January 2009 Archives

Yesterday I waited 15 minutes in the Burger King drive-thru to get the Whopper Junior that I had been craving all afternoon. There were four cars in between me and the first window, two of whom had ordered food for at least three other people. I got to thinking. Are there really this many people craving Whopper Juniors at 3:00 pm?

 

And then it occurred to me. As the U.S. recession deepens, people are attempting to economize by saving money on expensive food items. Fast-food chains that offer lower prices to thrifty consumers are faring well.

 

It seems to me that consumers are cutting back on healthy but relatively expensive items such as fresh fruit, fish, and vegetables, in favor of cheaper options high in sugar and saturated fats. While McDonald's boosted its earnings last quarter, Lexington's largest retailer of natural and organic foods, Whole Foods Market, recently had to shut its doors due to extreme drops in consumer demand. Households just cannot seem to prepare healthy meals on budget.  

 

 

 

Curious about this latest shift in consumer spending, I did some research.

 

Numerous studies conducted by the Nutrition Sciences Program at the University of Washington in Seattle have linked unhealthy eating habits and adult obesity to low incomes. While the U.S. already tops the global obesity scales, the unfolding recession could expand American waistlines even further as more people fall onto hard times and seek cheaper food.

 

The best way to fight this trend is to learn how to balance a cash-strapped budget with some basic nutrition necessities. Here are some quick tips: http://www.msnbc.msn.com/id/27423189/.

 

Leann Gerlach

January 31, 2009

I was listening to NPR about a week ago when Professor Phil Maymin, professor of finance and risk engineering from NYU came on the show and talked about the correlation between the markets and the most popular songs. He calls his theory "beat variance."

According to beat variance, if the markets are volatile, then the top Billboard songs will have a steady beat. This theory also works the other way: if the markets aren't crazy but hold steady, then the top songs will have more varied beats.

He said he used computer software and analyzed the variance in all 5,000 of Billboard's Hot 100 songs from 1958 to 2008. He came up with beat variance by looking at average beat from the 100 songs in per year and then comparing the variance to market volatility.

Against the backdrop of volatile markets, a recession and major changes in store for the economy, "Just Dance" by Lady Gaga is currently at #2 on the current Billboard Hot 100 List (it was at #1 until Kelly Clarkson's new single, "My Life Would Suck Without You", came out).

After watching the markets' erratic performance, apparently we just want to relax with "Just Dance" and its clear and steady beat, according to the theory.

Compared to "Just Dance," John Legend's "Ordinary People" has much more beat variance and therefore not as popular during turbulent economic times.

However, I think that the main demographic that listens to the top songs is one that doesn't really care about how the market or economy is performing (ie, 14-year-old teenage girls).

I asked my dad's broker what he listens to after a crazy day of trading.

"I just listen to The Eagles or Bob Dylan," he said. "What is Lady Gaga?"

I also think it's odd that the professor didn't consult any music scholars (I'm sure those people exist) or actual musicians about this type of stuff.

The professor also said that "Just Dance" calms you down, but I find I actually want to do what the song says.

So, I'm not sure about the beat variance in top songs as a reliable economic indicator.

But if you really want to hear the economy in the sound of music, check out this remix of the Busta Rhymes song "Arab Money" (which naturally has low beat variance, because Bus keeps it real). It's by underground hip-hop artist Emilio Rojas fittingly titled "Bailout Money" (be forewarned, there are curse words in the middle of the song). 

She don't get low; she doin' the Dow Jones
We don't broke the government got loans 
They gettin' bailout money

With love from the trading floor to the dance floor, 

Jess Ramos '09

            It's Superbowl weekend - do you have football fever? Well, if you're like most people, then you'll stop what you're doing Sunday evening and watch the game. This means forgetting about the grim state of the economy and how it's affecting you and, instead, kicking back and watching the spectacle that captivates us all, the Superbowl. But, the question remains: what does the Superbowl actually mean for the economy?

