Of Banks and Beer Sales

Feb 19, 2009: 10:41 AM CST

How can we tie a post about Banks and Beer Sales together?  Nate Silver of FiveThirtyEight.com posted two thought-provoking articles I wanted to share.

First, in “Beer is No Longer Recession Proof,” Silver shows us a chart (copied below from FiveThirtyEight.com) that compares Quarterly Percent Changes in Alcohol Sales (adjusted for inflation) plotted against Real GDP.

He notes that there’s no correlation (one would think alcohol sales would rise or hold steady during economic downturns) but what he’s most interested in showing readers is the steep, almost 10% plunge in percentage change terms for the most recent 4th quarter of 2008 (stats from US Commerce Department).

Silver notes, “This is absolutely unprecedented: the largest previous drop had been just 3.7 percent, between the third and fourth quarters of 1991.”

Further, “It’s not just beer, either. Sales of jewelry and watches were off by 7.2 percent in the fourth quarter, the third-largest drop ever recorded. Casino gambling receipts are down about 8.5 percent from a year ago, far and away the largest decrease ever over four consecutive quarters.”

Take a look at the full article to see a full explanation on this ‘strange’ development.

On a related note, Nate posted his thoughts (editorial) on Banks in the article “Things I Think We Know About the Banking Crisis” in which he shares some interesting thoughts.

He shares 14 points about the Financial Crisis that span from the Stimulus Bill, Nationalization, capitalization, etc.

I wanted to call particular attention to his discussion of the “Trade-Offs” and considerations going forward from here… the solution will be a balance of:

a.  Minimizing taxpayer expenditures
b.  Minimizing time (working quickly)
c.  Minimizing Moral Hazard (of banks – not getting off easy)
d.  Minimizing Panic/Contagion (into healthy sectors)
e.  Maximizing Fairness

Of course, Silver adds a complex layer to the solution to all these by stating that Politicians will want to minimize political fall-out and so some decisions might be compromised by political expediency.

Sometimes it’s good to hear alternate perspectives which can be helpful in getting a larger picture of what’s facing us in the financial community.

Corey Rosenbloom
Afraid to Trade.com


2 Comments

2 Responses to “Of Banks and Beer Sales”

  1. ???? Says:

    Good read. I have made a twitter post about this. Hope others find it as interesting as I did.

  2. Guest Says:

    Good read. I have made a twitter post about this. Hope others find it as interesting as I did.