by admin | Apr 27, 2015 | Uncategorized
Looks like it’s not going to be such a hot holiday season for liquor companies, casinos, and prostitutes – at least according to the latest reading of the “Vice Index.” The index – a concoction from SouthBay Research’s Andrew Zatlin measures actual spending levels – yes, on vices – and uses the numbers to show where the economy is headed. As opposed to Tuesday’s chipper report on the services sector from the ISM, the vice index’s September sounding came in at 104, its lowest level since February’s 96. That means, Mr. Zatlin said, that not only will spending drop from levels earlier this year, but it’s going to stay that way into the first-quarter. The index, he says, is highly correlated to official readings on consumer spending, with one caveat – the vice index predicts consumer spending four months out. “It’s signalling that consumer spending growth is about to drop and stay subdued for a few months,” he wrote in a note to clients. “Not contracting, but well below expectations.” The index measures spending on things like prostitution, liquor sales, and gambling; it measures prices paid, the volume and frequency of sales (Mr. Zatlin doesn’t disclose exactly how he tracks these). Measuring this kind of discretionary spending, he says, provides a window into the true state of the economy. What this means specifically for holiday sales isn’t exactly clear, Mr. Zatlin said. Vice spending tends to be more spur of the moment. “I don’t think people spending on vices think that far into the future,” he told MoneyBeat. But it certainly doesn’t point to a robust holiday season. On...
by admin | Apr 27, 2015 | Uncategorized
The US economy is facing payback today for the 2009-10 scramble to jump-start the economy. And there is now an urgent need to create demand, says SouthBay’s Andrew Zatlin. “Putting aside dogmatic discussions about the nature of recessions, the reality in 2009 was that supply chain inventory levels were too high,” argues, Andrew Zatlin, founder of Silicon Valley-based economic research analysts, SouthBay Research. He points to movements over the last fifteen years in both the Manufacturers Durable Goods Inventory-to-New-Orders and Wholesale Inventory-to-Sales as evidence of these overly high supply chain inventory levels. Zatlin says the Fed’s extremely loose monetary policies helped Wall Street and households to improve their balance sheets, pointing to thirty-year lows in household debit service as a percentage of total discretionary income, and personal consumption expenditures. In addition, fiscal stimulus came in the form of the 2008 Economic Stimulus Act. “Besides other treats (like raising depreciation limits and equipment spending caps), the most important part of the Act was to accelerate depreciation by 50 per cent — buy today and immediately get to write off 50 per cent,” says Zatlin. But the 2008 stimulus wasn’t enough. So 2009 brought the American Recovery and Reinvestment Act of 2009, repeating the 2008 accelerated depreciation measure and adding $787 billion in spending. “The impact was immediate,” says Zatlin. “Manufacturing immediately turned around. As did Business CAPEX spending.” The 50 per cent depreciation was extended again in 2010 with the Small Business Jobs and Credit Act of 2010 — “That’s three years in which businesses enjoyed unprecedented incentives to replace factory equipment,” says Zatlin. But that was then, this is...
by admin | Apr 27, 2015 | Uncategorized
A sex worker talks to a man outside a hotel in the Geylang red light district in Singapore, February 8, 2013. Everyone has their little indulgences. For some, it’s their morning Starbucks fix or a $2000 handbag. For others, it’s hookers and blackjack.And it’s the latter that are most representative of consumer spending in the US economy, according to Andrew Zatlin of South Bay Research. Zatlin’s one-man research consultancy based out of California, whose highly accurate, data-driven methods of forecasting jobs numbers have earned the title of ‘The Moneyball of Economics’ by the Wall Street Journal. One of South Bay’s products is the Vice Index, which according to Zatlin has an almost 90% statistical correlation with personal consumer spending and leads it by 4 months. The index measures spending on gambling and escorts, which, according to Zatlin, is a highly sensitive barometer for the ‘wealth effect’, or how rich we’re feeling at any given time. Zatlin’s data for the index goes back 15 years and South Bay has been calculating the index for the last 2 years. And this year, the index has shown a steady downward trend. “We were seeing it even before the government shutdown, and it’s continued to trend downward recently,” said Zatlin to Business Insider,”In Q1 of this year, we saw prices of escorts rose 15% at the high end but not at the middle or low end, which proved that the top 1% was doing fine, but not everyone else. This was contrary to the media’s narrative of a “booming” economy.” Zatlin would not disclose his sources and methodology for computing escort services pricing....
