Citigroup documents admits we're living in a Plutonomy, and seems to think it's just great.
I haven't seen this before. A friend of mine posted it on FB:
http://jdeanicite.typepad.com/files/667 ... part-1.pdf
[quote]
SUMMARY
➤ The World is dividing into two blocs - the Plutonomy and the rest. The U.S.,
UK, and Canada are the key Plutonomies - economies powered by the wealthy.
Continental Europe (ex-Italy) and Japan are in the egalitarian bloc.
➤ Equity risk premium embedded in “global imbalances” are unwarranted. In
plutonomies the rich absorb a disproportionate chunk of the economy and have
a massive impact on reported aggregate numbers like savings rates, current
account deficits, consumption levels, etc. This imbalance in inequality
expresses itself in the standard scary “ global imbalances”. We worry less.
➤ There is no “average consumer” in a Plutonomy. Consensus analyses focusing
on the “average” consumer are flawed from the start. The Plutonomy Stock
Basket outperformed MSCI AC World by 6.8% per year since 1985. Does
even better if equities beat housing. Select names: Julius Baer, Bulgari,
Richemont, Kuoni, and Toll Brothers.
..........
........ the so called “global imbalances” that worry so
many of our equity clients who may subsequently put a lower multiple on equities due to
these imbalances, is not as dangerous and hostile as one might think. Our economics
team led by Lewis Alexander researches and writes about these issues regularly and they
are the experts. But as we went about our business of finding stock ideas for our clients,
we thought it important to highlight this provocative macro thesis that emerged, and if
correct, could have major implications in terms of how equity investors assess the risk
embedded in equity markets. Sometimes kicking the tires can tell you a lot about the
car-business.
Well, here goes. Little of this note should tally with conventional thinking. Indeed,
traditional thinking is likely to have issues with most of it. We will posit that: 1) the
world is dividing into two blocs - the plutonomies, where economic growth is powered
by and largely consumed by the wealthy few, and the rest.
............
2) We project that the plutonomies (the U.S., UK, and Canada) will likely see even more
income inequality, disproportionately feeding off a further rise in the profit share in their
economies, capitalist-friendly governments, more technology-driven productivity, and
globalization.
..........
4) In a plutonomy there is no such animal as “the U.S. consumer” or “the UK
consumer”, or indeed the “Russian consumer”. There are rich consumers, few in
number, but disproportionate in the gigantic slice of income and consumption they take.
There are the rest, the “non-rich”, the multitudinous many, but only accounting for
surprisingly small bites of the national pie.
.....................
And that's just from the first couple of pages!
