It’s long seemed to me, as a female of the species, that the world of finance tends to be male territory. From Crypto Bros to Wall Street Wolves, the face of finance remains distinctly masculine.

Of course I’m not suggesting that women aren’t in finance and economics – because we are.

But from much of the publicity we get, you’d be forgiven for thinking we’re still around to make the tea. 

Cherchez la femme

Hence when I came across the so-called Hemline Index, I was startled.

Here were women! Predicting broad economic trends!

But not all of us, as it turned out. Just our legs:

Source: via Fashionblogga

The economy of skirts

The Hemline Index, supposedly floated by economist George Taylor in the 1920s – although the poor guy was apparently misquoted – points to a link between stock market trends and the length of hemlines:

• When the market was climbing in the early 1920s and 1940s and again in the 1960s, skirts got shorter.
• When the market was about to crash, hemlines dropped.

Now anyone with the slightest knowledge of fashion history could point out gaping holes in this theory. But I don’t suppose the (mostly male) economists ever bothered to ask a Vogue editor. 

Different social circles, I guess.

Anyway this deeply silly idea has continued to float around since the 1920s, as a way of forecasting economic change. But recently a Dutch economist (also male) carried out a proper study to test it.

And, shockingly, it turns out that hemlines can’t predict an economic downturn. They might move following one – several years later – but that’s about it. 

So don’t go selling your shares because you’ve noticed a few girls wearing maxi skirts.

You couldn’t make it up

Pondering the perturbations of hemlines and the stock market led me to the Lipstick Index.

This is an even more peculiar theory.

Promoted by (male) American cosmetics billionaire Leonard Lauder – the 126th richest person in the world – the Lipstick Index has it that lipstick purchases are inversely correlated to the health of the economy.

Lauder argued that when times are hard (and I always appreciate a billionaire’s insight into these things), women buy lipstick instead of more expensive items like clothes and bags.

Hence you can predict an economic downturn by soaring lipstick sales.

Only you can’t, of course.

It’s not a completely stupid idea. It’s just not a predictive index.

Fickle index fashion

Leonard’s theory was originally put forward by economist and sociologist Juliet Schor as ‘the lipstick effect’. This described the consumer behaviour of treating oneself to small but conspicuous indulgences when times are hard. 

The behavioural trend is valid, but it only applies to lipstick when lipstick is in fashion.

And fashion is, notoriously, fickle.

During the 2010s, for example, people started talking about a Nail Polish Index. And when we were all at home or wearing masks during covid, it became the Mascara Index.

People buy small luxuries to make themselves feel better. And if they’re struggling, women sometimes buy make-up in order to keep-up appearances.

That’s it. Good luck trying to predict the stock market using mascara.

Hair today…

By this point though I had fallen down the rabbit hole of girly economic indicators.

I needed another hit! What else could economists invent to turn women into financial weather vanes?

Well, in 2023 we apparently all became recession brunettes:

Not to woman-splain, but things have gotten expensive and many people are looking for a lower maintenance and more economical approach to blonde hair — but without moving away from blonde completely.

[…] the balayage, bronde and scandi trends aren’t going anywhere, instead they’re often being adapted to fulfil customers’ wants and needs. It seems many are “opting for a cost-friendly approach which allows them to still be a blonde, but reduces the frequency of salon visits each year.”

(So often untouched by fashion’s fluctuations, I missed out on this one too, being a lazy long-term brunette already.)

What’s the theory? That the rocketing cost of going to the hairdresser to top-up your blonde combined with the squeeze on disposable income to encourage lower maintenance hair trends.

In other words, women have let their natural hair colour regain ground as they’ve skipped the salon. Or they’ve died their hair ‘bronde’ (a mixture of brown and blonde) because it costs less to maintain. It’s a transatlantic fashion – although looking south the Australian style magazines seem pretty horrified.

Thankfully recession brunettes aren’t (yet) being used to predict the future. It’s more seen as a reflection of the rising cost of living – driving what the Wall Street Journal called a ‘Great Unblonding’.

Blondes may have more fun but it seems brown is cheaper to run.

Index vs index

The Great Unblonding rather contradicts the Haircut Index, developed by Japanese researchers.

According to these guys, when women wear their hair long it’s a sign of a healthy economy.

The wonks theorise that maybe when the ladies are doing well, they have less time to think about getting a haircut. So avoiding the hairdressers is a sign of financial success rather than a sign of recession.

There are enough holes in this theory that I could drive a bus through.

Only it’s awfully difficult to drive a bus in my high heels…

Ain’t no high heel high enough

The High Heel Index was developed by Trevor Davis at IBM, to match heel height to economic upturns.

Davis suggested a higher heel indicates an economic boom. Although he also found that at the start of a downturn heel heights initially went up, before going down after a few months if the economy didn’t rally.

So not an entirely obvious link, then.

I wonder if anyone’s ever combined these into a Financial Crash Superindicator?

Really bad news, surely, would be heralded by a brunette with red lipstick wearing a long skirt and very high heels.

Jessica Rabbit as the Fifth Horseman of the Apocalypse, perhaps?

