From the archive, originally posted by: [ spectre ]
HIGHS AND LOWS
THE CURSE OF 2ND AVENUE
April 10, 2007 — ON Thursday, New York’s mayor and governor will
break ground on the Second Avenue subway – again. The financial world
should pay attention: Previous “good news” for the long-planned and
long-postponed East Side line has always heralded a Wall Street
How could New York’s elected leaders have shown this uncanny ability
to mark the topping out of the markets? Consider the old adage: When
your cab driver starts giving you stock tips (or real estate tips),
it’s time to sell.
First, the historical record: Gotham’s board of transportation first
unveiled plans for the fabled subway line, to run from the east Bronx
to Lower Manhattan, in September 1929 – just one month after the Dow
Jones Industrial Average had hit a peak it wouldn’t reach again for 25
years. The city soon abandoned plans for the subway as New York, and
the nation, struggled through the Great Depression.
Nearly 45 years later, history would repeat itself. Between October
1972 and July 1974, Mayors John Lindsay and Abe Beame and Gov. Nelson
Rockefeller broke ground on different sections of the subway tunnel
three separate times, as The New York Times recounted yesterday. The
first groundbreaking neatly coincided (almost to the very day) with a
peak the Dow Jones wouldn’t see again until late 1982.
But the construction got going just as the economy stopped booming.
New York was facing near bankruptcy by 1975, and couldn’t even think
of investing money in a new subway.
There’s more: In between those two economic disasters, New York’s
temporary resurrection of plans for the Second Avenue line predicted a
far less dramatic stall in the market.
In the fall of 1951, just as the Dow was hitting an all-time post-war
high, city voters and officials approved $500 million in spending for
transit improvements, with much of the money expected to fund the new
subway. The Dow stalled immediately, fluctuating without any real
advance for the next two years; it wouldn’t pick up where it had left
off until late 1953. And as New York struggled with debt, nobody
thought much about the soon-abandoned subway plans again for a couple
New York’s odd record of trumpeting plans for the Second Avenue subway
just as we’re on the cusp of economic, financial, and/or fiscal
turmoil actually makes perfect sense. Just as cabbies giving stock
tips is a sign that speculation has run wild, so too are grand schemes
from politicians a sign of unrealistic political optimism.
That is, when pols feel so confident about the future that they think
it’s time to break ground on a decade-long project that will consume
billions of state and federal dollars, it may be a sign that their
vision is due for a correction.
It’s hard to see how it will be otherwise this time around. New York
state and city, as well as the Metropolitan Transportation Authority,
all face multibillion-dollar deficits in the next few years.
Abnormally high tax flows from a record real-estate market and healthy
financial markets have only postponed the day of reckoning.
And what about the federal government, set to contribute a third or so
of the cost for the first phase of the new subway? Over the past six
years, the Bush administration has increased the national debt by
about 50 percent, to nearly $9 trillion.
Two long wars, the recovery from a historical natural disaster,
massive entitlement expansions – and tax cuts, too, all at the same
time: When the bill for all of this spending, promising and borrowing
starts coming due, it’s hard to see how New York’s subway project
won’t be seen as one of the most expendable items on the feds’ list.
Gov. Spitzer and Mayor Bloomberg will smile for the cameras as they
don hardhats on Thursday – but if history is any guide, the rest of us
may want to call our brokers.
Nicole Gelinas is a senior fellow at the Manhattan Institute.
Rising Lipstick Sales May Mean Pouting Economy and Few Smiles
By EMILY NELSON / November 26, 2001
Staff Reporter of THE WALL STREET JOURNAL
Lipstick sales are red hot. So why is no one smiling?
The reason is that women traditionally turn to lipstick when they cut
back on life’s other luxuries. They see lipstick, which sells for as
little as $1.99 at a supermarket to $20-plus at a department store, as
a reasonable indulgence and pick-me-up when they feel they can’t
afford a whole new outfit. “When lipstick sales go up, people don’t
want to buy dresses,” says Leonard Lauder, chairman of Estée Lauder
Lauder’s Leading Lipstick Index tracks lipstick sales across Estée
Lauder’s many brands, which account for sales of about half of all
prestige cosmetics in the U.S. and include Stila, Origins, Bobbi
Brown, MAC and Prescriptives. Since the Sept. 11 terrorist attacks,
the index is up broadly, says Mr. Lauder. The index also climbed
during past recessions, such as in 1990.
MAC factories started running extra shifts to produce more lipstick
after Sept. 11. In the past three weeks, sales of MAC lipstick and lip
gloss have grown 12% at stores open at least a year, compared with the
“It’s like getting a haircut. It makes you immediately feel better,”
says Meredith Foulke, a 21-year-old senior at Auburn University who
recently sprung for a sparkly “Sweet Cherry” Clinique Liquid Lipstick,
while shopping at Dillard’s in Auburn, Ala. This year, she doesn’t
plan on splurging for a new suede handbag, she says, “but there’s
Lipstick sales at mass retailers tracked by Information Resources
Inc., the market-research firm, rose 11% from August through October
compared with a year ago.
