There’s the Skyscraper Index, and then there’s the Luxury Cupcakes and Breakfast Cereal Index. That is, a six-dollar bowl of cereal may be an indicator that easy money is a little too easy to come by. Karen De Coster spots the latest warning signs for high-end cupcakes:
I called the cupcake bubble back in 2009. Post-economic bust, what started rising from the economy’s ashes was a series of economic “successes” whose popularity made no sense in an economy that was awash with bubble-bust carnage. Cupcakes were the most obvious an imminent mishap.
Later on, as cupcake pandemonia took firm hold and media stories gloated about the glory and popularity of those pricey-but-oh-so-special cupcakes, I was writing about the cupcake bubble and what was really driving the bubble madness that created endless malinvestments [ see definition ] in the cupcake business.
Yesterday, it was announced that Crumbs, the New York-based “cupcake empire” was going out of business. Forty-eight stores in ten states went kaput. The day that Crumbs mania hit its high and it was announced that the company was going public, I called it out as a favorable stock short.
I didn’t attack cupcakes because I hate cupcakes – I like an occasional cupcake every now and then. I merely latched onto an absurd fixation that was being fueled by something other than demand and productivity. From 2008 onward, the advent of government stimulus policies along with the Federal Reserve’s fight to keep credit cheap and money plentiful created market distortions that were making even the ridiculous seem profitable and real. Americans developed a strange obsession with enormous, sugar-laden, pricey mounds of sweets all dressed up in toppings and flavors suitable for the most discriminating 5-year-olds, and thus business malinvestments in the cupcake world ensued.