Bare market

Finally, of course, there’s the Stripper Index.

Proponents of this will tell you that when the strippers start reporting a drop in club attendance combined with a sudden downturn in how much they’re tipped, financial disaster is on the horizon.

I’m not entirely sure of the robustness of this method of data collection, since it’s almost entirely anecdotal. But the economists seem to enjoy talking to the strippers about it.

(Don’t even get me started on the research into how Playboy’s Playmate of the Year tends to be ‘older, heavier, taller and less curvy’ in hard economic times. I’m not going near that one.)

The strippers on my social media feeds are saying that a crash is imminent (again). We’ll see how accurate they are.

But the big question is: does the underwear agree?

Getting to the bottom of it

You see, after I discovered index after index that painted women as mindless consumer-bots, I was thrilled to find one that turned the tables on men.

The theory behind the Men’s Underwear Index is that when men start feeling the pinch (no pun intended), they cut spending first on those things that people mostly never see.

No, not that secret folder of naughty pictures on their laptop labelled ‘Misc Receipts’.

Rather, their underwear. 

According to this theory, an early indicator of impending economic crisis is a sudden drop in men’s underwear sales.

So while women repeatedly come across as vapid overspending beauty-obsessed trend followers, men are cast as cheapskates who don’t replace their underwear.

That’s equal opportunities for you.

Fashion index fatigue

A lot of these indices seem to fall into the ‘correlation does not equal causation’ trap.

They’re also pretty pointless. As The Investor said years ago, you need a plan, not predictions.

Then again, it’s nice that the economists have something to do on a Friday afternoon when they’re bored of actual work.

And what do I know, anyway? My little female head is too busy with thoughts about skirts and shoes to handle Important Ideas. 

Excuse me while I rush off to buy a lipstick to make me feel better about being poor.

What caught my eye this week.

I read a short story when I was a teenager that unsettles me to this day.

It featured an everyday American town, only everyone there was beholden to this one particular kid. Even the adults would watch what they said and did around him.

To spoil the twist, it turned out the kid was born with godlike powers.

The town, and the chunk of the planet it sat on, was adrift in space somewhere after he’d dislocated it from the planet. The lives of the survivors living in this bubble now revolved around the child, although they tried desperately to pretend that life was normal.

Obviously the worst of it was their deity was a three-year old child, not a wise all-seeing superpower.

The kid-god was insecure, arbitrary, unpredictable, spiteful, prone to deadly tantrums, and generally mentally ill-equipped for the job.

I’m sure you can see where I’m going with this.

Trump TV

Look at a chart of the S&P 500 this week and you’ll find that US shares closed much higher.

Perhaps some Panglossian observers see a good week for the markets, like the town folk in that story pretended they were living a good life.

Passive purists will see more evidence to ignore the noise and keep buying.

But experienced, the week was a rollercoaster ride driven by the kind of crazy plot lines and reversals you’d expect to find – not coincidentally – in a season of WWE Wrestling.

We’re all degenerate meme traders now

I won’t run through the ups and downs. If you care about market drama, you saw them unfold.

Ditto Trump’s tariffs. If you haven’t read enough of the millions of words written by now to convince you of their sheer stupidity, this post won’t tip the balance.

But for two weeks the market has given us real-time pricing on just how damaging this plank of Trump’s agenda would be. The Nasdaq and very nearly the S&P 500 plunged into a bear market, before rallying on Trump declaring a 90-day pause for most of them.

Below is a daily price chart of that reaction. Remember these are multi-trillion cap indices – not illiquid meme coins – rising as much as 12% in a day:

What a killer run for Trump TV, watched around the world!

Personally I found it even more exciting than the one where his supporters invaded the US capital a few seasons ago.

It’s much more thrilling when you’ve skin in the game.

And the subplots!

The pseudonymous ‘Walter Bloomberg’ X account that promoted the ‘fake’ story the tariffs would be paused for 90-days, whipsawing markets by $2.5 trillion in half an hour as it was believed and then denied!

The arch-villain China slapping back with even more tariffs of its own!

Then Trump apparently being inspired by Walter’s fake ‘pause’ and actually implementing a 90-day delay. Possibly only after he watched a bank boss fretting on Fox TV!

This isn’t even to get into how these enormously consequential announcements are being made via Trump’s Truth Social account. Rather than, you know, the White House.

Or even accusations for potential nation-scale insider trading based on Trump telling his supporters it was a good time to buy stocks, shortly before the market ripped 10% on his latest not-Tweet.

Personally, I don’t think it can be insider trading when it’s done in public.

But also, what a quaint thing to worry about these days…

Do you even lift, bro?

Perhaps my favourite bit involved all the NPCs / billionaire tech and finance bros battling on social media. Especially Trump supporter and hedge fund manager Bill Ackman, who went from warning the tariffs would cause an ‘economic nuclear winter’ one day, to praising Trump for a textbook ‘art of the deal’ later.

I’m with AQR founder Cliff Asness who replied that:

“For me, one of the main benefits of making some money is not having to wear a gimp suit for anybody.”

But I suppose Ackman is in too deep to recant.

