investing

Celebrating big spenders

Friday, Nov. 13
Posted 4 p.m. EDT

It seems that the days of frugality among the big spenders are winding down. Mothballing the yacht and shopping your closet are just so last year. After all, what good is having it if you can't flaunt it?

Forbes' Cost of Living Extremely Well Index, or CLEWI, which tracks the price of 40 luxury items, rose 12 percent last year, and only 1 percent this year, the slowest gain since Forbes created the index 33 years ago. By many accounts, spending on luxury items is on the upswing this quarter. So perhaps we're seeing some bargain-hunting on the part of the rich, and, if we're optimistic, a bellwether for economic stimulus in 2010.

Rising sales: Sales are positive from the Ft. Lauderdale International Boat Show (in Florida), which opened Oct. 29 with $3 billion in inventory on display. Some yacht brokers said they sold more boats during the four-day show than they have in the past 12 months, and noted a positive trend in buying since July. Similarly, attendance and sales increased at the U.S. Sailboat Show in Annapolis, Md., in October.

Last Christmas, amid sales markdowns of 75 percent, Saks Fifth Avenue was predicted to be headed for the graveyard of luxury stores. But in October the store posted its first increase in retail sales in more than a year, as did Nordstrom.

"I'm looking across the street (from my office) right now, at Fashion Island, one of the most upscale shopping malls in the country," says Nicholas Yrizarry, CEO of Nicholas Yrizarry & Associates wealth management firm in Newport Beach, Calif. "There's maybe only five or six parking spaces open. People are shopping."

This month, Christie's International and Sotheby's auction results were well above estimates: $182 million for Impressionist and modern art at Sotheby's and $74.1 million in sales of post-war and contemporary art at Christie's. Though still below previous years' sales, the art world is in an upbeat mood.

And even the dismal automobile market saw a surprising upward trend in one category -- muscle cars. J.D. Power & Associates reported that sales in 2009 are up 7.2 percent, even while other segments of the industry suffered declines.

For all the talk of the rich pulling back and appreciating the merits of hearth and home, the latest data seem to tell a different story.

Spending as a catalyst: Yrizarry, who has been in the wealth management business for more than 20 years, says spending by the rich is not a reflection of economic indicators, but rather a catalyst that we should celebrate as a stimulus to the economy.

Since the recession, everyone -- including the rich -- has been standing on the sidelines, waiting to spend or invest money. "It's like a Mexican standoff," he says. But as long as people hesitate, the economy will not recover. Someone needs to fire the first shot. Generally in past cycles, that shot has come from the rich, who are quick to make decisions and unafraid of risk, Yrizarry says.

"They're not stupid. They see the bargains out there. Absolutely everything is on sale.

"Wealthy people control 80 percent of the economy," he says. "They move the buttons and switches." Not all of us can push the buttons and switches and must remain cautious with spending in this still-shaky economy, but we can rejoice in signs of a recovery.

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