            You didn't really think that this wouldn't be about the economy did you? It's the economy all day, every day now. Anyway, back to the point. One of the most fascinating (and comical) ways to measure the economy can be seen by what is called "The Superbowl Indicator."

            The indicator says that when an "original" National Football League team wins the game, the stock market is supposed to rise that year. Conversely, the market falls if the winner joined the NFL post the merger with the American Football League in 1970.

            What does all of that mean for this year? Since both the Pittsburgh Steelers and Arizona Cardinals are technically from the original NFL (I say technically because the Cardinals emanate from the St. Louis Cardinals which was an original NFL team), it doesn't matter who wins because the indicator says the stock market should go up. So this is good news for everyone.

            You may say to yourself, "sure, this sounds great, but this can't possibly have any bearing on what the future holds for the stock market." To that, I answer while the Superbowl Indicator is all in good fun, it has a surprisingly high rate of success - it has been right 79 percent of the time. However, this seemingly humorous, yet somewhat accurate indicator was incorrect just last year when the New York Giants defeated the New England Patriots. Based on that win, the stock market should have been strong this past year, but we all know how that went.

            Well, here's to hoping the Superbowl Indicator is right on the money this time since it's a win-win proposition. Lastly, here is my prediction for the game: Cardinals 20 - Steelers 17 (PS, I'm from Baltimore and am a big Baltimore Ravens fan so I couldn't possibly pick my arch-rival to win the game).

 

Here is a link to a Wall Street Journal blog about the Superbowl Indicator:

http://blogs.wsj.com/marketbeat/2009/01/12/checking-the-super-bowl-indicator/

 

 

By Hank Nathan '10

*****This entry was originally posted January 23, 2009. It has been reloaded to attribute it to the correct poster.*****


Greetings, and welcome to Washington and Lee University's (presumably) only economics blog written by a journalism class. Over the course of the next 10 weeks we hope to illuminate the world with our own quirky brand of economics, as we see it.

As anyone can plainly see, there's a lot in flux regarding the economy right now, and so many things one could wax poetic about. So let's start with a meaty one: one thing that, for better or worse, has remained static are fraternity and sorority recruitment numbers at our idyllic slice of academia! Now, for the general public not in the know, W&L sports among the highest fraternity and sorority participation levels in the nation, I think it's first or second right now. For the longest time the intra-fraternal doom-mongers have been predicting that the cyclic systems are due for a bust after 30 years or so of major boom, but no such trend has yet to have appeared. In fact, last year the number actually inched higher and this year's numbers seem about on par. According to my father, class of '74, fraternity involvement was at its lowest while he was here, hovering around 50%. It currently stands well above 80% for both sexes.

SO - how on earth is this an economic indicator, or perhaps a testament to our all encompassing Greek system's own ability to resist "These Economic Times?"
Well, allow me. Fraternity involvement is generally seen by the naysaying public as little more than "buying your friends." So it would stand to reason that in times of intense recession - see: now - a superfluous commodity such as friends-for-hire would be the first to go, especially with such a wealth of free citizens one could just as easily befriend. So then why are parents, those paying not only tuition but also room and board at a cost upward $50,000, willing to shell out thousands of dollars more for their children to join irrelevant bastions of hedonism and what-have-you? No matter our school's rich-boy stereotype, I simply cannot bring myself to believe that there isn't a large portion of the student body severely affected by the recession. But the numbers show that additional spending on frats and srats (to speak colloquially) is not wavering. This truly has to be an anomaly... and I'd love to know what the national recruitment figured were on the year. Your thoughts?

-Mike White '10

I used to be a nationally competitive figure skater.  I skated for 15 years, trained at the University of Delaware 6 days a week (an hour commute from my home), and participated in numerous competitions across the country.  The U.S. Figure Skating National Championships took place last week in Cleveland, and, needless to say, I was excited to watch the event.  So, you might be wondering how this has anything to do with economics.  

There has been much talk about the Superbowl as a possible economic indicator.  Supposedly, if an "original" NFL team wins the game, the market is supposed to rise that year.  With Pittsburgh and Arizona as the remaining two teams and both originating from the old NFL, it looks like this should be a good year for the markets.

