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The Chanel 2.55 vs. Warren Buffett

image via Bagsnob

So there’s been a ton posted, advertised and written already about the Chanel 2.55 flap bag- the medium/large classic flap that typically comes in caviar and lambskin leathers. Chanel manufacturers the bag every year- it’s a true classic.

I bought my first caviar flap in 2002- it was one of my first designer bags and was a little over $1k from the NYC Madison Ave store, which was a hugely princely sum at the time. I put it on a chair next to my bed and looked at it before I went to sleep. Don’t ask why.

Now it’s almost a decade later and as I hadn’t visited my friend Chanel in a while, decided to pop into a local boutique a take a look at some of their new offerings, including my old friend the caviar 2.55. And the price nearly bowled me over -$3400 (and this before California’s egregious 9.5% sales tax?) That is more than triple what I bought it for!

Β Since my first purchase in 2002 though, I’ve spent some timeΒ  working in finance, and know that the prices of goods rise over time, naturally of course – so I thought, could that be the culprit? To find out, I decided to plot the price of the 2.55 Chanel against some very well known stocks to see if price increases were in line with the performance of some of the US’s most famous companies:

– Chanel 2.55 Caviar Medium/Large flap vs:

  • – Ford
  • – Berkshire Hathaway (Class A)
  • – Google
  • – Dow Jones Industrial Average (DJIA)

I used the selling price for each of these as of January 1st of each year, with the exception of Google, which didn’t IPO until mid 2004. I mapped out the % return each year, and then for graphical purposes displayed the rise in each entity’s price given a $1000 investment (if this doesn’t give you an idea of the dark side of my nerdy social life, then…)

The following is the result —


Shocking eh?? Until 2009 the 2.55 flap was far outperforming them all, and only Google managed to eke out a relative advantage. The 2.55’s price has increased far more than Warren Buffet has been able to return to his investors in the same period. A quick caveat here that the prices are as of January 1st of each year and there has been some improvement in the stock market through 2010/2011.

Now of course I know this isn’t a fair comparison – the 2.55 market isn’t nearly as liquid as the stock market, and a used bag doesn’t exactly garner retail price. Still, I think the findings are interesting – one might make the following conclusions, but feel free to make your own:

  1. Chanel has been insatiably greedy over the past few years, riding the luxury wave to the mass market (highly likely)
  2. If you were deciding between a 2.55 and Ford stock in 2004,Β  pat yourself on the back
  3. If you want to buy a 2.55 now, you can either view it as buying at an unjustifiably high price, and perhaps hope that another 8 years from now the price will have tripled again (to a healthy $10,200). I might recommend the former, but I would have thought the same thing in 2004, and was vastly wrong.

Remember, past performance is no indicator of future return…!