“The rich, at long last, are spending again,” Cramer said during Thursday’s Mad Money.
The Mad Money saw a host of signs that the wealthiest Americans are regaining their confidence, not the least of which was Wednesday night’s better-than-expected Sotheby’s auction, which sold $181.7 million in Impressionist and modern art. But there are other indications, too, that the rich are shaking off what’s been about two years of reduced spending.
The earnings of high-end retailers tell a similar story. Whole Foods , Williams-Sonoma , Tiffany , Coach , Saks and Polo Ralph Lauren all sell wares that are easily had for better prices at discounters like Safeway , TJX Cos. and Ross Stores . But that didn’t stop these top-tier outlets from reporting, in the very least, stabilization in October same-store sales, if not better-than-expected numbers.
This is important because a recovery is just as much about psychology as it in the macro and micro economies. And with the country’s highest tax brackets turning spendthrift, those below get permission to do the same.
“Everyone else gets aspirational again,” Cramer said, “and the malls are jammed with shoppers.”
So how do you trade it? Cramer recommended Darden Restaurants and American Express .
Darden should see increased traffic in its Red Lobsters and Olive Gardens, as families use their extra dough to dine out. They might even upgrade to the company’s posh Capital Grille locations. Either way, Cramer called this stock “too cheap” at its present level of $32.78, down 20% from its high.
Then there’s American Express, “the preferred credit card of the rich,” as Cramer called it. On its most recent conference call, AXP’s management talked up its “premium customer base,” pointed to stabilized spending and predicted the possibility of spending growth this quarter. When the wealthy spend money, they use American express, and that should translate directly to the share price given this renewed spree.
AXP may be at its 52-week high, but the stock’s July 2007 peak was $65.89, more than 75% than Thursday’s $37.74 close. Of the 26 analysts covering American Express, 11 rate it a hold, and five rate it a sell. Cramer expects them to “all go platinum in the coming months,” which again would boost the share price.
“Better late than never,” Cramer said of the analysts.
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