Black Mirror Monday

At the risk of sounding exactly like someone who complains that WWE Wrestling is not a real sport – and thus who piously reveals that they don’t get the joke – it’s a bit sickening to me that this entire charade has become normalised in just a few short months.

Well I’m having none of it. This is not normal, and it’s not a brilliant way to shape US economic policy, let alone re-route the world.

It’s mindlessly stupid. The tariffs would plunge us into a depression if implemented, whereas they only have us flirting with recession when teased and (partly) retracted.

Listen, if the US wants to turn itself into an autarky run by an autocrat, go for it. I don’t believe the US public voted for that – and it would impoverish most people there, especially the poor – but that’s its (bad) business.

But let’s not pretend the case for free trade wasn’t made 200 years ago. And not just in theory – the world, and especially the US, has mostly grown crazy rich on the benefits.

You might as well declare you’ve doubts about the theory of steam engines.

Then again, 10% of the US electorate believes the Earth is flat, so perhaps they would.

In most cases for most countries at most times tariffs are bad.

Trump’s sky-high tariffs for the US are idiotic, and even as a threat they will have consequences.

No serious CEO will have begun to move factories to the US last weekend based on Trump’s earnest declarations that tariffs were ‘beautiful’ and here to stay and set to reinvigorate US manufacturing and all the rest.

Yet the unfolding farce will still be affecting millions of decisions up and down the supply chain.

To give one tiny example, the UK’s Character Group – the maker of Peppa Pig plushies – withdrew market guidance this week.

As This Is Money reports:

Character, which manufactures Teletubbies toys and the largest range of Peppa Pig products, told investors on Friday its ‘ability to assess the financial implications’ of tariffs has been ‘considerably obscured’ by escalating retaliatory measures.

The New Malden-based group predominantly counts the UK and Scandinavia as its key markets, but US sales made up about 20% of turnover last year.

The UK will face so-called ‘baseline’ tariffs of 10%, but much of Character’s manufacturing comes from China where exporters to the US now face levies of 145%.

Character Group is set-up just like millions of other companies around the world that took advantage of global trade to improve production and lower prices.

So we can only imagine all the similar decisions being made globally to pause output, and to suspend investment and expansion.

It sums up why markets hate uncertainty. It’s not because traders are lily-livered. It’s because the economic damage is real, and just as bad un-priceable.

Ah, Mr Bond Vigilantes, we’ve been expecting you

There’s not point re-litigating the brutal inanity of US policy every Saturday morning. This is going to go on for years, and attention is all Trump wants anyway.

But on that note perhaps the one good development this week was the potential re-emergence of the so-called bond vigilantes:

We all know former real estate bankruptcy Donald Trump loves cheap debt. So maybe rising bond yields did force his hand towards a pause, rather than, say, Ackman’s whining.

Of course, as Cullen Roche notes there’s a lot going on with US bonds:

The 10-year interest rate ripped from 3.9% up to 4.5% in four trading sessions. As I write it’s now back to where it was nine trading sessions ago at 4.3%.

So, we whipped way lower and then went way higher.

Again, it’s all uncertainty. No one knows where inflation and the economy is going. If inflation rips higher then bond yields will follow. If the economy rips lower then bond yields will follow.

But we’re in totally uncharted territory because we’ve never had the entire global economy at the mercy of a single unpredictable person writing Tweets sporadically.

I talked to some of the largest bond traders in the world in recent days and they’re all so perplexed about it. They described it as “chaos”, “uncertainty”, “madness”. There are theories floating around about carry trade unwinds, funds imploding, China selling and just bidless markets.

I suspect it’s a lot of all of these things. But the uncertainty of it all is the main issue. No one knows where any of this is headed and if you’re someone trying to lend money or set prices in the coming months then good luck guessing where you should be.

Trump’s supporters don’t care less that China ultimately buying a lot less US stuff would mean it would have far less need to hold shedloads of US treasuries.

Nor that unwinding China’s US debt stockpile would see US rates soar, crippling US households.

Remember, this is television! Don’t get hung up on reality.

The Mad King

Indeed as it’s presently unfolding, US exceptionalism is getting downgraded at a speed that would embarrass a B-Movie scriptwriter.

The only thing that’s different about the tariffs mayhem compared to the rest of the MAGA/Trump agenda, is it comes with real-time pricing. The damage is marked-to-market.

As blogger ermine puts it, the US is rapidly transitioning from having a POTUS to having a KOTUS, at least in practice.

A man whose daily utterances moves trillions in the markets. And who is checked mostly not by conventional counterbalances, but by the japes of sanctioned court jesters.

Fun and games

So in the spirt of the times – and since it’s all a game nowadays anyway – I asked ChatGPT for an appropriate toy:

I can’t wait to play with him next time.

Historians may someday look back and find something good to say about this entire episode.

They turned the murderous Genghis Khan into a nation-builder, after all.

Perhaps in some needlessly damaging way, this week really will eventually be seen as an idiotically-implemented check in the very-definitely authoritarian China’s rise to power, for instance.

Even forest fires do some good in the long-run.

It’s just your bad luck to find yourself in the middle of one.

Have a great weekend.

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