Speaker 1: There was a study published in 2020 that analysed Los Angeles County's records of unclaimed deaths. It found a significant relationship between economic hardship and the rates of unclaimed bodies. That between 1976 and 2013, high unemployment at the county level was strongly correlated with fewer family members collecting their deceased relatives. And if you graph the unclaimed body rates with US recessions, there's also a connection. Despite the limited dataset, it's an interesting insight into a more widely known phenomenon called the Unclaimed Corpse Index, an unofficial economic indicator that suggests dead bodies can be used to predict stock market crashes. It sent me down a rabbit hole where I found all kinds of bizarre recession predictors, from lipstick to exotic dances, and even mosquito bites. As well as one indicator that's never been wrong, and it's saying that, in 2024, we're on the cusp of the next recession. But first, let's go back to the morgue. The Wayne County Morgue in Detroit, to be specific. In 2009, CNN reported that the number of unclaimed bodies at the morgue was at a record high, tripling since 2000. Albert Samuels, the chief investigator, said he's never seen anything like it in his 13 years on the job. That some people don't come forward even though they know their people are there. One Detroit couple had visited Wayne County to identify their aunt, but didn't have the $695 needed to cremate her. This report was done during the second year of the global financial crisis, which brought with it the worst stock market crash in almost a century. The correlation between the rate of unclaimed bodies and stock market crashes works because it's essentially just a slice of the broader correlation between consumer spending and economic downturns. Recessions can be caused by a wide array of things, but they all result in a meaningful and persistent decline in spending. Businesses make less money and lay off workers to cut costs, and when a higher number of people are unemployed, they have even less money to spend. Consumer spending can be split into two categories, essential spending and discretionary spending. Renting a home, paying your electricity bill, and putting food on the table are all essential expenditures. Okay, eating food like that isn't essential, but you get what I mean. But we also spend a lot of money on things we don't actually need if push came to shove. So it's in that discretionary category that we can find some pretty bizarre indicators that the economy is in the early stages of a downturn. What if there was a group of people who are better trend forecasters than anyone in the

Speaker 2: finance industry? Now, this news is not something that people in the stripping industry can grind their way out of. The economy has drastically impacted their business.

Speaker 1: Funnily enough, sex workers might actually be pretty good at predicting a downturn in the economy. I figured the best way to find out would be to take my camera and microphone down to my local club. Just kidding. In May of 2022, a stripper who goes on Twitter by a username I'm not going to read out loud, tweeted, the strip club is sadly a leading indicator and I can promise y'all we're in a recession. The post was made in May of 2022. And at the time, there was still significant debate about whether the US was actually going to go into recession. Well, just three months later, and the data revealed that GDP had declined for a second quarter in a row, which is the definition of a technical recession. And this isn't just a once-off story. It's so common that it's been dubbed the stripper index. It's the concept of using stripper cash tips as an indicator of the state of the economy. Not only is adult entertainment spending definitely a discretionary expense, it's usually one of the first ones to go when there is an economic downturn. Urban Institute's analysis of the sex work industry found that five of the seven cities in their study saw revenue declines from 2003 to 2007, years in advance of the market crash, which started at the end of 2007. 66.7% of sex workers receive cash tips. So when their tips start declining, it's extremely noticeable. As strippers, we always have to be aware of fluctuations in the market and how upper-class white men are behaving and spending their money. Unfortunately, the stripper index is basically just anecdotal. The only publicly traded strip club company we could look at would be RCI Holdings. Their revenue fell 26.8% in the 2020 recession, but COVID restrictions were likely the main reason for it. But what about today? Is anyone sounding the alarm about a recession in the near future? Well, an article published at the end of last year quoted one Vegas dancer who said her income was down by half in December year over year, and had heard similar stories from other dancers in Vegas, saying, if Vegas girls aren't making money, no one's making money. When looking into recession indicators, I fully expected there to be some clues in the ways we cut money that could indicate that an economic recession is around the corner. But what I didn't expect to find was that there's actually one product that we buy more of when times are tough. This is Leonard Lauder, the son of Joseph and Este Lauder. His parents started producing skin lotion in the 1940s, and grew the company into one of the biggest cosmetic empires in the world. And as the chairman of the company in 2001, Leonard noticed a rather unusual pattern in the sales of their products. During periods of recession, the sales of most products declined, but there was one category that actually increased. Lipstick. At the time, the most recent recession had been in 1990, and sure enough, lipstick sales had risen noticeably. The Wall Street Journal reported Leonard's findings on the 26th of November 2001. This of course was very shortly after the tragic events of September 11, and there was a lot of speculation around whether the US was going to go into recession. Leonard believed a recession was coming because his lipstick index which tracked the sales across Este Lauder brands had gone up since the terrorist attacks. And it wasn't just their company, MAC lipstick sales were up 12% in three weeks, and Borghese Cosmetics had also seen a 12% rise since mid-September when compared to the previous year. But the most shocking part of this story published by the Wall Street Journal was that literally the next day, the US was officially declared to be in recession. The determination was made by the National Bureau of Economic Research, which isn't a government agency, it's just a non-profit organisation, but its tally of US recessions is recognised by the Bureau of Economic Analysis. Leonard Lauder's explanation for this was that when women needed to cut back on their luxury purchases, they tended to just spend more on smaller things like lipstick. When lipstick sales go up, people don't want to buy dresses. But while certainly credited for coming up with the lipstick index, Leonard Lauder's index doesn't always work. A few years later, in the 2008 recession, sales of lipstick contracted with the economy, dropping 6% in a year, and even worse for lip gloss, market research firm NPD reported they fell 14%. An indicator that did work in the 2008 recession is by far the weirdest one that I came across. Mosquitoes. The collapse of the US housing market triggered a global financial crisis worse than anything since the Great Depression. It was of course predicted by a few diligent investors like Michael Burry, who looked at mortgages being sold by the banks and found that anyone with a pulse could borrow hundreds of thousands of dollars. Even if you weren't human.

