Daily Gains Letter

Four Ways to Profit from America’s Wealthiest Citizens

By for Daily Gains Letter |

Wealthiest CitizensHalf of the U.S. workforce is partying like its 1998—and not in a good way. According to the Social Security Administration, the median wage in the U.S. in 2012 was $27,519.10, marginally better than 2011’s median wage of $26,965.43.

That said, the median wage remains virtually unchanged since 1998, when the median wage was $27,519.55 when adjusted for inflation. So actually, you made $0.40 less in 2012 than you did in 1998. But I digress.

The report shows that more than half of Americans earned less than $30,000 in 2012. Incredibly, 15% of working Americans took home less than $5,000, with an average amount of just $2,024.79. During 2012, the S&P 500 climbed 13%, illustrating that the majority of Americans are not benefiting from the so-called recovery we call the U.S. economy.

Fear not, for there is hope. Stagnant wages are not hindering everyone: the number of Americans pulling in more than $5.0 million a year in 2012 increased by 26.8% year-over-year to 8,982. In 2011, just 7,082 Americans earned more than $5.0 million.

These stratospheric numbers only take net earnings into consideration; they do not account for capital gains made on the stock market, dividend growth, etc. Whereas America’s wealthiest citizens turn to the stock market to pad their retirement savings, the majority of Americans rely on increasing property values, income vehicles, and pension funds to pave their way to retirement.

Thanks to a record run on the S&P 500 and Dow Jones Industrial Average, America’s wealthiest have been seeing their holdings increase significantly since the Great Recession ended in 2007. On the other hand, thanks to the artificially low interest rate environment, fixed income investors (the vast majority of Americans) have seen their retirement savings decimated.

What has this economic divergence done to America? The widening gap means the majority of Americans are being forced to change the way they save, spend, and invest. Those looking to add value to their retirement portfolio this holiday season might want to consider taking advantage of the spending habits of the wealthy and luxury brand stocks.

When it comes to the playgrounds of the rich and famous, few are as glittery as the New York City fall auction season. Over the next couple of weeks, deep pockets are expected to help a large number of blue-chip artists like Warhol, Giacometti, and Rothko set new records. As a result, luxury brand stock Sotheby’s, (NYSE/BID), the only publicly traded auction house, continues to be bullish and is currently up more than 50% year-to-date.

Strong luxury spending has been keeping luxury brand stock Michael Kors Holdings Limited (NYSE/KORS) on the radar. Since debuting on the NYSE in December 2011, Michael Kors’ share price has climbed roughly 220% and is up 52% year-to-date.

Investors interested in diversifying their holdings and gaining greater access to a variety of luxury brand stocks might want to consider an exchange-traded fund (ETF) with exposure to a large number of luxury brand stocks.

The SPDR S&P International Consumer Discretionary Sector (NYSEArca/IPD) is an ETF that tracks the consumer discretionary sector of developed global markets. Holdings include luxury brand stock juggernaut LVMH Moët Hennessy – Louis Vuitton SA and Swedish luxury brand stock multinational retail clothing company H & M Hennes & Mauritz AB.

A brand-new luxury brand ETF worth keeping your eye on is the Renaissance IPO ETF (NYSEArca/IPO). Tracking the Renaissance IPO Index, one of the top holdings in the index is a 9.8% position in luxury brand stock Michael Kors Holdings.

Despite an anemic U.S. and global economy, the luxury brand stock market has been incredibly resilient. And as long as the stock market and wealth creation continues unabated, the luxury brand stock sector will continue to be bullish.

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