In a recent broadcast of Mad Money, Jim Cramer did an analysis of several retailers who cater to the affluent. One of these was Tiffany’s. Jim indicated that the company’s stock price, of course, was highly correlated with its sales and ultimately its profits. Further, he proposed that the performance of this upscale retailer is highly correlated with profits and performance of investments/financial organizations. In English this means that when Wall Street types get big bonuses they spend heavily on the products offered by Tiffany’s.
My own data suggest that marketers of investment products and services are more likely to be of the income statement variety than of the balance sheet type. When incomes are high among these marketers you are likely to find a series of newspaper articles which detail prolific consumpation habits of these marketers. Conversely, when payouts are reduced, upscale retailers worry about their future. In a recent New York Times article, Kevin Roose stated that:
. . . securities firms in New York made . . . $13.5 billion in 2011 down sharply from $27.6 billion in 2010. . . . . . . feeling the pinch of lower Wall Street pay . . . luxury goods stores . . . in New York stand to suffer.
Ah, the income statement affluent. When they encounter a significant upswing in income they are inclined to go into hyperconsumption mode. Contrast the Wall Street affluent with a different segment. Recently, farmers in this country encountered a major upswing in their incomes.
. . . net income for U.S. farmers was a record $98.1 billion in 2011 up 24% over the prior year.
What impact will this have on Tiffany’s sales? You know the answer. Most farmers are balance sheet archtypes. They tend to allocate windfall profits to capital improvements and quality stocks and bonds rather than to trophies of diamonds and silver. New silos and tractors are the status symbols in farm country. There is a:
. . . tight relationship between its [John Deere’s] stock and corn’s price per bushel. . . . When farm income is high, farmers are motivated to invest in Deere’s big green and yellow machines [tractors, etc.]. See article in The Wall Street Journal.
In Stop Acting Rich, I profiled farmers in terms of their productivity in transforming income into wealth. They rank 8th along this dimension among the top 200 high income occupational groups in America. What about their counterparts, marketers of investment services? My acid test in this context is the proportion of millionaires produced as a function of high income generators within this segment. They rank well below farmers, in between high income physicians and lawyers. But in terms of the proportion generating high incomes [$200,000 or more], they rank in the top ten.