Perhaps surprisingly, I believe that figure skating, although not exactly an indicator, can reveal much about the economy.  Despite the current economic crisis, the skating world seems to be rather unaffected by the downturn of the markets.  Figure skating is a huge time commitment and an extremely expensive sport, yet 60,000 members currently participate in U.S. Figure Skating, a membership number that remains steady.  Sponsors have also continued to look to figure skating for advertising, and AT&T just signed a two year agreement as the sponsor of the national championships.  Smuckers, State Farm, and others have also recently sponsored the sport. (NY Times article)

Next year is an Olympic year; this probably does bring a significant interest to figure skating as fans look ahead to predict which skaters will represent the U.S. in 2010.  I think, however, that figure skating behavior reveals more than just interest in the sport.  Despite the economy, Americans clearly prioritize their desires and will continue to spend money on things that matter to them.  Tickets for the U.S. Nationals this year for the Championship Ladies event sold for up to $145, and approximately 10,000 fans flocked to this event.

Below is a link to Alissa Czisny's free skate performance, gold medal winner of the Senior Ladies championship.  The stadium is clearly packed, which seems unusual for such a disheveled economy.

http://www.youtube.com/watch?v=pYWeI-sksBE

What does all of this mean?  Well judging from the ice, maybe things aren't as bad as they seem.

--Lauren Miller, '09

This is the start of what will be a weekly post...so get excited!! Gathering information from a variety of sources, these are 5 of the top and bottom performing stocks this week (in my opinion)! Keep in mind, the markets were closed Monday, so this was a shorter week than normal. 

As I stood near the Washington Monument Tuesday and listened to President Barack Obama's Inaugural Address, I was struck by his willingness to acknowledge that all Americans -- not just the financial sector -- share some blame for our economy's current struggles.
"Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some, but also our collective failure to make hard choices and prepare the nation for a new age," Obama said in his speech (the full text is linked here: Inaugural address).
Most Americans, obviously, had no part in the mistakes made by Lehman Brothers, Bear Stearns, AIG and a host of other financial companies. But many Americans are to blame for spending beyond their means, piling up huge credit card debts and taking on mortgages they could not afford.
Obama did not dwell on the economy in depth; that's not really possible in an 18 minute speech. But he did outline the basics of the stimulus plan that will head through Congress soon: promises to focus on creating jobs, relying more on renewable energy and rebuilding infrastructure. He also talked about the actions of the market and seemed to suggest that increased regulation may be on the way.
I thought this approach worked well Tuesday. There will be time for a serious, lengthy discussion on the economy, perhaps in his State of the Union Address or in a prime-time televised speech. Tuesday, when two million people had gathered to celebrate and honor him, was not the time for a lengthy treatise on economic policy (plus we all might have gotten frostbite on our toes if the president had gotten too in touch with his professorial roots).
It should be said, however, that not everyone agreed with Obama's approach in this speech. Nobel Prize-winning economist Paul Krugman, said Obama's rhetoric about failing to make hard choices was confusing and wrong-headed. Krugman argued that the full crisis was brought on by "a runaway financial industry. ... The American public had no idea what was going on, and the people who did know what was going on mostly thought deregulation was a great idea."
But to dismiss Obama's speech as empty, "boilerplate" rhetoric, as Krugman did later in his column (see the full column here: Krugman's Jan. 22 column) is to diminish the power and purpose of the speech. I disagree with Krugman's assertion that this crisis was brought on by Wall Street's reckless actions. The financial industry may have been buying up mortgage-backed securities of uncertain values, but the industry wasn't forcing consumers to run up huge debts, get into mortgages we couldn't afford and spend like there was no tomorrow.
Let's not diminish the role that the financial industry had in this current crisis, but let's not make them the sole scapegoat either.

-- Jacob Geiger

This is the starting place for a blog about the economy, written by students at Washington and Lee University who are enrolled in a class during the winter of 2009 called "Reporting on the Economy."  Watch this space!