Those who are rich or relatively rich in America are responsible for much of our consumption. By some estimates, the top 20% of income earners in the U.S. are responsible for more than half of all money spent.
In an effort to cash in on that elite group, one exchange-traded fund, the Claymore/Robb Report Global Luxury fund (ROB), focused in on companies that generate most of their revenue from sales of luxury goods. In hindsight, it couldn’t have come public at a worse time.
Why it seemed like a good idea
When the fund started back in mid-2007, investors’ views about America and the world were fundamentally different than they are now. Many expected the rich to keep getting richer, with new wealth being created in emerging countries that would lead to increased consumption throughout the world. If that had happened, luxury purveyors would probably have seen their top lines continuing to grow, and their stocks would likely have continued to perform well.
In particular, the fund offered a quick way to get instant diversification into dozens of companies. The stocks the ETF holds include both American and international companies, including Mercedes maker Daimler (NYSE: DAI), luxury retailers such as Coach (NYSE: COH) and Nordstrom (NYSE: JWN), and casino operator Wynn Resorts (Nasdaq: WYNN). About a quarter of its holdings are U.S.-based, with European stocks making up 60% of the fund’s portfolio.