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What toilet paper, lipstick and men's undies tell us about the economy

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We're in unchartered waters.

Coronavirus has knees shaking about everything from health to investments and travel plans.

While watching the Dow can give an indication of the panic sweeping financial markets, here are some unconventional indices and social phenomena to be aware of.

toilet paper lipstick mens underwear economy

Note: each of them is completely lacking in academic rigor, working mostly on stereotypes and coincidence - do not let them inform your investment decisions.  

Men's Underwear Index

Popularised by former Fed Chairman Alan Greenspan, it suggests that economic health can be understood by the strength of men's underwear sales.

Sounds nuts, and it probably is, but bear with me.

When the economy is performing strongly, sales of men's underwear go up. By the same token, a poor-performing economy will see a declining sales of underwear.

Men view underwear as a luxury item. When times are good, they feel free to 'splurge' on a fresh pair.

Unfortunately, the index doesn't provide any insight into which styles of underwear are popular through good times and bad.

It should be mentioned that Greenspan also coined the dry-cleaning theory, based on essentially the same logic.

The Lipstick Effect

When the economy's in trouble, people tend to buy less expensive luxury goods. So: lipstick instead of handbags, and movie cinemas rather than an overseas holidays.

However, analysis by The Economist found that the effect, while there, is probably overstated.

Skirt Length Theory

This one is surely complete nonsense, but here goes.

The theory holds that long skirts are worn during a bear market when times are tough. In rosier times, the hemline goes up.

It seems to work best by coincidence. Hemlines did increase in lockstep with the economy following the 1987 stock market crash, but I'd be surprised if the world's leading fashion designers were designing their collections following economic consultation.

Toilet Paper Index

There's a new one doing the rounds - the Toilet Paper Index, your best measure of mass panic and irrationality.

Toilet paper sales have gone gangbusters since the outbreak of COVID-19. Ask anyone at the checkout exactly why their trolley is full to the brim with four years' worth of dunny roll, and you'll be hard pressed to get a more insightful response than 'everyone else is doing it'.

The great toilet paper panic of 2020 has seen fists fly, hair yanked, and yes, even knives pulled - more than enough anecdotal evidence to establish a strong correlation.

We're cutting through the confusion to help you manage your money during the coronavirus outbreak. Click here for more on how COVID-19 could affect your job, budget, super and investments.

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David Thornton is a journalist at Money magazine. He previously worked at Your Money, covering market news as producer of Trading Day Live. Before that, he covered business and finance news at The Constant Investor. David holds a Masters of International Relations from the University of Melbourne.
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