| The Misery Index is an economic indicator created by economist Arthur Okon to measure economic and social cost. It has been higher than today’s level but it’s clearly larger than anyone would like to see. The University of Michigan Consumer Sentiment Index, frequently quoted by business journalists, is also a leading indicator of future economic activity. It too has seen better days. Everywhere you look, it’s one negative after another. Autos, real estate, banks, unemployment, the stock market, the list goes on and on. It’s a miracle we’re still breathing. I often wonder if our alpacas know we are in the middle of a nasty global recession. Even if they did, they’d continue their genetic advancement, eyes wide open and keeping their end of the bargain. Adversity is nothing new to them. They would still happily hum, cush, pronk, breed, manufacture unbelievable fiber and produce cria after cria. Maybe we should take a lesson from a species that has survived 5,000 years of change, endured many hardships, is currently being reintroduced to the world and is now stronger than ever.
As a matter of fact, the foundation of our industry is also much stronger. We continue to see more breeders, register more alpacas, we have opportunities to attend more shows. Technology is helping us implement sophisticated breeding programs, apply advancements in the area of herd health and make progress with our wonderful fiber. This list also goes on and on. The only thing that has put a short-term cloud over our industry is us. Maybe it’s time to look into the mirror.
Economics 101
Recessions: Recession time periods are normal events within economic cycles. The gray bars represent recessions going back to 1980. The solid line is United States GDP. There have been 5 recessions in the last 28 years. In all cases economic rebounds are significant after the end of recession time periods. It will also happen after this recession.
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I know you are probably saying, “It’s not me, it’s the economy stupid.” Remember the Misery Index? It was first used during Lyndon Johnson’s term, but today the formula can be applied going back as far as anyone cares. The index peaked during the crossover period between Jimmy Carter and Ronald Reagan. Truman, Eisenhower, Nixon and most Presidents have had periods during which this measuring tool and other barometers reflected periods of economic difficulty. This recent downturn is painful but in reality is nothing new. Recessions and periods of slowing economic activity are somewhat common. Please see Chart A, which shows recessionary time periods along with the closely following economic rebounds. The economy is cyclical, always has been and will continue to show times of contraction and expansion. You may say: “But this time the issues are more widespread and more severe. The combination of autos, real estate, banks, etc. has created a CRISIS!” Time will tell, but we’ve had to deal with crisis before. Please see Chart B. Notice again the rebound, this
Crisis: Events classified as crisis are a part of any economy. Their impact on the short term can be painful but time periods afterward show significant improvement. This chart deals with improving conditions regarding the DJIA.
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time relating to the stock market, after the crisis period is over. Why is the U.S. stock market important? It’s a leading indicator. Historically the stock market will move higher 6 to 9 months prior to economic improvement, signaling the end of recessionary periods. Remember, when you’re in the middle of the storm, they all seem bad. Things will get better! As reported in The Wall Street Journal on 2-27-2009, Abraham Lincoln liked
to tell the story of a King who ordered
his wise men to come up with a single sentence that would never be false. Their solution, which Lincoln called consoling,” covered all possible contingencies: “And this, too, shall pass.”
If you happen to be new to the industry or are considering entry into the wonderful world of Alpacas your timing may be excellent. Today the Alpaca industry can point to many positives. While there are to many to discuss in this writing, one worth mentioning is the fact that demographics can not be ignored. The baby boom generation is going strong and will be for some time. There are 78 million of us representing 28% of the U.S. population. As a group we will be more active and maintain our health longer than any generation before us. As described by Ken Dychtwald in his well known book “The Age Wave”, boomers are in the driver’s seat. Today the largest segment of the U.S. population is excited about our next career. This time around we want space, simplicity, healthy normal lives and things that are green. At the same time technology has given us the ability to move away from urban centers while continuing to be productive within the work force. Given these macro economic forces as a backdrop the demand for Alpaca’s, and the contribution they make to our changing world, will continue to grow.
There Is No Bailout Money For Alpacas
So what should alpaca breeders do until the improving economy is visible? Put our head in the sand? Look the other way? Sweep it under the rug? Absolutely not ! We should act like other industry groups and hit the situation head on. Let’s continue to promote all that is great about the alpaca industry, stick to our knitting and invest wisely in future genetics. Behavioral economics is an interesting field of study, focusing on human decision-making. As a group, we have tendencies to behave irrationally when making purchasing or investment decisions. Often the herd mentality takes over, and we follow the crowd. This is a mistake. How does this relate to the business of alpacas? Today there is a fire sale on alpacas. Opportunities to acquire outstanding genetics from excellent breeding programs at compelling prices exist. I agree the global economy has an obvious impact and financial decisions are paramount to success but these prices will not stay low forever, and when the economy turns for the better, which it will and probably sooner than later, those who wait and follow the crowd will say, “I should have….” It’s the wise investor who knows when to go against the grain.
As alpaca enthusiasts, we should be proud of the advancements we have made in the past and undoubtedly will make in the future. The attributes of our industry, the things that intrigued all of us about these wonderful animals, the attraction to all things alpaca, are still alive and well. There may be wind in our face today, but it will blow in a different direction in the future and be at our backs once again.
If we need to be convinced, all we really need to do is look at our alpacas.
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