The Costco hot dog hedge - Kalshi Kit
By Terry OldrealHighlights
- This week: Hedging the Costco hot dog
- Our favorite new markets: Drafting Bronny James, Tesla production, commencement cancellations
This week...
In the mid-1980s, as the high-interest rates and double-digit inflation of the 70s began to recede, economic optimism returned.
It was around this same time (1984) that a Hebrew National hot dog cart was first parked outside a new warehouse club in San Diego, and the $1.50 Costco hot dog combo was born.
Forty years later, inflation and high interest rates are back in the news, but the Costco hot dog deal never left.
Adjusted for today’s prices, the meal should cost $4.57 (a +200% increase). But it’s still sold for just $1.50 (a 0% increase).
Compare that to a Big Mac, which cost $1.35 in 1984, but now costs as much as $5.31*.
Why is the Costco dog so cheap?
The reason is simple. Schlubs like me are more willing to drop $600 on bulk toilet paper and frozen tilapia (and maybe a few thousand more on some gold bars) if we can get tubes of cheap processed meat at rock-bottom prices.
Costco’s wise corporate leaders know this.
In fact, Costco co-founder Jim Sinegal once threatened to murder another company executive who suggested they raise the price.
In 2008, Costco even built its own hot dog factories to help keep prices low.
Clearly, the company takes this very seriously, because they understand that if the price goes up by so much as a nickel, all hell is going to break loose. Not just for the company, but for America.
The existential risk of a Costco hot dog price hike
The Costco hot dog combo is the thin pink line between order and chaos.
People’s faith in government is near an all-time low, as is their faith in the press. Christ, even people’s faith in faith is crumbling.
But for now, faith in the $1.50 Costco dog remains. It’s more than just a cheap lunch; it’s an unwavering sign of stability in a world gone mad.
However, if this deal dies, it will signal that the American experiment has ended in failure and will undoubtedly lead to social unrest and untold economic fallout.
Imagine hundreds of mini January 6ths at Costco locations around the country, where enraged dads wearing horned helmets rampage through the aisles starting fires with Scripto Multi-Purpose Utility Lighters, stealing Kirkland Signature sweatpants, and filling looted Greenmade InstaView storage bins to the brim with farm-raised frozen shrimp.
Sure, instead of rioting, I guess people could just switch to Sam’s Club, where the hot dog deal is only $1.38. But to quote Nikita Khrushchev, in that scenario, “the living will envy the dead.”
That’s why Kalshi is proud to introduce the Costco Hot Dog Hedge, a way to protect yourself from the economic fallout of a potential Costco hot dog price increase.
Prepare for the worst, hope for the best
Yes, the potential ramifications are terrifying. But is a price increase likely?
Probably not in the short term. But inflation has been persistently high and eventually, all things must pass.
Just because it’s been the same for 40 years doesn’t mean it’s going to last forever. And when it does eventually happen, you don’t want to be caught off guard.
This is exactly the type of thing Nassim Nicholas Taleb is always squawking about. It’s a potential black swan event, but with hot dogs. A Black Angus event, if you will.
Odds are, you’ll never need your smoke detector, but the potential outcome of a fire is too catastrophic to ignore.
That’s exactly why you need to hedge the tail risk associated with an increase in the price of a Costco dog.
Consider it a smoke detector for society.
Click here to protect yourself from potential economic fallout now, while you still can!
*We used the price in Hawaii to sound dramatic!
Our favorite new markets
Bronny James' Draft Prospects
In 2003, LeBron James was drafted right out of high school by the Cleveland Cavaliers. Twenty-one years later, LeBron James Jr. (aka “Bronny”) is set to enter the NBA draft.
Will he be as successful as his father (no)? Only time will tell (no, really, he won't). But we don’t have to wait long to see where he’ll be playing, since the draft is scheduled for June 27th.
Will he end up with his dad on the Lakers? Will he be bringing his talents to Cleveland? Or will he end up somewhere else?
Elon's big comeback!
In the last Kalshi Kit, we talked about how Tesla’s 2024 was off to a very rough start, with the stock price down nearly 40%. Clearly, Elon Musk read the article and it inspired him to double his efforts and right the ship.
Not long after the company’s Q2 earnings call, Musk took an unscheduled trip to China and managed to cut a deal to gain access to the country’s mapping and data services. This will allow Tesla to roll out its self-driving software in the Middle Kingdom.
Apparently, Wall Street is a big fan of the new development, and Tesla’s stock erased much of its losses from earlier in the year.
Is Tesla back on track, or is this just a (massive) dead cat bounce?
Check out our new Tesla Quarterly Production market, and see what our Traders think.
Canceled College Commencements?
Last week, police moved in on Pro-Palestinian protestors at Columbia university after they barricaded themselves inside an on-campus building. Earlier today Columbia canceled its ceremony.
Now, the protests have spread to other campuses, including UCLA, with violent clashes erupting between protesters, counter-protesters, and police.
But even before the recent clashes, USC had canceled its commencement over security concerns.
Will more schools follow USC anc Columbia’s lead?
Disclosure
Kalshi’s upcoming new markets and features are not guaranteed to be live. These previews are meant to provide traders and interested observers with a sneak peek into what Kalshi is building, but they are not a promise that they will eventually be live.
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