Kapur has tagged the concept of the global split between the rich and the rest as "Plutonomy". The rich are buying luxury goods and services, and the stocks of these companies are available to the rest of us. In fact, Kapur gives us a list of 24.

He published his report on the Plutonomy Machine on Oct-16, 2005, and followed up March 5, 2006. His thesis is that the rich will continue getting richer.

Download Plutonomy 1

Download Plutonomy 2

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He writes:

"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."

"The top 1% of households in the U.S., (about 1 million households) accounted for about 20% of overall U.S. income in 2000, slightly smaller than the share of income of the bottom 60% of households put together. That's about 1 million households compared with 60 million households, both with similar slices of the income pie! Clearly, the analysis of the top 1% of U.S. households is paramount. The usual analysis of the "average" U.S. consumer is flawed from the start. To continue with the U.S., the top 1% of households also account for 33% of net worth, greater than the bottom 90% of households put together. It gets better (or worse, depending on your political stripe) - the top 1% of households account for 40% of financial net worth, more than the bottom 95% of households put together."

"Since consumption accounts for 65 pct of the world economy, and consumer staples and discretionary sectors for 19.8 pct of the MSCI AC World Index, understanding how the plutonomy impacts consumption is key for equity market participants."

"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 drivers of plutonomy in the U.S. (the UK and Canada) are likely to strengthen, entrenching and buttressing plutonomy where it exists. The six drivers of the current plutonomy: 1) an ongoing technology/biotechnology revolution, 2) capitalist-friendly
governments and tax regimes, 3) globalization that re-arranges global supply chains with mobile well-capitalized elites and immigrants, 4) greater financial complexity and innovation, 5) the rule of law, and 6) patent protection are all well ensconced in the U.S., the UK, and Canada.

They are also gaining strength in the emerging world. Eastern Europe is embracing many of these attributes, as are China, India, and Russia. Even Continental Europe may succumb and be seduced by these drivers of plutonomy."

"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."

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This is an impressive piece of work, but I take issue with a few points. For one, demand from the rich is not elastic. In fact, a lot of the demand " corporate jets, yachts, third and fourth homes and the like " comes mostly from corporations owned by the People's capital but managed by the "rich". The demand exists as long as the Little People permit it.

And in many notable cases this year and last, the People have stood together to put a stop to it. Authorities like Eliot Spitzer have stepped in to charge these people with theft. Not just in the U.S., but abroad in countries like Korea and Japan.

Once while taking public transit I met a man who I knew was a senior executive for the some of the Gnomes in Canada. I inquired why, which perhaps impolite, but I knew the man fairly well. He retorted: "I'm damned not prepared to pay the unconscionable parking rates". I was actually surprised he did not have a limo and driver.

Lord Thomson, one of the world's wealthiest persons and certainly a Gnome, who sadly passed away quite recently " working at his desk - often took the same public transit system on his way from home to office.

I can only wonder what Citigroup's Kapur would have thought if Lord Thomson had died on the downtown subway train he often took to the office.

Apart from the lack of common sense in many cases, deflation is another risk of the rich. But should deflation grow into depression, then it is the rich who are able to first borrow from banks and others to buy up assets for pennies on the dollar.

Taxation seems not to be much of a risk to the rich these days because of all the loopholes in legislation planted by their lobbyists and money-grubbing legislators. Besides they can plan to move their assets into offshore trusts like Canada's most recent ex-Prime Minister Paul Martin, whose assets are protected in a Barbados from almost all taxation.

And the bankers to the rich are the names " hundreds of them " in the offshore tax havens, where presumably the Little People are not a similar welcome sight of the authorities in the high tax jurisdictions. Oh, that will change; trust me.

But the Citigroup/Kapur report is a good one. The concepts are well thought out. The portfolio list of 24 companies/stocks and the write-up is worthy of your consideration.

Yes, the rich are getting richer. And if the income is earned by legitimate means, I have no trouble with that. My beef, as you know, is not with wealth creation or capital ownership, but with securities laws, rules and regulations masquerading as protectors of the Little People.

That is such a crock, it is downright laughable.

Rather than delve into the Kapur Plutonomy 24, most of which are listed in Europe or Asia, I listed the six major ones that are listed on the major U.S. (and Canadian) exchanges. When you are feeling low and a little window shopping can perk you up, you might look at this list " buy-sell-and-profit even. :-)

Interactive charts:
COH, FS, RL, BID, TIF, TOL

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GICS 25 Coach, Inc (COH) (COH) Financial Data
GICS 25 Four Seasons Hotels (FS) (FS) Financial Data
GICS 25 Polo Ralph Laren (RL) (RL) Financial Data
GICS 25 Sothebys (BID) (BID) Financial Data
GICS 25 Tiffanys (TIF) (TIF) Financial Data
GICS 25 Toll Brothers, Inc. (TOL) (TOL) Financial Data

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