In a world where even the best and most highly skilled investment Tigers (Tiger and Tiger PE and many others) have lost their ability to make sense from market signals, it’s time to look at fashion signals again. As we shall see, fashion is proving to earn its stripes and outperforming every other inflation hedge.
Some may remember that fashion helped me predict the financial crisis of 2007. At that time, the Chinese clothing factories were belting out products at an incredible rate, and clothing stores in Britain’s high streets were receiving unlimited funding from Icelandic banks. This led to several predictable outcomes. Fashion shops lost all their inventory management skills and concerns, leading them to stock up on increasingly loudly patterned clothing (Pucci prints were ubiquitous). The louder patterns were an effort by the Chinese manufacturers to attract the marginal additional buyer, which a plain white shirt could not do. High Street fashion started to cost £5 an item which seemed enticingly cheap, but it could not survive a single wash or more than a single night out because the patterns were so loud and you could not wear it again without everybody noticing. So, people started spending £5 multiple times per day which actually amounted to more than they could afford. The fashion and apparel market imploded. When the whirlwind ended, people went back to Zara for a plain white shirt and a plain black skirt because now they needed to keep their job.
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Fashion may seem ridiculous, ethereal, and unreliable to many in the markets. After all, most of the people on trading floors or in asset management are hard-nosed quantitative rationalists who don’t care much about fashion. But, fashion is art and artists detect trends before everybody else.
In 1964, Marshall MacLuhan wrote, “I think of art, at its most significant, as a DEW line, a Distant Early Warning system that can always be relied on to tell the old culture what is beginning to happen to it.” He quoted the famed poet, Ezra Pound, saying, “The power of the arts to anticipate future social and technological developments, by a generation and more, has long been recognized. In this century, Ezra Pound called the artist “the antennae of the race”. Art as radar acts as ‘an early alarm system,” as it were, enabling us to discover social and psychic targets in lots of time to prepare to cope with them. This concept of the arts as prophetic contrasts with the popular idea of them as mere self-expression. If an art is an ‘early warning system,’ to use the phrase from World War II, when radar was new, art has the utmost relevance….”
Today fashion is giving off a load of significant signals.
A Russian Winter is bearing down on the West, now that Russia has elevated the price of energy and commodities and limited access to them no matter what the price. How did the uber-supermodel Gigi Hadid know far enough in advance to launch a knitwear line just as the customer base needs sweaters? That’s an artist for you. What matters is that fashion made with yarn is “in”. Gigi’s new fashion brand, “Guest in Residence” is centered on funky “Skater Grunge with Schoolgirl Prep” knits. Vogue also says that crochet is all the rage, especially hand-knitted Granny Hats! Vanity Fair agrees. But even Zelensky’s wife turned to a knit for the incredibly ill-conceived photo shoot she and her otherwise heroic husband recently did for Vogue. But, sadly, she chose to wear a black turtleneck, the one fashion knit that is in poor regard. Steve Jobs turned the Issey Mikaye black turtleneck into an iconic statement. It meant, “I am too spectrum and too busy with important things to spare a moment of thought for what I wear”. This would have worked forever except for Elizabeth Holmes. Her aping of Jobs destroyed the black turtleneck for both men and women. No one, not even Zelensky’s wife, can wear it now and still be taken seriously. But, Bela Hadid, Gigi’s equally famous sister, recently spoofed the black turtleneck by appearing in one with one arm in a sleeve and the other out over puddle pants. Issey Miyake, who just passed away, would no doubt be delighted.
Puddle pants? Yes, trousers that are just a little bit too long and which puddle on the floor. At a time when everybody is tightening the belt but needs more warmth, this frivolous excess has real meaning. It says, “I can afford to wear the fabric down” and “I’m going to be warm".” Puddle Pants are about excess fabric and shadow Dior’s wanton use of reams of fabric in the aftermath of WWII. The cost of heating and pump prices are already frightening people into a “Don’t Pay/Can’t Pay” campaign in the UK. The energy war is converting from a superpower fight between Russia and the West into a civil conflict between citizens and their governments.
