A few days ago, former Federal Reserve Chairman Alan Greenspan was asked if the United States was headed for a recession due to the soaring gasoline prices, raging inflation and higher interest rates.
A headline from CNN Business read as follows: “Is a recession coming? Alan Greenspan says the answer is in men’s underwear.”
Needless to say I smiled broadly reading the headline because a little more than a year ago I published a weekly column along those very lines.
This week from CNN Business: “Former Federal Reserve head Alan Greenspan has a keen interest in men’s underwear. Not because he’s preoccupied with the evolving fashions of nether garments — rather, he sees underwear sales as a key economic predictor. Sounds weird, right? But it’s just one of the many strange ways experts try to predict booms and busts.”
But in early 2021, my column in this newspaper was entitled “Bizarre economic indicators,” which I decided to reprint here this week. Here it is. See for yourself.
“We know that the Bacon Cheeseburger Index and the ‘death cross’ for stocks or shares suggest further deflation with commodities and big trouble is ahead for the Dow Jones, S&P and so on. But we also know those are arcane economic indicators shunned by economists.
“In fact, in most cases, such indicators are scoffed at by the ivory-towered, highly educated economists that prefer to follow such things as employment, inflation trends, consumer spending patterns, or money supply to predict which way the economy is headed.
“Nonetheless, here are some little known, bizarre indicators and the reason why such indexes are followed closely — in no particular order and from businessinsider.com, where I found most of the information:
“Men’s Underwear Index: This index bulges with the theory that men’s underwear is stable not a luxury. In times of financial stress, men hang onto their underwear longer before buying new pairs which in turn causes underwear sales to soften.
“Hemline Index: This index perhaps is the most famous of all arcane indexes. Simply put, when the economy is good, hemlines are higher to show off expensive hosiery.
“Lipstick Index: When times are tough, women tend to spend a bit more on luxury items.
“Haircut Index: A study shows that customers visit salons every six weeks for a haircut, but in bad times every eight weeks.
“Dry Cleaning Index: Alan Greenspan, former Fed chairman, stated he looked at dry cleaning sales often. In bad times, he said, people only dry cleaned items that had to be done.
“Cardboard Box Index: This indicator is considered a relatively good measure of economic activity because most all nondurable goods are shipped in corrugated containers.
“Aspirin Count Theory Index: Theoretically, aspirin production and stock prices are inversely related.
“Waffle House Index: From Wikipedia, ‘The Waffle House Index is an informal metric used by the Federal Emergency Management Agency to determine the impact of a storm and the likely scale of assistance required for disaster recovery. The measure is based on the reputation of the Waffle House restaurant chain for staying open during extreme weather and for reopening quickly, albeit sometimes with a limited menu, after very severe weather events such as tornadoes or hurricanes.’
“And, from list25.com, extremely bizarre economic indicators: Skinny Tie Width Indicator, Japanese Haircut Indicator, Buttered Popcorn Index, Happy Meal Indicator, Alligator Population Index, Marine Advertisement Intensity Index, Unclaimed Corpse Indicator, Mosquito Bite Indicator, First Date Indicator, Plastic Surgery Indicator, Baked Bean Sales Indicator, Bike Fatality Rates, Car Salesman Closing Time Indicator, Coupon Redemption Index, Baby Diaper Rash Indicator, Skyscraper Boom Indicator, Speed Contractors Return Calls, New Headquarters Indicator, Year of the Dragon Indicator and The R-Word Index.
“In the 19th century, Victorian historian Thomas Carlyle coined the phrase, ‘the dismal science,’ as a derogatory alternative name for the discipline or the study of economics.
Looking closely at the list of bizarre leading indicators, is the study of economics that dismal?
“It may have been in the 19th century, but in today’s modern world with such off-the-wall indexes gauging economic activity, it sounds to be more fun and interesting than dreary and dark.”
With all that in mind, always remember three important ideas about markets and forecasts. First, no one knows for sure what any market will do regardless of the economic indicators, bizarre or not. Not for sure, they don’t.
Second, use a stop. Have a “get me out” point in mind when the markets begin to treat you poorly, taking your money.
And, finally, never rely on men’s underwear for anything, marketwise or otherwise.