If you’ve ever watched the 1960s classic comedy sitcom “Green Acres,” you know that Lisa Douglas (played by Eva Gabor) had a taste for the high life.
She’s adorned with diamonds and an expensive dress as she looks out over New York City and sings the line from the show’s theme song, “I just adore a penthouse view.”
And in real life, all three Gabor sisters showed a love for luxury.
Few of us indulge as extravagantly as the Gabors, but recently more of us are indulging in luxury of some kind.
“Luxury consumption…shows manic psychology bordering on new high ground. The Merrill Lynch Luxury Index has carried to within 2% of its October 31, 2007 peak.”
The chart speaks for itself:
As you might imagine, the Merrill Lynch Luxury Index tracks stocks associated with the “high life.” Luxury goods and services sectors include cars, jewelry, wine, high fashion, travel, and financial services.
So what happened to the “Great Recession?” Has the economy suddenly “turned around?” Can you even have a “turn around” when housing prices are still in decline and unemployment is still high?
So what can explain the increased demand for luxury items? Look no further than the stock market rally — which is a direct reflection of the psychology mentioned in the quote above. As the chart above shows, a mania for luxury was also strong in 2007.
Here’s what the August 2007 Elliott Wave Financial Forecast reported (two months before the Dow’s all time high):
“…a key corollary to the speculative fevers for tulip bulbs in 1637 and stocks in 1929 was a furious demand for extravagant luxuries….
“The boom in luxury goods is no secret. But the latest surge carries extravagance to the outer limits of human imagination. Consider, for instance, the Maltese Falcon, a sailboat that Time magazine describes as the ‘largest, most self-indulgent ever made…splurging by the wealthy has risen to gaudy proportions as the super rich seek new heights in pampering, price tags and one-of-a-kind items that set them apart.’
“’There’s this insatiable appetite for the most luxurious,” said the chairman of a luxury leasing firm. There are many signs that the latest binge is a final blow-off in luxury spending.'”
You might ask yourself if the present demand for luxuries is trying to tell us something about the economy and market.
by Elliott Wave International: Love of Luxury: When Have We Seen This Before? | Elliott Wave International