Concerns in the Luxury Market?

The Business Insider has a good article from an Australian money manager who has been watching the luxury market.  Because so much of the luxury market growth has been driven by China, any slowdown there would have a sobering effect on the luxury market in general.

The BI reports

The slowdown in Hong Kong (super) luxury goods is a faster decline than other Chinese data. Why so fast?

I have a theory given to me by a China watcher. The theory - it turned bad sharply with the ouster of Bo Xilai and now the murder charge on his wife Gu Kailai. Gu Kailai is going to have a hard time avoiding a mobile execution unit. This changes the stakes and it is structural. A half million dollar watch no longer says "look at me". It says "look at me, I am a kleptocrat". Thoughts of that beautiful Van Cleef and Arpels hair clip become the last thing that runs through your brain before the bullet.

The optimists - and there are many - think the super luxury good market in China will return when the political situation stabilizes. To quote Bernard Fornas in that WSJ article:
"When you talk to the people over there, they are all waiting for a new president to come in. That will fuel the economy with fresh money and lower interest rates."
But who said the new kleptocracy will love Rococo just as much as the old kleptocracy? Maybe party self-preservation will require less ostentatious displays of wealth. After all ostentatiously showing off wealth to an oppressed billion people does not seem like a way to preserve your power.
We know what a completely collapsed luxury good market looks like. Brazilians like a bit of bling. But in the late 1980s and into the 1990s the kidnapping rate in Brazil went skyward. (There is an horrific documentary about that called Manda Bala which translates "send a bullet".) After kidnapping became a major industry (particularly in São Paulo) carrying a $3000 handbag no longer said "look at me", it said "kidnap me".

A collapsed luxury good market in China may - if the Gu Kailai case is a guide - look different. Bling will mark you as an enemy of the people. This is a company about imagery - it sells a dream. Here is the nightmare:

Source: Business Insider