Global Investing

Facial, massage, dating… In search of recession-proof industries

Facial, massage and dating… what do they have in common?

These are the industries which seem to be recession-proof and saw improved sales and revenues in recent months.

The Professional Beauty Association says its main tracking indexes for the salon and spa industry all posted a rise in the fourth quarter of 2011, driven by stronger sales, traffic levels and a more optimistic outlook for the economy.

The Salon & Spa Performance Index, which is the main index of the three, is a quarterly composite index that tracks the health and outlook of the U.S. salon/spa industry.  It rose  1% from the third quarter of 2011 to stand at 102.9 in the fourth quarter. A base level measurement of 100 is used, with values above considered positive.

The survey also showed 61% of salon/spa owners expect higher retail sales as compared to 7% that expect a decline.

“The salon and spa industry remains resilient. As with the broader economy, it is encouraging to see positive growth and expansion as indicated by the Salon & Spa Performance Index,” says Steve Sleeper, Executive Director of the Professional Beauty Association.

Correlations between downturn and long salon queues

Who said cosmetics are recession-proof and would be the last to be hit in the economic downturn? (I, at least, thought so.)

But whoever said so seems to be wrong. The Professional Beauty Association‘s three main tracking indices for the salon and spa industry extended a decline in the third quarter of 2011 to hit their lowest level in two years. 

The Salon & Spa Performance Index (SSPI) is a quarterly composite index that tracks the health and outlook of the U.S. salon and spa industry. It fell 1% from the second quarter to 101.9, posting the second consecutive quarterly decline.

from Anooja Debnath:

When it comes to recessions, 40 is the new 50

If it were about age, 40-somethings would cringe. But it seems a dead certainty that 40 now means 50 -- or even higher -- when it comes to predicting the chances of a recession taking place.

Going by past Reuters polls of economists, every time the probability hits 40 percent, the recession's already started or is perilously close to doing so.

After the brief recovery period from the Great Recession, Reuters once again started surveying economists several months ago on the chances of developed economies stumbling back into the muck.

from MacroScope:

Emerging markets: Soft patch or recession?

Could the dreaded R word come back to haunt the developing world? A study by Goldman Sachs shows how differently financial markets and surveys are assessing the possibility of a recession in emerging markets.
One part of the Goldman study comprising survey-based leading indicators saw the probability of recession as very low across central and eastern Europe, Middle East and Africa. These give a picture of where each economy currently stands in the cycle. This model found risks to be highest in Turkey and South Africa, with a 38-40 percent possibility of recession in these countries.
On the other hand, financial markets, which have sold off sharply over the past month, signalled a more pessimistic outcome. Goldman says these indicators forecast a 67 percent probability of recession in the Czech Republic and 58 percent in Israel, followed by Poland and Turkey. Unlike the survey, financial data were more positive on South Africa than the others, seeing a relatively low 32 percent recession risk.
Goldman analysts say the recession probabilities signalled by the survey-based indicator jell with its own forecasts of a soft patch followed by a broad sustained recovery for CEEMEA economies.
"The slowdown signalled by the financial indicators appears to go beyond the ‘soft patch’ that we are currently forecasting," Goldman says, adding: "The key question now is whether or not the market has gone too far in pricing in a more serious economic downturn."

Avoid financial meltdown – use a thesaurus

So it’s not just investors who are guilty of moving in a herd-like fashion.

Financial journalists use the same verbs and nouns with greater frequency as stock markets overheat but display more variety in their phraseology after the bubble bursts, a study by Irish computer scientists has shown.

Trawling through nearly 18,000 on-line news articles that mention the Dow Jones, FTSE and Nikkei stock indices between 2006 and 2010, Aaron Gerow of Trinity College Dublin and Mark Keane of University College Dublin found that the language used by the writers had become more similar in the run-up to the global financial crisis.

from David Gaffen:

5 Questionable Arguments Against the Double-Dip

Don’t tell George Costanza, but double dipping is all the rage these days. The possibility of the U.S. slipping back into recession after a brief period of growth is a hot topic of late – and while such an occurrence is unlikely, pundits are feverishly declaring that it can’t and won’t happen. 

