Boxes and boxer shorts

The Federal Reserve just lowered interest rates one-quarter percent and Wall Street celebrated with more rallies.

Not all stocks are going up, but many are, making this analyst look a bit foolish. Nothing new. Us stock folks always get it wrong on occasion. Getting it right more often than not is the trick and it’s not a slam dunk to do so, of course.

The market is a finicky beast because getting it right means knowing what millions and millions of people will be thinking on any given day.

I always say the markets will reflect economic reality eventually, but its day-to-day movements are only the sum of the daily beliefs of all those millions of people in it.

There are clues we can search for in the buying habits of consumers to give us some indication of how the economy is doing. Since the economy is mostly driven by what and of how much those millions of people are buying, there are some basic things that can tell us way before the government statistics reflect what may be happening in the economy.

Cardboard boxes are the basic envelope for all things made and sold. At some point or another, most things we buy come in a box. If demand on the street starts to slow, fewer boxes are needed and that shows up in a slowdown of cardboard box sales. Since government economic statistics are a looking-back indicator of what has already happened, looking at cardboard box sales on a day-to-day or week-to-week basis gives us a more accurate and immediate window of what overall box sales are doing in the economy long before government statistics report it.

The cardboard box industry is incredibly large, with more than $100 billion in revenue. Right now, US box makers are cutting back production, says Jadrian Wooten, a Virginia Tech economist. Since boxes made here are sold worldwide, the cutback is ominous and could be an indication of things to come, not only in the US but worldwide.

Talking about putting things in boxes leads us to another weird and seldom looked at statistic. Boxers, falling under the underwear category, was an indicator former Federal Reserve Chief Alan Greenspan was rumored to pay close attention to. It is sometimes referred to as the “Men’s Underwear Index.” Perhaps he thought when people cut back on underwear, and instead just washed them a little longer, signaled times were tough.

Maybe a far stretch, to be sure, but the underwear indicator was indeed a Greenspan tool. (Pun not intended but there nonetheless).

Interestingly enough, Sean Bagniewski, a state representative from the Des Moines area, suggested in a newsletter the recent slowdown of sales of 12-foot skeletons at The Home Depot might be a warning the economy is indeed slowing.

On the flip side, Estée Lauder CEO Leonard Lauder suggested his company sells not less but more lipstick in economic times of stress. He quipped that people spend what little discretionary money they might have on the little pleasures of life, like lipstick.

Now that is truly putting lipstick on the proverbial pig!

In conclusion, although these indicators may help in determining what is coming, economically speaking, the fact of the matter is people appear to be spending less on at least a few things that normally aren’t cyclical in nature, which means the purchase of these things are fairly constant throughout the year.

In other words, some “bodies” somewhere are buying fewer boxes while washing more underwear, all while donning more lipstick while passing on the giant skeleton this Halloween.

The visual is not exactly pleasant, is it?

Neither is the economic indication.

This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a BA in Economics with honors, 1979, and California Insurance License #0L34249. His insurance agency is BAP INC. insurance services. Email: marc@moneymanagementradio.com.