Sales of lipstick at Borghese Cosmetics Inc. are also up 12% since mid-
September vs. last year, spurred on by saleswomen wearing T-shirts
emblazoned with the American flag and the words, “love, peace and
lipstick.” Company executives in New York designed the T-shirts after
noticing shoppers buying lipsticks and expressing “a sense of defiance
that ‘they’ aren’t going to disrupt our lives and take away our simple
pleasures,” says Georgette Mosbacher, the New York-based company’s
Deep, bright lipstick shades, with names like “berry,” “red glorioso”
and “vino divino,” are now most popular, while pale, neutral shades
aren’t selling as well, Ms. Mosbacher says. “This is a case of wanting
to brighten up … [Lipstick] has always made women feel good.”
Lipstick, which dates to ancient Egypt along with makeup in general,
often reflects women’s attitudes. During the 1920s, for example, mass
marketing of makeup in the U.S. took off, women got the right to vote,
and bright red lipstick was popular.
Other cosmetic items don’t tend to benefit from the lipstick effect.
The high-margin prestige cosmetics that drive overall sales are rarely
discounted; more typically, stores offer free gifts with a purchase.
When upscale department store Bergdorf Goodman, part of Neiman Marcus
Group Inc., held a sale for selected shoppers last month, it offered
30% off everything except cosmetics.
Indeed, Borghese’s Ms. Mosbacher is lowering her overall sales
expectations for the year to a 9% to 12% increase, down from 15%
before Sept. 11. Estée Lauder also reduced its overall sales
expectations, saying its other business, particularly duty-free
airport shops, is hurting.
Lipstick sales might be even higher, if not for brands that promise to
stay on longer, reducing the need to buy another stick. Top-selling
lipsticks include Cover Girl Outlast lipstick and Max Factor
Lipfinity, which claim to stay on for eight hours. Both brands are
owned by decidedly practical consumer-products maker Procter & Gamble
An ad for Revlon’s Absolutely Fabulous lipstick, shot last spring,
seems particularly appropriate with its hint of stock market woes and
lipstick-as-comfort-food tone. The ad shows a woman in front of what
looks like the New York Stock Exchange trading floor, and it reads,
“On a bad day, there’s always lipstick.”
Write to Emily Nelson at emily [dot] nelson [at] wsj [dot] com
What lipstick and skirts tell us about markets
21.07.2006 / by Andrew Van Sickle
Take a break from p/e ratios and macroeconomic statistics. There are
plenty of less scientific – and more entertaining – alternative
indicators that purport to tell you where stocks or the economy are
heading. Here are some of the stockmarket’s most popular urban
Alternative indicators: magazine covers
Once the mass media cottons onto a trend, the market has probably
reached a top or bottom. Magazine covers seem particularly prone to
leaping on a bandwagon just as it goes off a cliff. In 1999, just
before the dotcom collapse, Amazon’s Jeff Bezos was named Time’s Man
of the Year. BusinessWeek has also had its fair share of howlers,
including a cover entitled ‘The Boom’ in February 2000 and a notorious
feature on ‘The Death of Equities’ in 1979 – not long before the
secular bull run of the 1980s and 1990s finally began. In early 1999,
The Economist reckoned that oil, then at $10, could head to $5. Black
gold promptly turned north and is now heading for $80 a barrel.
Similarly, a recent cover proclaiming that Goldman Sachs was on top of
the world appeared to usher in a period of turmoil at the investment
Alternative indicators: the lipstick indicator
Coined by Leonard Lauder of the cosmetics group Estée Lauder, this is
based on the notion that lipstick sales rise when the economy is
struggling because consumers forego big-ticket items and opt for
small, affordable luxuries instead. So rising lipstick sales reflect a
downturn. This indicator has been a relatively reliable signal over
the years; Estée Lauder’s lipstick sales doubled after September 11th,
for instance. US lipstick sales are tipped to rise by 38% by 2008,
suggesting we are heading for trouble.
Alternative indicators: the hemline indicator
Another indicator that seems to be rooted in pop psychology, this
posits that when hemlines are high, good times lie ahead; as they
fall, markets follow them down. Short skirts supposedly reflect
exhibitionism and thus confidence, while long ones connote
subconscious vulnerability. In the UK, hemlines are short at present,
although the good times may soon be over: at recent catwalk shows in
the US, autumn skirts were worn below the knee or longer.
Alternative indicators: the US Superbowl indicator
This widely monitored sporting indicator refers to the annual end-of-
season championship game of American football. In late January or
early February, the winners of the NFC league and the AFC division
face off. A win for the NFC team heralds an up year for stocks, while
an AFC victory foretells the opposite. The Superbowl has been played
since 1967 and the indicator has been right on 32 of 39 occasions – an
82% success rate; over the past few years, however, it has been less
impressive, proving wrong for four years on the trot between 1998 and
2001. Last year’s victory by the AFC’s New England was indeed followed
by decline – the Dow finished the year 0.8% down – and this year the
winner was also from the AFC.
Alternative indicators: the US electoral cycle
Market watchers across the Atlantic have noticed that stocks often
move in a four-year pattern that seems to be related to the electoral
cycle. History shows that stocks dip in the beginning of a four-year
term as political realities and unpopular initiatives eclipse lofty
promises. The final two years are better for stocks as the government
typically stimulates the economy to fuel the feel-good factor.
According to the Stock Traders Almanac, the average fall in the Dow
Jones index from its peak in an election year to a mid-term trough has
been 22%. But since 1914, the Dow has gained an average of 50% from
the trough to the pre-election year high. Meanwhile, Standard &
Poor’s, crunching data from 1945, note that the second and third
quarters of the second year of an administration produce the worst
returns in a four-year term, averaging -2% and -2.2% respectively.