If you were wondering, the final read on University of Michigan sentiment for July (released on Friday) was virtually unchanged from the preliminary print.
Recall that the headline reading on the country’s marquee gauge of consumer moods was predisposed lately to large revisions. Not this month.
At 66.4, the headline indicates American consumers remain generally dissatisfied, although you wouldn’t know it from still-robust spending.
Part of that ostensible disconnect (i.e., between above-consensus personal spending and subdued sentiment) might be explainable by way of the wealth effect. Consider the juxtaposition illustrated below.
So, that’s Michigan sentiment among the top tercile of stock holders versus sentiment among Americans who own no equities. As you might expect, there’s always a disparity, but it ballooned dramatically midway through 2023 and then again early this year.
As a quick reminder: The top 1% of society owns roughly 50% of all corporate equities. The bottom 50% owns 1% of the stocks. So, no stocks. The bottom 50% of American society owns basically no stocks at all, at least when expressed as a share of the total.
At the risk of irritating some of you (a risk I gleefully indulge whenever I get the chance), that ridiculous disparity in stock ownership argues for taking some of the stocks from the 1% and giving them to the bottom 50%.
At the risk of further irritating some of you, I’d not-so-gently remind readers that you’re very unlikely to be “victimized” in a redistribution scheme of that sort. Because contrary to the central thesis of the pep talk upper-middle-class America gives itself every morning in the mirror, capitalism didn’t work for you. You just think it did. Upper-middle-class is something entirely different from 1%.
You could argue there are all sorts of people for whom capitalism “worked” who aren’t 1%, or anywhere near it. But I’d call that an exercise in question-begging. What, exactly, is the goal of a capitalist? And I don’t mean the euphemistic, idealized pitch about merit, hard work and self-reliance. I mean the real goal. The real goal’s to get rich. Or, actually, wealthy. And wealthy’s 1%. At least.
Think you’re 1%? Ok, show me consistent annual income of $800,000 going back — I don’t know, let’s call it five years — and $40 million in the bank. Can’t do it? Don’t have it? Don’t feel bad. Because God knows $500,000 and $20 million (so, hugely well-off, but not 1%) affords you a pretty spectacular lifestyle. Especially if you have no children, no spouse and nothing to worry about. You might even be able to pass for 1% among real 1%ers –– right up until they go yacht shopping, at which point you’ll have to make up an excuse.
If you’re a pretend 1%er hiding among real ones, they might ask, at some point, why you’re always wearing Kering brands instead of LVMH houses. In that uncomfortable scenario, just act indignant and pretend you didn’t get your Alexander McQueen from SSENSE: “I happen to like McQueen, ok?! And Balenciaga’s awesome. I wouldn’t wear Loewe or Celine if you paid me, f-k you very much.”
Anyway, Michigan survey director Joanne Hsu offered some perfunctory color on Friday. Sentiment, she said, “remains guarded, as high prices continue to drag down attitudes, particularly for those with lower incomes.” Year-ahead inflation expectations slipped to 2.9%, and longer-term expectations were “well anchored” (to use Jerome Powell’s preferred description) at 3% for a fourth straight month. Election uncertainty, Hsu went on, “is likely to generate volatility” in consumer moods between now and November.
(Pro tip: Never wear a Kering house around real 1%ers. And never pay full price for a Kering brand.)
Thanks for the pro tip, hopefully someday I can use it
I use it. I don’t buy LVMH houses except on special occasions when I find an excuse to treat myself. The comparison’s an interesting case study in how pricing power in luxury goods depends very much on perceptions and how that can become a self-fulfilling prophecy. So, for example, you can get 30% to 50% off Kering brands (even Bottega) pretty much all year around, and in my experience, the availability of the items at discounts reduces demand for them among higher-end clients because nobody wants to wear something that someone else got for half off. That’s a doom loop: When you can’t sell it at full price, you have to discount it, but the discounts mean even less demand at full price, both because of the perception among high-end clients that people with less money might own it too and because people will simply wait, knowing the new season will go on sale eventually. So, if you look at Gucci, Balenciaga, Bottega, McQueen and even Saint Laurent, you can find it all on sale somewhere. Those are Kering houses. Celine, Louis, Dior and Loewe are very difficult to find at discounts, or at least new, from authorized stockists. I don’t even know if there are authorized stockists for Dior. If you go back and read a year’s worth of Bloomberg articles on Kering vs LVMH, you can see how this has impacted the trajectory of the companies. It really is pretty interesting.