Here are some of their reasons, some of which appear to strain credulity:  Double-dips are “rare.” Simon Hobbs of CNBC is a vigorous promoter of this idea, but let’s face it, the last 15 years of financial-market history is a veritable compendium things that no one expected to happen – LTCM, the financial panic, Lehman Brothers. Rare means nothing. The stock market hasn’t dropped enough. Ah yes, the stock market, that stellar indicator of the economy’s future, such as in October 2007, when it hit an all-time high, two months before the onset of the worst recession since the Great Depression. Next. The yield curve hasn’t flattened enough. This indicator comes with a bit more in the way of history, as a flattened/inverted yield curve has been a reliable indicator of economic weakness ahead. But the Federal Reserve is anchoring the short end of the curve to the ground with its zero interest rate policy. It complicates the curve’s predictive value – something Goldman Sachs noted in a morning commentary. “External shocks” are responsible for the declines in economic activity, such as that in Europe. Similar shocks were enough to spark recessions in the 1930s, 1970s, and in 2008. Everything’s connected now, remember? Corporate profits are strong. As they were all the way through the beginning of 2007, once again, before the most recent eruption.  

A recent Reuters poll put the odds of a double-dip recession at about 15 percent. Gluskin Sheff’s bearish strategist David Rosenberg puts it around 50-50, and Jim Bianco of Bianco Research also put that kind of odds on it. It may not happen – but when a lot of people are trying to convince you that something’s not going to happen, it can make you believe that it’s more likely than not.

Back to the dance floor

It was Chuck Prince, former CEO of Citigroup, who famously said on July 9, 2007: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still standing.”

PARAGUAY/

Little did he know the music did nearly stop for Citi with its shares tumbling to less than $2 in 2009 from $55 in 2007.

A year later, worldwide reflation from huge liquidity injection and stimulus packages helped the global economy from collapsing.  The music may have started. The question is, should investors return to the dance floor?

from Funds Hub:

And if it were a W?

 

The Dow Jones Industrial Average has recouped more than 50 percent of the losses from the October 2007 peak and the March 2009 bottom.

 

It’s been a remarkable rally, and the cheerleaders of the world’s major economies say it indicates a return of confidence to markets.

 

Woolworths was one of the first casualties of the downturnThey say the world’s market rallies are based on galloping improvements in economic fundamentals, and this just eight months after many of them were predicting the end of the world as we know it.

from MacroScope:

UK heading for second downturn?

MacroScope is pleased to post the following from guest blogger Julian Chillingworth. Chillingworth is chief investment officer of UK investor Rathbones. He questions here whether Britain will face a second downturn shortly after struggling out of recession.

Are we likely to witness a two-tier recession in the UK?  Perhaps not a recession but certainly a secondary downturn. A vast number of people have enjoyed lower mortgage payments and a level of job security, but will this last?

The UK is in somewhat of a unique position in so far as it faces a regime change, with some obvious ramifications for policy.  However, whoever takes the seat (most likely the Tories) must still cut back public expenditure and raise taxation, both within the context of high unemployment.

Real-estate investors go back to schools

The old adage – there is no better time to go back to school than during a recession – seems to ring true for real estate investments as well.******With recession-wary workers and rising international interest driving up university applications, student home operators in the UK are enjoying near 100 percent occupancies, with rents predicted to go up 10 percent this year.******In contrast, other property classes in the UK such as offices, shopping malls and factories have seen values plunge a startling 45 percent since mid-2007. And the recession means rents are forecast to fall as much as 15 percent this year as landlords face the rising threat of tenant defaults.******As I wrote earlier, investors such as pension funds that were burnt by traditional commercial assets are now turning to the student accommodation market for the projected growth and steady returns other parts of the market aren’t delivering.******

Students pack up their dorm room after graduating from university in the city of Xian, Shaanxi Province July 3, 2004. REUTERS/China Photos WC/FA******Student homes specialists King Sturge estimates that average rents jumped 7 to 10 percent annually in the last five years and can go up 10 percent this year, although it sees the yearly increase moderating to 5-7 percent for the next few years with new entrants to the market.******Branded student housing can be very pricey and the best stuff are a far cry from crowded, slum-like dorms that some of the world’s students have to put up with: high-end versions in London that offer en-suite bathrooms, flat-screen TVs and laundry services cost up to 300 pounds a week.******With the belt-tightening that comes with a recession, parents may groan about the higher costs of student housing for their university-bound offspring.******But operators expect there will be those who are still willing stump up the cash, if only to ensure their children make it for classes.******”First year students usually can’t find housemates to rent with, and there is no guarantee the flat will be near to school,” says Gabriel Behr of the University Partnerships Programme, a student homes operator owned by funds under Barclays Private Equity, which is developing over 700 new rooms for King’s College London.******”Are parents willing to stick their kids somewhere five miles away from class?” he asked me.