How your undies track the recession

The 'can I return this?' indicator

The amount of stuff consumers return to stores can also tell us when a rebound is in store, says William Angrick, the chief of Liquidity Services (LQDT, news, msgs).

Retailers normally don't share much information about returns, but Angrick isn't shy about it. His company buys returned items from retailers and sells them to other businesses, which put them back on the market.

Returns have spiked for pricey discretionary items -- such as high-end apparel and shoes, expensive electronics and top-of-the-line tools and grills -- just as they did during the previous recession. "It's been high since October," says Angrick. And returns aren't letting up -- as you'd expect if consumers felt recovery was on the way.

Here's another bad sign: Angrick says the number of consumers who band together to amass the larger buying power needed to purchase directly from Liquidity Services -- like the soccer moms who recently bought a bunch of Guitar Hero games and game boxes -- is not letting up either. That's a sign they're not confident enough to pay retail.

The end-of-the-month squeeze indicator

Some working people and a lot of those on government assistance get paid once a month, usually near the beginning of each month. So during recessions, buying patterns change. Wal-Mart Stores (WMT, news, msgs) has noticed that when times are hard, purchases tend to bunch up at the beginning of the month, when aid and paychecks arrive. People also buy larger packages of stuff at the start of month and smaller ones at end of month as they stretch their budgets.

These two trends have played out once again this recession, Wal-Mart spokesman John Simley says. And neither has let up, suggesting a recovery is not yet at hand.

There's no shortage of quirky indicators in the retail world, in fact. Experts also look to doughnuts and hot dogs. Sales of both rise as consumers seek cheap, comforting foods. During an earlier bout of hard times, hot dogs were sold in more than one place as "Depression sandwiches."

The nattering nabob indicator

With the number of Internet blogs soaring, market analysts now see them as an excellent gauge of public sentiment. Todd Salamone of Schaeffer's Investments Research likes to use the Web site Blogpulse.com to chart the number of references to business-related phrases like "recovery" or "Great Depression of 1930s."

When the nattering nabobs of the blogosphere are using bullish phrases like "green shoots" often, as they are now, it's a sign the public has become overly optimistic about the economy.

That may sound like good news, but it's not -- for stocks. When so many people are already bullish, there are few converts to jump in and push stocks higher. And it becomes harder for the next bit of good news to push up stocks. Widespread bullishness also leaves the markets more vulnerable to surprise bad news, Salamone says.

The recent spike in bullish sentiment is one reason Schaeffer's Investments Research has a bearish short-term outlook for stocks. It may be better to wait for a spike in the use of negative terms -- like "recession" -- in the blogosphere, to buy stocks. "Periods of ultimate despair create an opportunity for positive surprises," Salamone says. "They become buying opportunities."

The secret life of bees

The quirkiest market indicator of all may be the honeybees raised by market analyst and investor Gary Shilling. (And no, he's not a crackpot; in his newsletter Insight, he forecast much of the current financial mess.)

Shilling is an avid beekeeper in New Jersey who has noticed that when he has a poor honey crop, a bad year for the economy and stock market is in store. "Last year was second-worst year I've ever had," Shilling says.

• Video: 'Green shoots' aren't in the numbers

This year, the bees are predicting an "iffy" performance, because conditions so far don't suggest a great summer honey harvest.

Of course, Shilling isn't relying on his bees when he predicts more problems ahead. Shilling is troubled by excess housing inventory and problems in commercial-real-estate loans, credit card loans and student loans. And more layoffs will spook consumers and keep their wallets shut.

All of this means the recent strength in stocks is just a sucker's rally to be sold, Shilling believes. If he's right, the bees, the underwear and many of these other indicators are right on target.

At the time of publication, Michael Brush did not own or control shares of any company mentioned in this column.

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