The Hindu Business Line : Long and Short: ‘Thud’ as an economic indicator

In business schools, you always have a couple of courses in economics that are supposed to give you the basic tools needed to make some insightful observations on the markets and interest rates and such like. And, then, distil this learning into a set of simple axioms that will accompany you till your death.

By the time the courses are done you emerge with a set of firm beliefs: Inflation up? Fed must increase interest rates! Interest rates down? Flight of capital! Close those borders now! Rupee getting weaker vis-À-vis the dollar? (Tough to imagine. I know. But try.) Exports go up. IT companies begin to measure recruitment targets in thousands.

If you’ve begun to forget some of these ever dependable relationships just switch on one of those business channels after the markets close and listen carefully to those analysis segments.

Anchor One: “Housing growth is slowing down…”

Anchor Two: “Of course. That’s because interest rates are going up!”

Anchor One: “Which is good for corporate bond markets of course.”

Anchor Two: “And a liquid bond market is good for corporate borrowings and therefore for Industrial growth…”

Anchor One: “Which increases employment of course… and spending…”

Anchor Two: “Which could increase inflation…”

Anchor One: “Are you saying that interest rates will go up to counter that?”

Anchor Two: “That could slow housing no?”

And so on and so forth. (That TV Anchor exchange I’ve put up there should help most people clear their economics courses with moderate dignity. Don’t forget to use terms like Malthusian, Keynesian etc. liberally.)

But what if I said that there were cooler ways of saying how an economy was doing. Of course, some of you know this already. The milkman has a mobile phone. The cable guy has more channels. You can’t afford a flat in Jodhpur anymore.

All that mostly means that the economic is growing rapidly and your salary is beginning to stand for less and less everyday.

Some might remember the Steven ‘Bo’ Keeley phenomenon. The American veterinarian spent months every year travelling around the world, especially in South-East Asia, trying to find out ‘low level indicators’ of economic growth.

For instance, he looked at the length of discarded cigarette butts and the cleanliness of brothels to figure out which economies were beginning to boom. Abandoned construction sites meant that there was an underlying problem with the markets. Many of his learnings became popular axioms.

“Don’t use a broker whose office plants have died.”

All of his meticulous observations and reports went into the vaults of maverick Wall Street wizard, Victor Niederhoffer. Who then used it to determine where he would invest.

Personal indicator

And, now, today morning, much like Bo Keeley, I may have stumbled upon my own personal ‘low level indicator’. I like to call it the early morning ‘media thud’.

The dull thud that emanates when the newspaper walah drops his bundle at my door.

Last year, I am pretty sure I could hear only when I stood in the kitchen, adjacent to the front door, doing something quiet like stirring coffee. Today, the thud is comfortably audible from across the hallway.Indian newspapers are definitely getting bigger.

At home, we have the regulation daily white newspaper, the flamboyant orange one so that the world knows there are MBAs in the house, and a morning tabloid which is really the only paper we read. ‘Flash news: Aish may or may not be pregnant! The truth revealed!’

A la Bo Keeley I would like to think that the morning thud is a strong indicator of economic growth. Perhaps, it means that newspapers are making more money. More ads. More companies wanting to sell things. Because people are getting richer. Therefore, journalists are getting paid more. Ad infinitum.

It all fits in this elegant theory of mine, don’t you think?

But think twice before investing based on my strategies. Niederhoffer entered Thailand in 1997 two months before the currency crashed. He lost only 90 per cent of everything. Have you been noticing any unique trends, social or otherwise, that could point towards the state of the economy? Tell us about it.

(The author, an alumnus of IIM-A, was a management consultant before quitting to work as a freelance writer, author and general handyman. He blogs at www.whatay.com)

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