Apropos of nothing, every time you display in-depth familiarity with luxury fashion/design brands, I feel like we’re getting some sort of tell about your private life. Not that I’m prying, just making an observation. It fits completely, it makes perfect sense to be knowledgeable about that alongside being knowledgeable about business, finance, and politics. It’s interesting only because, in my experience, the vast majority of people just don’t make that much sense. In my own life I personally know a few people who know a lot about fashion, and I know plenty of people who are astute about politics and finance, and, I think, for reasons I can’t even guess at, absolutely nobody who can knowledgeably discuss all of the above. Just an observation that happens to strike me.
BTW, I particularly appreciate your posts about finance, because that’s the area I have the most to learn, and where I have the hardest time finding pithy writers who can spell their analysis out succinctly but clearly. Thanks for this and the others of the last few days.
Wave- here is my best idea, fwiw. One of my kids is totally into this! The other two like to splurge.
https://www.reddit.com/r/fatFIRE/
Definitely not me Googling LVMH houses and Kering houses right now
Saint Mxxxxxx and Enfants Richés Deprimes if you really want to get edgy with it. I’ve been on that lately.
Haha! I did too!
Capitalism’s end game is competition until only one is left standing. As a society, we don’t debate if capitalism needs some checks on it, before it goes to it’s natural conclusion, we debate whether we should set those safety rails at one-percent, 10-percent, etc..
Most of the individuals with a voice, of significance, in that debate are from near the top of the asset/income spectrum, so we tend to disenfranchise a lot of Americans in the debate.
I would argue the survivors/leaders in any market are not in that position because they were the best competitors. They got there because they offered/did things that no one else could. They had unassailable moats the other guys only wished they had. Successful capitalists are built on the back of a sustainable competitive advantage so they never have to lower a price to sell more. Competition, contrary to popular belief, lowers profits and winnows the losers. The winners never really had to play the game at all. BTW, same with people. The folks at the top have ideas no one else does, execute them perfectly, and protect them from all comers. I once asked my wealth advisor what I would need to get the bank to pay attention to me. He said, 500k in income and NW of 25 mil would be a start but 50 mil would be better.
Amen, sir. A few years ago I lead an asset manager review for the endowment supporting a school I attended. We went to one of our alums who was a senior exec at one on the largest, most successful hedge funds. When we asked who he would recommend to do a good job with our $100 MM he said one word – “Vanguard”.
Don’t think I own anything from Kering, never mind LVMH etc…..not sure I even know what one might get for spending stupid amounts of money on consumer such baubles and beads. And I already knew I was nowhere near 1%….but my partner and I are fortunate enough to still own some stocks and bonds and real estate and more stuff than we need, including more toys than we have time to use to the extent we’d like. Maybe that puts us only within the 10%….but plenty happy. And, in early and late 60s both healthy enough to pedal and sail and slide on those toys. THAT makes us really happy consumers!
TGIF- so a couple of thoughts: I am definitely not in the top 1%, but I do own stocks and this week wasn’t fun, as I ended down for the week. Having said that, I just returned from the grocery store with one bag of groceries (no alcohol) that cost me $92- so I realize I am very fortunate.
My second thought, which I know you won’t like, H; but keep in mind- I am just having some fun making this next comment: I have absolutely no problem at all giving some of my stock to people in the lower 50%- however, I would like to decide when I give that to my children (all in the lower 50%).
Finally, I remembered reading this article that is a fun read on serious wealth, luxury brands and succession plans, which I am posting in case you want something fun to read this weekend!
https://www.nytimes.com/2023/09/14/business/bernard-arnault-lvmh-family-succession.html?smid=nytcore-ios-share&referringSource=articleShare&sgrp=c-cb
Couldn’t see most of it because of subscription wall, but in my mind I read that paragraph about the Olympics partnerships in the voice of Ned Beatty’s character from “Network”.
If you are going to fake indignation why not with Academy Sports or Walmart brands?
Ancillary to the point being made, but the 1% threshold is way lower than 40m$. 20m$ in net worth is well within the 1% range. By the BLS’ own data the 1% threshold is somewhere around 10m$. Some private banking publications model the threshold even lower to 5m$.
1% is a lot of people. By simple math 1% is over 3 million Americans. I’m sure the superyatch industry would love to have an addressable market of 3 million customers, but the industry’s yearly output is in the hundreds, worldwide.