Brad’s Note: Every Friday, we share insights from the analyst team behind the scenes at Wide Moat Research. I’ve worked with these analysts for years, and they are among the best in the business.

Today, we’ll share an insight from Nick Ward, equity analyst with Intelligent Income Investor. I’ve worked with Nick for almost a decade now. He’s been with us since the beginning of Wide Moat Research and his coverage spectrum spans a variety of sectors.

As Nick shares below, the richest of the rich aren’t phased by inflationary pressures. And that means that the gap between the rich and the poor is widening.

Years ago, I worked for Jim Cramer at, writing reports about his famous Charitable Trust Portfolio.

You probably know Jim from his show Mad Money, which has been on the air for nearly 20 years. Jim is a guy that people love to hate. 

But frankly, I don’t get it. 

I never got to know him personally, but I’ve followed his work for years and while it’s true that he’s enthusiastic – bombastic, even – I think Jim’s heart is in the right place. 

And while he’s had some misses over the years (who hasn’t?), his ideas are solid. And he’s especially good at trend spotting and finding thematic investing ideas to get behind. 

One of my favorite themes that Jim loved to pound the table on was his Great Gatsby index, a group of companies that cater to the wealthiest spenders.

“The rich are not like us,” he would say.

Inflationary pressures don’t really matter to the richest of the rich. Honestly, they don’t even notice them. I can remember him barking about this portfolio on CNBC back in 2013.

Jim was spot on. And high-end luxury is an area we’re keeping a close eye on here at Wide Moat Research. And for any profit-minded investor, you should, too.

Millions of Millionaires

Brad has already been covering this theme with you in recent weeks. For instance, when covering the transformation of Las Vegas back in May:

There is no gaudy “theme,” no hokey attractions, and no neon billboards for jackpots. Gone are the knick-knacks in the hotel gift shop. Instead, high-end brands like Brioni, Hermès, and Saint Laurent are in the shopping district.


The city has transformed from “Sin City” to a world-class destination for luxury, amenities, and entertainment.

And speaking on his insights from the ICSC conference, he said:

Do you know who is very optimistic? The luxury side of retail.

Apparently, the wealthy aren’t slowing down their spending at all. So, the companies that cater to them continue to do just fine.

I spoke with Don Wood, CEO of Federal Realty Investment Trust (FRT). As the head of a shopping center REIT with over half a century of experience, I listen when he talks.

He says, “Inflation is not an equal effector,” and used Lululemon Athletica (LULU) – one of FRT’s tenants – and Big Lots (BIG) as examples. The former is a high-end activewear, loungewear, and shoe store.

Go to its website, and you’ll find a “cropped cami tank top” for $68 and a “women’s woven visor” for $49. Yet, as Wood pointed out, Lululemon is enjoying much wider margins, selling products for much more than they cost.

Brad – as usual – has it right. Wealthy customers are not slowing down their spending. More importantly, there are more millionaires today than there have ever been… billionaires, too.

According to the USA Wealth Report, there are over 5.5 million millionaires in America, up 62% over the last decade.

When Forbes released its annual billionaires list in 2024, it broke records as well. There were 2,781 billionaires in the world, up by 141 compared to the 2023 total.

These ~2,800 individuals have a combined net worth of $14.2 trillion… up by $2.3 trillion in a year.

The wealth gap between the rich and the poor is widening.

In large part, you have the world’s central banks – not to mention the federal government – to thank for that.

Until very recently, the Federal Reserve’s policy was one of low rates and increasing liquidity. In the aftermath of the Great Financial Crisis, the Fed’s key rate was cut to effectively zero. And there it stayed for years. And when COVID threatened the economy in 2020, they pulled the exact same move.

Then, there was quantitative easing, which injected some $8 trillion worth of liquidity into the markets over the course of twelve years.

Not to be outdone, the federal government rolled out an unprecedented amount of stimulus and “helicopter money” during the pandemic years. Much of that ended up in the market or wound up in the possession of the world’s wealthiest investors.

All of this has been bullish for stocks. The S&P 500 has posted double digit total returns during six out of the last seven years. That’s not necessarily surprising when you consider that the S&P 500 has provided a 10%+ total return CAGR since its inception in 1957.

But there’s no denying that monetary and fiscal policies of recent years have been good for stocks. And that’s how you end up with record numbers of millionaires.

And to that, I say: Good for them!

Don’t envy the rich. Take the necessary steps today to one day join them. That’s our goal for our subscribers with Wide Moat Research. And if you’re reading this, I’ll assume it’s your goal as well.

Jim always had an “if you can’t beat them, join them” sort of attitude. And identifying companies that benefit from the 1%’s spending habits, is a great strategy.

Don’t Eat the Rich, Invest in Them

At a certain level of net worth, broader economic concerns stop mattering. Wealthy individuals don’t stop shopping at high-end retail because of inflation and rising prices. At a certain point, it just doesn’t matter.

You might not be able to afford a Birkin Bag, but you can buy shares of Hermes. The stock is up some ~235% over the past five years. By comparison, a “middle of the road” retailer like Macy’s is down about 10% over the same period.

It’s not a perfect comparison, but it paints a clear picture.

These companies have been wonderful long-term investments because of the durable cash flows that their top-tier brands generate… regardless of the condition of the broader macroeconomic environment. With the exception of a slight dip between 2019-2020, Hermes has grown its revenue and gross profit since 2016.

The same thing can’t be said about brands once thought of as defensive or recession-resistant that cater to less prolific spenders.

For instance, Starbucks saw its same-store sales fall by 4% last quarter (missing consensus estimates of +1.5% by a wide margin).

The lower- and middle-class people who frequent Starbucks are spending less because their wallets are being squeezed, and this is a discretionary purchase they can do without. 

Even McDonald’s is struggling to grow its sales because higher raw material and labor costs are forcing them to raise prices, meaning that consumers are no longer finding value on the fast-food chain’s menu. Many now consider fast food a “luxury.”

Heck, even the dollar stores are struggling. Dollar Tree recently announced it would be closing 600 Family Dollar stores this year.

Inflation is a tax on the poorest consumers, and that doesn’t bode well for companies that cater to those consumers.

None of that paints a pretty picture for most consumers and the broader economy. But it does tell us something important: lower-end retail is not the defensive sector it once was.

Contrary to what you might think, luxury brands are the new defensive stalwarts in the consumer discretionary space.


Nick Ward
Analyst, Wide Moat Research