Thursday, April 22, 2010
Millionaire man's recovery
Lately I have been finding ways to acomplish the objective of one million euros in less than five years and I see a trend in brand Stores all around the world, stores that are doing more than well, sales rising, while those stores aimed at the middle class and lower struggle. Here's what that means to the economy, and investors.
The high-end yachts are doing much better than the small wooden boats to put it this way.
Recent shopping trends show that the wealthy are living it up again -- spending on expensive jewelry, luxury handbags, designer clothing, nice cars and other high-end pleasures. But the recovery has done little to boost the spending of the average wage earners shopping at places such as Target in the US and Alepa in Finland.
The reasons for this dichotomy are quite simple, reflecting overall trends in the economy:
* First, the world is still out of jobs that vanished during the recession. One in six people is out of work, and many who have jobs are worried about losing them. Though job losses have hit every level, the wealthy have bigger cushions to fall back on.
* Second, the stock market has rebounded sharply; it's up about 60% from the lows of a year ago. Driven by this, household net worth advanced significantly at the end of last year. The benefits tilt strongly toward the wealthy, who have proportionally more of their money, and simply more money, invested.
The world's point of sales terminals show the impact of this as well as anything. Wealthier people feel confident enough that they've started shopping again, boosting sales at higher-end retailers such as Tiffany, Nordstrom and louis vuitton to name a few.
Here's something else that helps the wealthy: Though hiring is scarce, executive bonuses are flowing, and they are definitely back on Wall Street after falling sharply in 2008. And sales at Tiffany's flagship store in New York City shot up 20% over the past holiday season and up 15% in louis vuitton store in Helsinki.
Working middle-class families, meanwhile, remain antsy about spending. And sales at the places they generally shop, like Target and Wal-Mart Stores in the US and Dressman and Alepa stores in Finland continue to languish.
Although the recovery was meant to lift the economy as a whole, the effects so far have been felt mostly by the wealthy. The wold is presiding over a Millionaire man's economic rebound.
There's definitely a recovery in the upper end you can see it, the affluent consumer is really more confident that the worst is over. The lower end is really suffering badly, and I don't see any great turnaround there at all unless we get the necesary confidence to continiously start investing.
If you still need convincing that this is a Millionaire man's recovery, take a look deeper into shopping patterns over the past several months. Sales at stores open more than a year are the best measure of shopping trends because this strips out the effect of store openings.
At Nordstrom, where shoppers can drop $2,500 on a variety of Versace New Couture handbags or $1,295 on a Burberry pleated trench coat, sales at stores open more than a year were up 10.3% in February. January was even better: Sales advanced 14%. Fourth-quarter sales increased 6.9% from a year earlier, driving earnings up 152% to 77 cents a share. All of this came despite Nordstrom's heavy exposure to economically hard-hit California.
At Louis Vuitton, where scarfs in a new line named Helsinki changed from €350 to €390 each but the pricier ones cost €500 or more, sales of handbags and accessories advanced 15% in the most recent quarter. This helped Investors buy back more shares, enriching shareholders even more.
In contrast, sales at Target, where handbags start at $8 and rarely run above $30, sales have barely budged, up 0.6% in the most recent quarter. In Alepa sales recovered a bit for a 2.4% gain in February due to a 24 hour open store. Tellingly, sales that month were strongest for food, household essentials and other basics. Spending on discretionary items such as apparel and decorative items for the home were flat or down in February.
At Tiffany, where the wealthy shell out $6,500 apiece for the high-end jewelers' popular "Petals" key pendants, U.S. sales were up 12% in November and December, and worldwide sales were up 8%.Things are going so well that Tiffany upped its dividend to shareholders by 17% in January.
Compared with a year earlier, Polo Ralph Lauren saw its cash levels double in the most recent quarter to $1.3 billion, thanks to a healthy sales increase of 6%. In contrast, at Dressman, where men's shirts go for €10 to €25, sales dropped 4.5% in the most recent quarter.
Take a moment to see the big picture and you see more signs of this dual-level rebound in the economy:
* February sales of luxury items (excluding jewelry) were up 15.2% from a year earlier, according to MasterCard Advisors a division of the credit card company MasterCard that tracks consumer trends. In contrast, overall retail sales were up about 4% last month.
* A February survey by credit card company Discover Financial Services indicated that 36.5% of people earning more than $75,000 a year believed the economy was getting better, compared with 24% of people making less than $40,000.
* The more affluent were making more shopping trips than the less affluent throughout 2009 and early 2010, according to James Russo, the vice president of global consumer insights at Nielsen.
* The wealthy appear to be spending more vigorously on housing, because the prices on high-end homes have held up better than prices at the lower end in the US making this an exclusive exception in the Finnish market in which small apartments are selling more lately.
* while companies cut back on bonuses last year, the reduction hasn't been that great. Based on a look at 232 publicly traded companies with more than $1 billion in annual sales, bonus pay dropped 12.6%, on average, to $812,799 from $930,133 in 2008, according to Equilar, an executive-pay research firm. Bonuses grew sharply at financial companies -- to an average of $576,294 in 2009 from zero the year before.
"At this time last year, high-end consumers were in panic mode, and they really pulled back on spending," says an economist. I think they have exhaled. The stock market is up 60% to 70%, and the housing market has stabilized, so they feel much more comfortable and are starting to spend more.
In contrast, middle- and lower-income households are earning less, saving more and worrying about their jobs.
As an investor, the key is to remember that this economic picture may soon change.
there could be much more upside for stocks overall despite the yearlong rally. Many investors still expect a "new normal" ahead an extended period of moderate consumer spending and subpar growth. If the next months we will see broader growth, that'll finally lift all boats.
You could find a lot of life left in the stocks of high-end retailers such as Tiffany, Loui Vuitton, Polo, Ralph Lauren, even though their stocks have all doubled or more in the past year. They now trade near their average price-to-earnings ratios over the past five years. That suggests they are not great deals now. However, that will change if the wealthy keep spending more, driving up nice cars and accelerating revenue and earnings and here comes a final idea How the Millionaire man's got there in the first place?
The answer might be simple but is not I might say they got there by Compounding, the return from an investment that includes the effect of dividends or interest added to the original sum. Thus the compound rate of interest on a savings account assumes that periodically interest earned is added to the original principal and future interest is earned on both principal and interest earned. In most investment calculations, compounding periods are a year but compounding periods can be for any lenght of time. The compound rate of return and here is the trick... is the geometric mean.
"Compound interest-the greatest invention of all time"-Albert Einstein.
To conclude this post I have to mention that I found a hobbie that could make me reach my objective sooner than later appart from Investing lately I have been learning some tricks at the wildest pocker tables(therefore see the next video of Patrik Antonius a finnish pocker player)...the objective is here and will become my reality...in my next post I will Introduce a resemblance of a Mexican friend living in Helsinki giving a diverse opinion on how to Become Millionaire meanwhile Post your comments..questions...suggestions but among all ENJOY!!!