"Blingdexes"

The rich not only have more money than the rest of us, they have markedly difference spending habits as well. To get a handle on the wealthiest segment of the consumer economy, Citibank created in 2005 a "Plutonomy index," composed of stocks of companies that sell to the rich. Today's Wealth Report in the Wall Street Journal reports that other companies are inventing similar indices, including Merrill Lynch, Goldman Sachs and the German stock exchange.

For spectators, the indexes offer a useful new barometer to measure the increasingly separate economy of the rich. And that economy is booming. Most of the luxury indexes have posted an average increase of at least 13% between 2001 and 2006. The Dow Jones Industrial Average, by comparison, has increased an average of 4.7% annually during the same period.

The article also reports that total assets held by the top 1% of Americans has increased by 50% since 1998, to $16.7 trillion in 2004. That is some serious spending power.

However, most spending by the rich is discretionary, so investing in the stocks of companies that cater to the rich may not be a sure thing. Remember the infamous "luxury tax" on yachts, imposed because the rich could so easily afford to pay more? They responded by not buying yachts at all, and the American boat-building industry was crushed. The tax fell on the workers and owners instead of the buyers, and it was one of those taxes with big dynamic effects and no net revenue to the government at all.

Still, as the number of millionaires grows, the consumer economy can be expected to be less homogeneous. There will always be a place for both Tiffany's and Wal-mart.