What 10 Quirky Indicators Tell Us About Today's Economy

Saturday, February 23, 2013

What 10 Quirky Indicators Tell Us About Today's Economy

By FORBES
Washington, Feb.23, stock advice .- Some observers eager for an insightful edge on the economy forgo readouts and graphs, favoring instead men’s underwear, women wearing only underwear and the Super Bowl.

Oddball economic indicators abound. Many more seemed to be coined during the financial crisis, a period in which economists wanted as much insight as possible about the market’s ills.

Leave it to the professionals? If the past is any measure, these zany precursors are as good as any chart worshiper’s divinations. What’s more, the ones that tend to be most accurate signal a bull market ahead.

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Among the most useful signs: coupon usage. When the economy is bad, shoppers look to save anyway possible. Things get better, coupon demand decreases. The volume of coupons rose until 2010–peaking at more than 178 billion coupons just for consumer packaged goods. That’s about 570 coupons for each American. Coupon issuance then slackened in 2011 and 2012. Volume was off 8% through last June. True, you can argue the recovery has roots in 2010, but it only recently picked up any speed–just as shoppers seemed less reliant on coupons. Psst. No one tell Ron Johnson at J.C. Penney.

There are other indicators with decent records. Help-wanted ads act as a measure of employment. Diapers offer a signal of consumer strength. As do the proceeds from the Napa Valley Wine Auction. All three show recent increases.

Even the Sports Illustrated Swimsuit Edition and the Super Bowl hold up, though perhaps they’re more suited for the rabbit-paw owners among us. Bespoke Investment Group research concluded an American on the nudey cover almost always portends a bull market. Good news! Supermodel and Michigan native Kate Upton is back on the cover this year. And as for the Super Bowl, a winner from the old NFL (today’s NFC division) suggests the market will increase. How accurate is it? About 80%. More good news. The Baltimore Ravens, which dates back to the old division in Cleveland, captured the 2012 crown.

Other indicators haven’t proven as useful. Lipstick and cosmetics sales, for example, have trended higher for a decade, through at least a handful of recoveries and recessions. Another example, divorce rates, lack a clear correlation. Still others point to the Hot Waitress Theorem: Attractive females who’d normally work as models or put out their shingle as starlets instead turn up as Hooters hostesses. To us, this one requires much more extensive field research before a credible conclusion.

Here are 10 quirky economic indicators:

1. Super Bowl Winner

TIMOTHY A. CLARY/AFP/Getty ImagesIndicator Explained: Root for the NFC Division team. A win from an old NFL team (today's NFC)
portends a market increase for the rest of the year 80% of the time. Trend stretches all the way back to when the AFL and NFL played for the Vince Lombardi Trophy.

Bullish Or Bearish In 2013? Bullish. This is a bit confusing, but it's because this year's champs, the AFC Division Baltimore Ravens, were actually a NFL team in Cleveland.

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2. Coupons

Indicator Explained: When the economy is bad, shoppers look to save any way possible. Things get better, coupon demand decreases. The volume of coupons rose until 2010 – peaking at more than 178 billion coupons just for consumer packaged goods. That's about 570 coupons for each American.

Bullish Or Bearish In 2013? Bullish. After demand hit highs in 2010, coupon volume has fallen. Coupon issuance was down about 8% through last June (the latest figures available).

Source: NCH

3. Sports Illustrated Swimsuit Edition

REUTERS/Carlo AllegriIndicator Explained: Bespoke Investment Group research has proven that an American on the nudey cover portends a bull market.

Bullish Or Bearish In 2013? Bullish. Supermodel and Michigan native Kate Upton graced the cover again this year.

4. Men's Underwear

AP Photo/H&MIndicator Explained: Rarely seen, rarely replaced. When men start shopping for these long-lasting garments, consumer confidence seems higher.

Bullish Or Bearish In 2013? Bearish. Men’s underwear was 3% of the overall menswear industry in 2008. It has since shrunk to 2.2%, and it is expected to contract further during the next five years.

Source: IBIS World

5. Divorce Rates

Indicator Explained: Financial problems strain a marriage, and make it more likely to break apart.