If you think fashion and war don’t go together, think again. Already elected officials have gone quiet after suggesting that the solution to the Russian winter is to don more sweaters. It will be interesting to see if sweater-wearing politicians will be allowed onto the floor of the Commons to vote this winter. Last winter, a British MP was thrown out of the commons for wearing a sweater, which was considered “inappropriate” for the hallowed chamber. There may be other reasons to throw sweaters out of Parliaments. One is the introduction of “acoustic fibers” into sweaters and clothing. Yes, your sweater can now listen to you. “Elastomeric cladding that concentrates the mechanical stress in a piezocomposite layer with a high piezoelectric charge coefficient” can now pick up on your conversations. One writer mused about the various tricky scenarios that may arise from this new fashion tech including kids tracking their parents’ movements to stop parties/chuck out illegal substances before they arrive back home. Your clothing IS the new wiretap. Instead of threads on Twitter unethical investors might turn to threads on Twitter personalities. Argyle socks as the new source of a trading tip? Check out the US Government’s announcement that they are now actively looking for such smart apparel. You might even want your t-shirt to listen to your heartbeat and alert you to an impending heart attack. But, there is little doubt that surreptitious data-gathering via textiles brings a whole new meaning to dirty laundry.
Meanwhile, the demand for ever-more militaristic fashion seems unstoppable. Ukrainian seamstresses have shifted their attention to military wear “sewing cloth vests to fit body armor plates.” Russian fashion Czarinas no longer rule the front rows in the West and they are no longer buying fur, due to the sanctions. But, Russian fashion designers are linking up with designers, shows and markets in other places, according to Forbes, such as Milan and Mexico City. Russian fashion is echoing Putin’s newly announced intention to expand Russia’s navy by building bases far from home in places like the Mediterranean and Latin America.
The Washington Post goes further regarding the fashion tech trend and argues, “Slowly but surely, robots will wind up in our clothes”. Fashion is also embracing "tactile electronics". Consider Yoga pants from Wearablex that emit vibrations to improve your posture. Remember “The Wrong Trousers,” from Wallace and Gromit? Well now you can buy “The Right Trousers.” They are medical devices that The Washington Post writes, are “embedded with electrical pumps to force air into tiny tubes that expand and can help elderly or disabled people with issues like getting up or improving blood circulation.” Textile fibers themselves are becoming robotic too either as batteries or as artificial muscles woven into the fabric. The NBA is already measuring pressure loads via sensors in clothing to prevent injuries.
Tech isn’t fashion yet, but it will be. The public preoccupation with ESG and climate change means that the appetite for fast, disposable fashion is falling faster than hemlines (floor-length Maxi skirts are back in!). People are clocking that apparel production apparently produces 20 percent of global wastewater and something like 10% percent of greenhouse gas emissions, according to the UN. This is where tech comes in handy. Sustainability requires data. CIO writes, “To create the circular, sustainable, profitable fashion industry that is desired and required, companies will need the ability to oversee and track the status of all materials and products as they travel within their supply chains. Data is the key to this solution.”
The big tech firms get this. Microsoft just filed an interesting new patent for “Smart fabric that recognizes objects and touch input.” Apple has just filed for a new patent as well, for a "Fabric Sensing Device". So, this business of clothes tracking what’s in your pockets, how you move and where you are is coming. I watch the news unfold that Facebook provided the chat messages between the mother and daughter that are now being used by law enforcement to charge both because the mother was assisting her daughter with an abortion procedure. Going forward, it will be your jeans and jacket that may testify against you. I suspect that it will soon it will become fashionable to figure out how to manage all this tracking by creating a Bill of Digital Human Rights.
Meanwhile, The Refinery describes the autumn fashion trends as having “a subversive attitude” and ‘offering a refreshingly rebellious take on closet staples”, “with gritty, punk undertones” and “the official induction of the catsuit as a fearless approach to all-in-one dressing”.
Finally, since investors and market observers want a bottom line and not just a hemline, take note that fashion is proving to be a better investment than almost any other asset class, according to Credit Suisse and Deloitte. Chanel bags were up 24.5% in 2021, and the classic Chanel Flap Bags also outperformed the S&P by a mile, coming in at up 15.5% through 2021 (with very low vol of 2.5%-5% annually). Birkin bags are completely outrunning inflation too, though by a bit less. Despite all the bad news out there, Hermes just came in with record profits and record margins of 42%. Of course, fashion itself is starting to feel inflation pressure. Even the famed Anna Wintour’s staff at Conde Nast are striking for higher pay. Inflation is very real. But, go find a property or a TIP that gives you that kind of inflation hedge! Vintage or exclusive watches won’t get you there either. Their prices have collapsed under the weight of crypto magnates being forced to sell real assets to make up for their virtual (but very real) losses.
Fashionistas are earning their stripes better than the market Tigers mentioned above. They might want to take a look at fashion signals. Send me any you find on Twitter at @DrPippaM!
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Of course the top .5% will flourish….for a while. Winter is coming for them too.
Oh please no, not maxi skirts again! I have an unreasonable dislike of that particular trend, along with low-waisted jeans which are also threatening to come back. Punk and subversive though, I can get behind that. Another trend I see with Gen Y in particular is thrifting w/self-modifications to thrifted finds.