There are a multitude of economic indicators to use as a barometer of the economy. Many are extremely complex, while others are fairly simple. One of the more unusual ones actually seems to make a lot of sense. Look at your underwear drawer!
I was recently reading an article in the Washington Post (article) and assumed that it must have been a slow news day. The reporter was talking about how consumer confidence can be gauged by the underwear you keep. It seems that there is even a Men’s Underwear Index (MUI), and former Federal Reserve Chairman Alan Greenspan sees it as a credible means of tracking consumer sentiment.
The theory behind the index is that men will replace their underwear as it wears out. However, when times are tough they will wait longer than usual before purchasing a replacement. So when money is tight the sales of boxers and briefs are in the toilet. When people feel better about the economy again you will see the sales rise.
When you think about it, it makes total sense. It’s a theory that can be applied to other items as well. Watch the sales of anything that is semi-discretionary and you will likely find that it mirrors the state of the economy.
Look for Signs
There are certain things that people have to buy regardless of how the economy is doing. We all need to eat, our cars need gas, people have to have shelter. It’s the little things that show the true state of things. Are people buying regular coffee instead of the fancy latte? Are they buying store brands instead the national names? Shopping at discount outlets instead of major department stores?
While this may seem obvious, the change happens gradually. By tracking such an index, such as the MUI, you can spot these changes before they are obvious to all. It can help you stay ahead of the curve in the investment game rather than just being a follower.
So look in that underwear drawer, are your briefs full of holes? If so, the economy probably is too!
I don’t believe in the after life, although I am bringing a change of underwear. – Woody Allen