Speaker 2: I'm looking for a Harvey Humpsey. You want my landlord's dog?

Speaker 1: Your landlord filled out his mortgage application using his dog's name? But all of that analysis could have been avoided if they'd just looked at the mosquitoes. In 2009, Maricopa County Environmental Services Department saw a 60% jump in the number of pools being treated for insects in just two years. The increase likely indicates two clues. One that there were lots of empty homes just sitting there degrading away. And two, owners were getting their pools treated because they were preparing their homes to be sold. The award for the saddest indicator goes to the First Date Index. In the fourth quarter of 2008, Match.com said it had its best period in seven years as an increase in loneliness and anxiety leads to more online dating. Okay, I know, these last few indicators are ridiculous and pointless. I just thought they'd be fun to include. But what's not ridiculous is the last indicator that I'm going to talk about. This graph has predicted every recession since 1976. And when I say predicted, I mean predicted. Like one to two years in advance every time. It works every time because it shows how investor behavior actually induces recessions in cycles like clockwork every five to eight years. It's called the 10-2 bond spread. There's a little bit of explaining that I need to do, but I promise it's worth understanding, especially given what it's showing today. A bond is an asset that pays a fixed payment, called a coupon, over a specified period. If you take the annual coupon and divide it by the price of the bond, you get the bond's yield, which is how much the investor would earn as a percentage of their upfront investment. And since the coupon payment is fixed, changes in the bond's yield are caused by changes in the bond's price. Higher price means a lower yield, and vice versa. The 10-2 bond spread focuses on two specific types of treasury bonds. Ones maturing in two years, and ones maturing in ten years. When the US government needs to borrow money, they issue and sell these bonds, as well as ones of all different lengths, as short as one month, and up to 30 years. The 10-2 spread simply takes the yield of the 10-year government bond, and subtracts the yield of the 2-year bond. So we can track the difference in yield every day going back to 1976. And as you can see, most of the time the spread is positive, meaning the yield on the 10-year bond is higher than the yield on the 2-year bond. The most widely understood reason is something called the liquidity premium theory, which basically says that there's a risk associated with having your money locked away for longer, and so you demand or you earn a higher yield to compensate for that risk. But occasionally the spread briefly goes negative, meaning the 2-year bond is offering a higher yield than the 10-year bond. Remember, both of these bonds are government bonds, so the only difference to you as an investor is how long your money is locked away. And so you might find it kind of irrational that during some periods of time, people are willing to lock their money away for longer, and accept a lower yield at the same time. What's fascinating is that the grey bars on the chart reflect periods of economic recession. There hasn't been a US recession that's occurred without the 10-2 spread first going negative, and there hasn't been a negative 10-2 spread that wasn't quickly followed by a recession. Both the 10- and 2-year bond yields tend to move in the same direction, but a negative spread can occur when the yield on the 2-year bond is rising faster than the 10-year bond. Or just to put it more simply, bond yields across all different lengths of bonds are rising, but the longer bonds are rising slower because more people are wanting to lock their money away for longer. Which they do if they believe an economic slowdown is coming. But it's not just that the 10-2 spread shows investor expectations, it's also a self-fulfilling prophecy. A higher yield on short-term bonds means a higher return for the investor, but on the other side, it means a higher interest payment for the borrower. Broadly, this means less profits for companies, and less money being invested in growth. And every time since 1976, that's produced a recession. Today, the 10-2 spread is negative. The 10-year yield dipped under the 2-year bond yield about 2 years ago. The most important part to understand from an investor perspective is that you can't really use this in your investing process because every time, the time frame has been different. And so you can't really use this as a way to sell your stocks and then buy back in after the market crashes. If you had sold your shares when the spread went negative in 2022, you would have missed out on about a 30% return plus dividends. But regardless, it'll certainly be fascinating to watch the 10-2 spread and the economy over the next year or so to see if it once again has predicted a recession. If you enjoyed the video, consider hitting the subscribe button and check out one of these videos next. Thanks for watching. Have a great day.