Luxury industry crisis to deepen in U.S.
The 150 years prison conviction of BERNARD MADOFF, who pulled off the largest financial fraud in the world, through its ponzi scheme has dominated headlines in media all over the world. While Madoff apologized in court, many of its victims will never be able to recover financially. From celebrities to middle class people, Madoff’s clients lost from life savings to properties, some in the court house in Manhattan saying they are now living on food stamps. VANITY FAIR has been one of the publications to cover the Madoff story extensively, since the very beginning. In its July issue, Vanity Fair questions how his sons can claim to have known nothing of its father’s doings, especially since they both had worked for their father all their career. All those in and outside court including those interviewed on television were in disbelief of how state authorities including SEC and FBI could not catch this USD 65 billion fraud in time, especially since it spanned across such a large number of people.
Recently, another fraud has surfaced, this time initiated by a banker, STANFORD, who based its investments in the Caribbean. Although much smaller in financial damages, this latest discovery only adds to the outrage of the general public over how state authorities could shut an eye for so many years on such frauds.
We believe, the effects of these frauds will go beyond the people it affected directly, and have a major impact on the entire luxury industry, especially the US market in the coming 12 months. This will only deepen the current crisis of the US luxury market, which has been dramatically affected by the current international crisis. Vanity Fair was one of the first publications to avert over the crush of the 2 top American resort destinations, favoured by the wealthiest: PALM SPRINGS and HAMPTONS. The magazine reports in its July 2009 issue the price of Hamptons properties has almost halved in the past 5 months, with many top properties now on the market. SOTHEBY’s Real Estate which is the leading real estate broker in the Hamptons reports a 60% drop in rentals. Hamptons has been, alongside Martha’s Vineyard, the favourite social playground for the wealthiest Americans for decades and it remains to be seen how the resort towns will be able to survive this severe crisis.
That is why, we believe, the luxury market in the US will continue to be deeply affected especially the auto, fine jewellery and watches as well as hospitality. People buy less and pay less for their once compulsory lifestyle. All these ‘’victims’’ will travel less and spend less on luxury products, therefore having a direct effect on the worldwide luxury market, already deeply affected in Japan, Russia and Western Europe. These effects will be seen in the next 10 months, with slowing sales at top luxury brands, such as Hermes, Harry Winston, Van Cleef Arpels, Cartier, Bvlgari etc
In a black humorous note, Vanity Fair published in its latest issue a comparison of how the financial frauds have changed the lives of many wealthy Americans.
Bonding technique with son:
- before crisis: financing his film
- during crisis: taking him to a movie
- before crisis: American Express Centurion
- during crisis: Price Chopper AdvantEdge (supermarket card)
- before crisis: owning restaurants
- during crisis: eating in restaurants
Wife’s must have bag:
- before crisis: HERMES Birkin
- during crisis: re-usable Trader Joe’s tote (plastic or canvas)