Monday, April 6, 2009

A New Dow Index

Up here in Vermont we have for years dealt with the daily vagaries of the local economy, but now the national and global economic crisis is creating a whole new correlative for us. We watch the jobs report, housing starts, GDP, consumer confidence, and all the rest of the so called indicators that the government or private industry publishes. The indices let us know how bad things are, or if things may be getting better. For our food loving friends there is also the Big Mac Index, most likely a better barometer for the value of things world wide.

This morning as I take out the trash--mostly paper, cat food containers, and other recyclables (owning a restaurant disallows us from normal garbage) the bag slips from the trash barrel and I notice something new. My wife has taken pieces of duct-tape and wrapped it around the barrel to secure the gentle disintegration of its sides. No big deal, but as the day unfolds I find duct-tape appearing in places it has never appeared before—a sock drawer, a pair of gardening clogs, a chair leg handsomely covered by a slipcover, a computer bag, my ski boots—and on the list goes to even the computer itself.

Then it dawns on me that I’ve discovered a perfect financial index, one so simple yet more indicative of the current malaise than all the logarithms the complex financial universe has to offer: The Vermont Duct-tape Index or VDI as its acronym asserts.

A simple measure of the number of feet or yards of duct tape used a year ago is subtracted from the amount currently used. This figure is divided into last year’s figure. If the indicator approaches 20% there is trouble in the household--and the world. Though it is a lagging indicator, it is also a desperation indicator, which mirrors the psychology of the consumer as well as their financial condition, due to it’s attachment to the idea that duct tape is a last ditch effort that may transcend logic.

As the use of this index prevails, it may even penetrate the big leagues when it moves from VDI to DOW: Duct-tape Overtakes World.

A call to our local hardware store provides further indication of the tape’s measure of successful indexing. Sales have increased by a whopping 18% over last year. We assume figures for 2009 over 2008 will be more astounding. We know for a fact from the Duck Tape Club that in 2005, 873 million yards of Duck® Tape alone was sold. We await figures for 2008 & 2009. Only time will tell if Countrywide’s canard will prevail globally and spur the rise of real Duck® Tape stocks!