Are you counting on your investments making you rich one day? Let folks who already are in the top tax bracket help you get there, too.
It was created by Tobias Levkovich, Citigroup’s chief United States equity strategist, who believes that profits and share prices of luxury goods makers, higher-end retailers and travel and entertainment companies should hold up even if businesses serving them suffer from difficult economic conditions.
The reasoning, according to a story on the Living Large Index (let's call it the LLI) in today's New York Times, is that "people with an abundance of disposable income are inclined to keep disposing of it while the rest of us are forced to keep our thinner wallets in our pockets."
Among the LLI stocks are American Express, Tiffany, Saks, Nordstrom, Coach, Royal Caribbean Cruises, Callaway Golf and Wynn Resorts.
A vote from vice: Charles L. Norton thinks the LLI is, at least theoretically, a good idea. "Usually in a recession, people at the lower end of the food chain are hurt most and so those catering to the luxury end tend to be relatively insulated," he said.
Norton knows a thing or two about atypical investing. He's manager of the Vice Fund (blogged about here), which invests in companies specializing in tobacco, gambling and alcohol.
Counting on wealthy wannabes: The one potential problem the index might face, some advisers tell the Times, is that much of the LLI product purchases are by so-called aspirational buyers, folks who hope to be really rich one day (like me, when I buy the occasional Coach handbag; #5 on this list), but who are not yet there. That means the stocks could face problems if aspiration turns to desperation in a wider economic downturn.
The truly affluent, on the other hand, never have to worry about their spending, even when times are tough.
Or, as one adviser put it: "As a result of gains on Wall Street and a reduction of the top tax rate, the rich are getting richer. They are going to continue to be able to afford luxuries."