative could, on a good day, make the most spendthrift Saudi prince look like a penny-pinching piker.

When prosecutors droned on and on with examples of Manafort's profligate behavior, the judge cut them off and reminded the jury that being rich and senselessly extravagant did not constitute criminal activity in America. That may be true enough as a point of law, but when it comes to wise and life-enriching consumption, the combined net worth of every Russian oligarch can never overshadow real taste and quality.

Take, for example, the lowly BLT sandwich -- the magical and delicious layering of bacon, lettuce and tomato. This late-summer masterpiece's value can never be fully expressed in terms of dollars, rubles or wire transfers.

In fact, I was blissfully slamming down my second BLT late yesterday afternoon when news of the Manafort conviction smoked across the internet. Manafort details were fascinating enough to at least slow my Jurassic bites, but once Michael Cohen, the president's ex-lawyer, pleaded guilty to a variety of charges, I knew another BLT was crying to be assembled and devoured.

I raced to the refrigerator, confident that it was stuffed to the max with tomatoes donated by relatives, neighbors and complete strangers made desperate by the huge ripening surplus. But given how greedily I had been stacking the salty slices, would there be enough bacon?

When I found nothing but a depleted package filled with a few sad crumbles, I indignantly showed it to my wife as if some master thief had slipped past the palace guards and absconded with the crown jewels.

"Yep," she said matter-of-factly, "it looks like you've eaten your way through another 10 pounds of bacon. Just run down to Walmart and get your bacon boat loaded."

Ever since bacon-mania took roots soon after the turn of the century, I had warned her about the danger of being caught short bacon. The taste of bacon simply became the rage of retail demand. Strips of bacon found their way on everything commonly known as food, adorning hamburgers, chicken sandwiches, salads, pizzas, hot dogs, pies and cakes.

Furthermore, the essence, smell and crunch of bacon had become such a wildfire that it comes infused in such unlikely hosts, such as milkshakes, syrups, bacon mints, bacon ice cream, bacon cologne, bacon soda, bacon jellybeans and bacon toothpaste.

All of this explains why I stopped at the ATM before moving on to Walmart to fill the trunk, whatever the cost, with enough heart of BLT to get me past Labor Day.

As things turned out, I had a much better day than either defendant Manafort or Cohen. And all it took was recognizing that the bottom had fallen out of the belly market.

In July, the average price for bacon in grocery stores was 40.1 cents per pound lower than in July 2017 (i.e., off 7%). While part of this decline can be explained in terms of greater year-to-date pork production (i.e., up 3.3%), other cuts in the carcass have held up much better.

July retail ham prices were 19 cents per pound higher than a year earlier, and boneless pork chops were down only 3.1 cents, year over year. Therefore, it's fair to say that slumping belly prices this year have been primarily responsible for imploding carcass values and crashing cash sales.

The average wholesale price for the pork belly primal on Wednesday afternoon was $76.42 per hundredweight, FOB the plants, down nearly $17 from a week ago, down roughly $93 from a month ago, down approximately $129.50 from a year ago and the lowest price for any day since May 14, 2015. This price drop is doubly worrisome since August pork belly prices are usually near their annual peak.

Finally, take a sober look at the new cold storage report. As of July 21, frozen bellies totaled 38.54 million pounds, down from 53.28 million the month before, but more than double the freezer inventory last year (i.e., 17.6 million). Bellies may be historically cheap, but product is not being thawed at a very fast rate.

So has the great bacon craze of the early 21st century expired and been sent to the graveyard? It may be too early to tell, even though the product has certainly lost its sizzle in 2018.

I suppose many would say the same about Paul Manafort and Michael Cohen.

John Harrington can be reached at harringtonsfotm@gmail.com

Follow him on Twitter @feelofthemarket

(AG/BE)

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