The Over/Under(wear) of Our Economy (Posted June 13, 2016)

Practically every time you turn on the news and hear the talking head discuss the economy, you usually get about six words into their spiel and your brain explodes – because they’re always talking about “mitigating factors” and “behavioral predictors”. Why do they employ such gobbledygook (that’s a word) when they talk about the economy? Because they’re just guessing, and they’re trying to make you think they’re smart. Believe me, I went to college with a bunch of budding TV journalists, and their class load didn’t involve Doctorate studies in macro- versus microeconomics in the 12th century – it was a lot of voice projection and learning how to stare at your interviewee until he gets really uncomfortable.

The following items of discussion are not my own making – I’m not that smart. Fortunately, though, someone was smart enough to distill this information down to a level I can understand, and I now submit this to you for your illumination. Here’s a list of more down-to-earth ways to track how the American economy is doing:

Lipstick Index

The “lipstick index” is a term coined by a guy at Estee Lauder in 2001. Since then, the concept has been expanded to nail polish and foundation. However, the basic idea remains the same: when finances are tight, consumers will forego large luxury purchases for smaller indulgences, like cosmetics.

Men's Underwear

The men don’t want to be left out – this is a good indicator of the economy because it’s a basic necessity whose purchase can be pushed into the future until more disposable funds are available. This “index” came from that laugh riot, Alan Greenspan.

Hemlines

The Hemline Index: the theory behind this indicator is that women's hemlines tend to follow the stock market. Skirts tend to get shorter during boom times, while ankle-length hemlines signify a bear market.

Cardboard Box Shipments

The idea behind this one is simple: many goods ship in corrugated cardboard boxes, so when box companies are producing more, it's a good economic sign.

Now, I’m fairly confident the folks at the Fed, at their meeting this week, aren’t going to be discussing whether Alan Greenspan has purchased a new set of briefs (or boxers) or what color lipstick Janet Yellen should or shouldn’t wear (I think she should go with an autumn shade), but we lesser mortals can read the “signs” as well as they can – just fire up the internet and type in a few key words. You might want to avoid “men’s underwear” and “lipstick” in the same search, though.

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Financial Nearsightedness

Years ago when the Consumer Financial Protection Bureau was created, we had some wacko thought that part of the job of the folks filling its ranks would be to . . . protect the consumer. In some people’s view, this would mean that builders of new homes would no longer be able to dangle the carrot of “free” incentives if the buyer would finance the purchase through the builder’s in-house or preferred lender. To those same people, it just made sense that the CFPB was created to even the playing field and make it so that the consumer got the very best deal available. Well, we were wrong. Builders ARE allowed to offer incentives for using their in-house and preferred lenders despite the fact that sort of goes against the idea that the consumer is getting the very best deal available. And for most consumers, all they see is the incentive, and this computes to less money coming out of their pocket at closing – and they’re right (sort of). The purpose of today’s article is si

Topless Professionals - Nope

Fads come and go, certainly, but you can’t always tell the difference in the moment between a fad and a trend – because refusing to adapt to the trends can be limiting . . . if not disastrous. Let me share a couple of examples where failing to see where things were headed didn’t turn out well. An engineer presented the idea of a “filmless camera” to the executives at Kodak back in 1975, but they laughed him to scorn. In 2012, Kodak was forced to file for bankruptcy because they failed to adapt to the digital world. We all know Steve Jobs and Steve Wozniak, but how many of us recognize the name of Ron Wayne (and, no, that’s not Batman’s brother)? Ronny was the third founding member of Apple, and he sold his 10% stake in the company in 1976 for $1500. His shares would now be worth over $50 billion. WAY BACK in 2000, Reed Hastings approached Blockbuster and offered to sell Netflix for $50 million. Blockbuster turned Hastings down. Netflix is now wor

Sitting on the Fence Only Gives You Splinters

“I woke up this morning and couldn't find my socks, so I called information. She said they were behind the couch. She was right.” Reading the words of comedian Stephen Wright isn’t quite the same as actually hearing them with his deadpan delivery, but they’re still funny. The same can be said for timeless wisdom: whether you hear it coming directly from the lips of a wizened old sage or you read it in a little missive such as this, it’s still wisdom, right? They say a picture’s worth a thousand words, so you’re about to get 2,000 words’ worth right here: I’m going to show you two graphs that are going to speak volumes about buying power and interest rates – far more than I could convey if I tried to write over 2,000 words (and probably put you to sleep). Obviously, this first graph shows how even a slight change in interest rates can affect someone’s buying power in the real estate market. There’s a fairly big swing between what someone can a

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