Bullish Or Bearish In 2013? Unclear. The latest accurate figures are outdated (from 2009), but show an overall decrease in divorce, regardless of the economy.

Source: U.S. Census Bureau

6. Help-Wanted Ads

Indicator Explained: More help-wanted ads, more demand by employers. This means employers are hiring, likely a sign of greater business and consumer spending. It’s a measure valued enough to be tracked by the Conference Board, which distributes some of the most widely read reports, like the Consumer Confidence Index and Leading Economic Indicators Index.

Bullish Or Bearish In 2013? Bullish. There were more than 5 million help-wanted ads posted in January, up 15% from a year earlier.

Source: Conference Board

7. Napa Valley Wine Auction

AP Photo/Eric RisbergIndicator Explained: Held in luscious Northern California, samplings of prime vintages and dainty finger-foods help pry dollars from the attendees of this annual event. During more prosperous times, the event raises more money. A 2003 study by wine industry consulting firm Motto Kryla Fisher found overwhelming correlation between increases in auction proceeds and the Dow Jones industrial average.

Bullish Or Bearish in 2013? Bullish. The auction took more than $8 million last year, up from $7.3 million a year earlier. This year’s event will take place in May.

[More from Forbes: Full List: 10 Quirky Economic Indicators]

8. Lipstick

Indicator Explained: Leonard Lauder is something of a wannabe economist, in addition to being a former executive of the eponymous cosmetics company. He posited that women tended to buy more lipsticks and makeup during tough economic times—a more cost-conscious way to maintain a glamorous appearance than, say, splurging on a new handbag.

Bullish Or Bearish in 2013? Bullish. Lipsticks sales are indeed set to rise again this year. But lipstick sales have seemed fairly recession-proof in the last two decades. Plus, not all cosmetics companies reported results in the past few years, making it hard to draw a clear correlation.

Source: IBIS World

9. Diapers

Indicator Explained: Parents in past recessions went without and still managed to keep up spending on their children. Not so during the latest financial crisis. Diaper sales fell during the financial crisis, as seemingly essential goods became luxuries.

Bullish Or Bearish In 2013? Bullish. The diapers industry is expected to continue to grow, reaching $5.4 billion. For perspective, the industry totaled more than $5.7 billion just four years ago.

Source: Euromonitor

10. Hot Waitresses

AP Photo/Matt YorkIndicator Explained: In hard times, attractive females who'd normally work as models or try to put out their shingle as starlets instead turn up as Hooters hostesses.

Bullish Or Bearish In 2013? Unclear. We suggest you perform your own field research on this. Lunch break!

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Benjamin Graham Was A Crappy Hedge Fund Manager

Jack Bogle, the outspoken godfather of index funds and passive investing strategies, didn't approve of a recent Wall Street Journal article defending hedge funds.

In particular, he took issue with the author's reference to Benjamin Graham, the legendary Columbia finance professor who literally wrote the book on Security Analysis and mentored Warren Buffett.

Bogle wrote a letter to the editor. Here's an excerpt: Citing Benjamin Graham as the first "hedged fund" operator is an especially unfortunate example. "The trick," Mr. Rice writes, was Graham's "clever way to make money . . . whether it [the market] continued to rise, or started to fall." ...

Proposal for New Hedge Fund Fee Structure: 1% + 33% of Alpha

By The Big Picture

One of my pet peeves is the way that insiders -- whether corporate CEOs, hedge fund managers, or elected politicos -- capture compensation (or credit) for normal cyclical gains they had little or nothing to do with.

This is the approach favored by the Crony Capitalists — those people pretending to be free market participants, and who merely pretend to be creating value. They are taking credit for structural successes that would have occurred with or without them. What they are actually doing is capturing value, not creating it — and then transferring it from its true owners (shareholders/investors) to themselves.

This is wrong; it is legalized theft.

If you want to see a good example of how CEOs transfer shareholder wealth to themselves, a good place to start is Roger Lowenstein’s 2004 book, Origins of the Crash: The Great Bubble and Its Undoing. The section on CEO compensation is astounding; these guys were essentially getting wildly overcompensated for being CEOs during a bull market. The prime example was the CEO of Heinz, who gave himself (with the tacit approval of his Board of~~Crony~~ Directors) a $90 million bonus. And this was back in the early 1990s, when $90 million was real money.

