Friday, May 21, 2021

Thoughts #24: Buy luxury!

The pandemic bubble is upon us all. QE Infinity flooded the world with liquidity with the bulk of the benefit going to the haves rather than the have-nots. Let's look at the following few charts.

LVMH share price

This is the 5 year chart for LVMH, the world's largest luxury company and it traded up swiftly after Covid19. LVMH represents the first class haves of the world. Their luxury portfolio includes, well, LVMH itself (the ubiquitous bag), Moet Hennessy (champagne), Mont Blanc (pen), Tag Heuer (watches), Tiffany (jewellery). The really aspirational coveted stuff. There are even more atas stuff like Hermes and Patek Philippe out there but they cater to super uber rich. Too niche. So, LVMH represents the haves. Hence I believe the chart above might be similar to how the wealth of the top 5-10% income earners would look like.

Tapestry share price

This is the 5 year chart for Tapestry. Tapestry used to be known as Coach. The mass luxury brand with a wider reach. It now has Kate Spade and hence the name change. Tapestry is luxury for middle income people. It did well in normal times, during 2015-2018, its share price was close to $60. Then it got hit terribly by the pandemic and the share price collapsed. Well, as things normalized, it came back. In my mind, this chart represents the middle income. We got hit but it's not so bad.

AMC share price

This third chart is the 5 year chart for AMC, the world's largest cinema chain. It wasn't really doing great because everyone is binge watching stuff on Netflix so the footfall to cinemas was already declining. Then the pandemic hit and literally nobody went any cinemas. Well they were closed anyways. So AMC fell like a rock. At rock bottom with share price $1.98, the reddit warriors who bought Gamestop decided they should support AMC too. So they cooked up a storm to squeeze short sellers (hedge funds who represented the haves and the uber rich and famous we talked about). Share price went up to $13 at its peak. Some short sellers did got hurt. But eventually, it collapsed because it's another mini bubble in the bigger scheme of bubbles from Tesla to Bitcoin. To me, this chart represents the have-nots. It is really tough. It's a one way street of dwindling wealth. It could be the biggest issue in our lifetimes - social class warfare.

Glux ETF

The stock idea here though is to buy a luxury ETF - GLUX. It has some of the top luxury traded names and it has done almost as well as LVMH (yes LVMH is also in it). The time is not right to buy now given that it is at all time high. But it is important to monitor this ticker because luxury stuff will get even more luxurious. Reddit warriors buying Gamestop and AMC would have done better buying this since their god - Elon Musk is also represented. Tesla is the largest component of GLUX. That is one risk though and the reason I haven't bought.

Let's keep monitoring and hopefully can huat on this ticker!


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