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Warren Buffett


Chanel 2.55 vs. Warren Buffett – An Update

One of the more popular posts is one where I compared the prices of Chanel’s iconic 2.55 bag vs. the stock prices of various securities. At the time, I was faced with what I considered monstrously high price for a new Chanel bag vs. what I’d previously paid in 2002, and was wondering how the prices of the bag had risen over time. Had it outperformed the general stock market? Should I have followed my instincts back in college and used all my savings to stockpile classic Chanel bags at their $1k price tag, like Elaine and the Sponge on Seinfeld?

Okay, sorry about that – I am a shameless Seinfeld quoter. But anyway, since that post in 2010, a lot has happened in a year – mainly, the US has had a slow, turtle like “recovery” (well that’s debatable) and Chanel has decided to raise prices, yet again. So I decided to do an update for you all…and added in Goldman Sachs as a security as well (just a little shout out to all the women in finance who read this blog….apparently there’s a lot of you!)

Without further ado, an update to my 2.55 vs. Warren Buffet chart – please see below for notes and details:

This chart assumes a $1k investment made in each security as of the beginning of 2004 (Google IPO’d later in ’04), and charts the performance thereafter based on retail price. The conclusions are pretty similar to what I showed in 2010 – the only stock that outperformed Chanel bag prices was Google, and gold by a slim margin. Warren Buffet’s Class A wasn’t even close.
My original conclusions from last year:
  • Chanel has been insatiably greedy over the past few years, riding the luxury wave to the mass market (highly likely)
  • 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 think those two points above still probably ring true. I’d like to add a a few more of my own conclusions here.

First is the fact that luxury cannot continue at this pace forever. Sorry, no. Β China, the biggest area of growth of luxury firms, is doing fantastic (and high five to my comrades) but its growth will slow and more domestic players will enter. These luxury companies that have so far had the basic China strategy of, “Be a foreign firm. Enter Chinese market. Sell whatever we want and price at whatever we want,” will face stiffer domestic competition and resistance to these price hikes. Well…I really hope so, anyway.

Second is of course that luxury and fashion items are in my opinion, not an investment. They are highly illiquid and you can’t live in them, or put them in your Roth IRAs. When the bad Terminators arrive and the machines take over, we will not be patting ourselves on the back, having invested smartly in Cartier Love bracelets. Ultimately, you should choose what to dangle over your shoulder, or drape over your shoulders, not by if you think you’ll make a profit, but by what speaks to you and is hopefully, affordable to you. Beauty and luxury have their own personal price tag…and in the end it’s up to you to figure out what that price is πŸ™‚

So go forth, shop, and enjoy…but stay educated, friends! Actually I have just heard that Chanel will be raising prices again soon – maybe I need to be doing a revision of this every year. I would love to hear comments and feedback on this topic…and of course, have a fabulous weekend!


The Chanel 2.55 vs. Warren Buffett

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…