E-motions: Vol. No. 1, Issue No. 28 Brought to you by California News Tech (OTC BB: CNTE)

By: Tai Nicolopoulos E-Motions Writer 06/13/2006

Go for Luxury Goods when Investors Worry that Only the Super-Rich are Getting Richer

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1. Emotions in Focus: Investors Put their Faith in the Top Tax Bracket

    Many investors want to know where to put their money when negative sentiment hits the Street. While there are many solutions to this problem, one in particular addresses the recent spate of news stories about the rich getting richer and the poor getting poorer in America.

    In particular, debates in the Senate about abolishing the estate tax, have sparked discussion in the media about the benefits the super-rich receive, to the detriment of the rest of the country, under the current administration. There is a sense that the structure of our society is changing, and the once-comfortable middle class is shrinking. This kind of discussion can lead to concerns about the overall health of the economy, especially the retail sector. Nonetheless, certain retail stocks have been doing very well; goods and services catering to the aspiring, as well as the truly, rich. With the media buzzing about an economy and tax structure that benefit the rich, companies like these make perfect sense for nervous investors on the Street. Not only do they fit within the category of luxury goods, but also they appeal to consumers who are looking to ease their status anxiety.

2. The Big Movers and Why

    Are you missing out on potential profits from Heads Up^TM recommendations? Last week, MediaSentiment^TM subscribers using Heads Up^TM for Thumbs Up / Thumbs Down recommendations for publicly traded companies were able to take advantage of these Big Movers, moving 15% or more in their recommended directions, after they released earnings.

Big Movers in the Spot light:

    Recently, two stocks benefited from growing concerns about the socio-economic status of many Americans. On Wednesday, May 31st, famous high-end jewelry retailer Tiffany and Co. (NYSE: TIF), went up 5.2% after releasing a positive earnings statement. The next day, Movado Group (NYSE: MOV), a producer of many lines of high-end watches, went up 23.65% after a positive earnings release. These two companies both offer luxury goods that rely on what consumer goods experts call “aspirational marketing”. These goods can range from very expensive to entry-level luxury items, but they all play upon people’s desires to not only socially elevate themselves, but also to be seen as socially elevated. In particular, Tiffany’s has long been associated with fine jewelry and luxury, but it also stocks a wide variety of jewelry items in lower price ranges. Meanwhile, Movado has a number of licensing deals with retailers with successful aspirational brands, including recent agreements with Hugo Boss, Coach and Juicy Couture.

    In reality, Tiffany has grown the most from sales in Japan and the rest of Asia, and analysts upgraded Movado because of licensing deals that have yet to show a return on investment. Likewise, buying a piece of Tiffany & Co. branded silver or a Coach Watch by Movado may feel satisfying and seem to convey status to consumers, but many of them are still losers under the current administrations economic policies.

    Nonetheless, like the investors who buy stocks with luxury goods and aspirational brands behind them, these consumers want to feel like they are ahead in the new economic climate by spending more on high-profile brand names. Whether or not buying entry-level luxury goods or stock shares will actually change their financial fates, consumers and investors alike take comfort with brands that convey affluence and stability. For these reasons, luxury goods and services will remain hedges against the increased stratification of wealth, despite how little these sectors actually reflect or influence the macroeconomic picture.

Other Big Movers:

    Thursday, June 1, 2006

    Ciena, Corp. (Nasdaq NM: CIEN), which supplies networking technology to enterprises and governments, went up 6.51% after a Thumbs Up Heads Up^TM recommendation.

    Wind River Systems, Inc. (Nasdaq NM: WIND), which produces software optimization solutions for electronic devices, went down 14.89% after a Thumbs Down Heads Up^TM recommendation.

    Friday, June 2, 2006

    Baker’s Footwear Group, Inc. (Nasdaq NM: BKRS), which manufactures shoes and accessories targeted at young women in the US, went down 15.32% after a Thumbs Down Heads Up^TM recommendation.

    All figures reflect all MediaSentiment Heads Up^TM recommendations between Monday, May 29, 2006 and Friday, June 2, 2006, rating companies on the day of their quarterly earnings releases correlated with their stock highs and lows for the subsequent day.

3. How to Use the News

    Like in the case of many kinds of bad news, when the media buzz suggests that a large part of the economy, an industry, society, or any other entity is in trouble, look for who benefits. In the case bad news for the struggling middle class, looking to consumer goods, like Movado and Tiffany’s, and other products perceived to be aimed at the wealthy is a sensible strategy. More generally, you can get an idea of how to hedge your investments by determining what kinds of fears exist about the current market. Products and services that either play on people’s fears, alleviate their financial concerns, or in this case, cater to their status anxiety, are likely to be good bets.

4. Links you can use

The Real Story: Movado Just Keeps on Ticking
Senate Debates Controversial Abolition of Inheritance Tax
Foolish Forecast Through Tiffany's Window

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