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financial crisis

The first time I heard about the Lipstick Index was from a Mary Kay rep: I learned from her that the three recession-proof products are lipsticks, alcohol, and cigarettes. It is not difficult to understand why alcohol and cigarettes are recession-proof: if you are addicted to something, you are going to get your drink on, in good times or hard times. (The same can be said of drugs and “purchased sex”, then? I imagine a flat line across the chart for these addictions?)

Above is the Daily Chart from The Economist on January 23, 2009, comparing national GDP to lipstick sales from 1989 to 2007.

The term Lipstick Index was coined by Leonard Lauder, the chairman of Estée Lauder, in 2001 during the recession. Lipstick sales in the US jumped by 11% in the 3rd quarter, (and more excitingly for the would-be theorists, the sales increased 25% for cosmetics during the Depression). The common theory states that lipsticks is a relatively inexpensive luxury for women with tighter purse strings. But statistics shown here does not show an obvious trend to prove this theory.

In my view, there will always be people who can purchase luxury goods when the rest of us are forced to “eat cake”. The retail anecdotes for this past Christmas season tells an interesting story: when stores were saddled with unsold inventories, 3 (relatively) big-ticket items were hot hot hot, couldn’t keep them on the shelves: Nintendo Wii, Uggs Boots, and Amazon’s Kindle.

Go figure!

Now if anyone could explain to me the attractions of those Uggs Boots…

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Or is it?

From NPR:

“In 1979, Chrysler avoided collapse by getting $1.5 billion in loans from the government. Charles Hyde, professor of history at Wayne State University and author of Riding the Roller Coaster: A History of the Chrysler Corporation, says in return Congress insisted that the company come up with some $2 billion in cost-savings and concessions.”

I mean, is it a cliche if history DID repeat itself?

Or maybe not, since it seems that at the last bailout of Chrysler, the Gov. actually came out ahead (to the tune of $500 million). How about this time? People have changed in the last 3 decades. 30 years ago people did not grow up with such a sense of entitlement, corporate greed was not openly a norm, and personal responsibilities were taught and valued.

Fast forward to today. Ok, fine, Tuesday. The Big 3 Automakers’ CEOs flew on their own private jets, not ONE, but THREE, to Washington today to make the case for their needing to be rescued. Seriously? You can’t make this stuff up.

Here is more of this priceless gem from ABC:

“The CEOs of the big three automakers flew to the nation’s capital yesterday in private luxurious jets to make their case to Washington that the auto industry is running out of cash and needs $25 billion in taxpayer money to avoid bankruptcy.

The CEOs of GM, Ford and Chrysler may have told Congress that they will likely go out of business without a bailout yet that has not stopped them from traveling in style, not even First Class is good enough.

All three CEOs – Rick Wagoner of GM, Alan Mulally of Ford, and Robert Nardelli of Chrysler – exercised their perks Tuesday by flying in corporate jets to DC. Wagoner flew in GM’s $36 million luxury aircraft to tell members of Congress that the company is burning through cash, asking for $10-12 billion for GM alone.”

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Ok, I didn’t come up with such a clever title, of course not. The venerable Tom Paxton changed his old song “I am Changing My Name to Chrysler” to fit the current climate. Some things just never change, do they?

Watch Paxton sing this catchy song on YouTube:

Lyrics to the song, in case you feel like a sing-along at your Christmas Party where you serve pea soup and Spam this year.

I AM CHANGING MY NAME TO FANNIE MAE By Tom Paxton

Everybody and his uncle is in debt,
And the bankers and the brokers are upset.
Goldman Sachs’s, Merrill Lynch’s
Saw themselves as lead-pipe cinches,
Now they’ve landed in the biggest screw-up yet.
Lehman Brothers and Bear Stearns and all their kind
Have turned out to be the blind leading the blind.
They are clearly the nit-wittest
In survival of the fittest––
Let me modestly say what I have in mind

Chorus:
I am changing my name to Fannie Mae;
I am changing it to AIG.On this bail-out I am betting;
Just a piece of what they’re getting,
Would be perfectly acceptable to me.
I am changing my name to Freddie Mac;
I am leaving for that great receiving line.
I’ll be waiting when they hand out
Seven hundred million grand out––
That’s when I’ll get mine.
Since the first amphibian crawled out of the slime,
We’ve been struggling in an unrelenting climb.
We were hardly up and walking
Before money started talking
And it said that failure was the only crime.
If you really screwed things up, then you were through;
Now––surprise!––there is a different point of view.
All that crazy rooty-tootin’
And that golden parachutin’
Means that someone’s making millions––just not you! (to chorus)

©2008 Pax Music, ASCAP

(Credit to my venerable co-worker for alerting me to this song)

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