Why Do You Want To Be A Hedge Fund Investor?

www.ritholtz.com

Earlier this year, Goldman Sachs Asset Management announced that it would launch a new mutual fund that — apparently — will bring the joy of hedge fund investing to the masses. For as little as $1,000, the Multi-Manager Alternatives Fund (GMAMX) allows mom-and-pop investors to put their life savings into some of Wall Street’s riskiest and most expensive products. This “fund of funds” will, according to its prospectus, let investors gain exposure to the trading strategies of hedge funds...

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Daniel Loeb surfing to the top of the hedge fund charts again

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The portfolio added 3.3 percent alone between March 1 and March 13. By comparison, hedge funds have returned about 4 percent year-to-date, according to HSBC.

The roughly $1.7 billion Ultra portfolio is a levered version of the firm’s flagship Offshore fund, which manages about $5.7 billion and has gained 8.5 percent over the same period. ...

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Despite low turnover, hedge funds notably reduced holdings of underperforming long-time favorites Apple and gold while raising allocations to rallying Financials. For the first time in three years AAPL was not the top stock in our VIP list, instead ranking as the third most frequent top-10 holding... Continue to read.

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Apple Stock Hit by Panic Selling: 'Someone Yelled Fire'(Yahoo) Forget the "fiscal cliff." The real panic on Wall Street is over Apple's stock. Nearly every mutual and hedge fund has piled into Apple Inc. (NASDAQ:AAPL) during its spectacular rise over the past few years. Now, these same funds are scrambling for the exits as the stock goes through an equally spectacular decline. Apple plunged to a six-month low Thursday as funds rushed to take profits on the stock before it's too late. Shares are now off 25 percent since late September-shortly after the iPhone 5 launch and a month before the iPad Mini introduction. The stock, once up 74 percent on the year, is still up 30 percent for 2012. That's why Wall Street is getting out while it can. ...

Billionaire George Soros’s Latest Stock Picks (InsiderMonkey) George Soros is best known for the fortune he made shorting the British pound in 1992, but he currently invests a considerable amount of money in equities and so is required to report many of his long positions in 13F filings. We’ve gone through the 13F for the third quarter of the year and compared Soros’s holdings at the end of September to three months earlier. Read on for our impression of his moves and compare them to what he's bought and sold before. AIG. American International Group, Inc. (NYSE::AIG) became Soros’s largest 13F equity holding during the third quarter with a position of over 15 million shares being reported in the filing. A number of value investors have been getting into the insurer over the course of the year, and at a P/B ratio of 0.5 it certainly looks cheap compared to the book value of its equity. We also like its earnings multiples- it trades at 9 times forward earnings estimates- and revenue was up strongly in the third quarter compared to the same period in 2011. Fellow billionaire Dan Loeb had initiated a position during the second quarter of 2012 and we think that it still looks like a good buy for investors. ...

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Argentina's President Is Making Great Political Theater Out Of Paul Singer Seizing The Country's Naval Ship(BusinessInsider) Cristina Fernandez de Kirchner is turning her feud with hedge fund manager Paul Singer into a political rallying cry in Argentina. The President has refused to pay Singer's firm Elliott Management the $1.3 billion it owes the fund after it defaulted in 2010. de Kirchner says it's because Singer was given multiple chances (in 2005 and 2010) to restructure, like other hedge funds did, and take a haircut to recoup at least a portion of their losses. Singer, needless to say, did not. Instead, he decided to capture one of Argentina's naval vessels as collateral, and got Ghana to give him an order to detain the ARA Libertad last month. ...

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BMW Pininfarina Gran Lusso Coupé.

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time-honoured companies are unveiling the outcome of their first collaboration at the Concorso d’Eleganza Villa d’Este 2013. The BMW Pininfarina Gran Lusso Coupé is a one-off and represents the exclusive interpretation of a luxurious BMW Coupé as seen through the eyes of Pininfarina.

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Texas is set to double its wind energy generation from 60 gigawatts to 120 gigawatts in 2013.

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Saturday, February 23, 2013