Just for Fun: Red Lipstick, Men’s Underwear, and Short Hemlines? What Do They Have in Common?

In the overall scheme of things, a dip in the sale of men’s underwear wouldn’t seem like something that Alan Greenspan would focus on.  As a matter of fact, the former US Federal Reserve chairman used to monitor the fluctuation in the sale of men’s boxers as a barometer of the U.S. economy.  His reasoning?  When men are worried about the economic outlook, new underwear is the first thing forgone.  Greenspan, when referring to a drop in sales in this item, is quoted as saying “…that is almost always a prescient, forward impression that here comes trouble.”

Another interesting indicator of tougher economic times is the Leading Lipstick Indicator, a term coined by Leonard Lauder (chairman of Estee Lauder), who found that during rough economic times, his lipstick sales went up, particularly bright red lipstick.  The theory behind this phenomenon is that a consumer turns to less expensive indulgences, such as lipstick, when the economic future is less certain.

Keeping an eye on fashion can help to predict which way the economy is going.  Back in 1926, Wharton School of Business economist George Taylor made a striking observation: when the economy was good, women raised their hemlines so they could show off their silk stockings. When times got bumpy, women would lower the length of their skirts to hide the fact that they could no longer afford new hosiery.  This casual study developed into the Hemline Index.  The theory is the shorter women’s dresses and skirts, the better the future of the economy looks.  With recent “anything-goes fashion”, not to mention the fact that most women now wear pants, it is hard to say if the theory still holds true.

If you need a tradesperson to do a chore or a remodeling job around the house, keep in mind the “Tradesman Return Call Index”.  Normally the hardest people in town to get ahold of, the more quickly a good carpenter, painter, or tile expert gets back to you, the slower the trade.  Since building is a tried-and-true economic barometer, this speed of response could point to a slowing economy.

Are you thinking of taking a trip soon?  Pay attention to the conversation with your cabbie.  Studies have shown that when times are tough, older, degreed drivers dominate as taxi drivers, and when things start to improve, there are more students and less educated drivers.

While these “barometers” are fun to follow, Tarbox monitors the more traditional economic indicators in the construction and rebalancing of client portfolios.  We focus on the “big picture” decisions, strategic asset allocation, diversification, and the minimization of costs.  Our goal is to achieve the returns you need to meet your financial goals over the long term, no matter what level the hemlines are this year.

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