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Japan Is the Most Exciting Market in the World

There are conflicting stories to tell about investing in Japan at the moment, and annoyingly both appear to be correct.

The first is that the stock market is on fire, producing the best returns of any major developed country since the start of last year as foreigners wake up to the new shareholder-friendly approach of government, stock exchange and corporate boards.

Billionaire Warren Buffett’s visit and positive comments in the spring highlighted the value of venturing to the country, and stocks are up more than 20% since late March as foreign cash poured in.

The second is that all the work has been done by the collapsing yen, and in dollar terms Japanese stocks have performed almost exactly like the S&P 500.

I’m convinced by both stories, which is tricky. Under the first, I’ve long thought that Japan is shifting more toward market capitalism (even as the U.S. appears to be moving away from it).

The reform process that began with the third of the “three arrows” of Abenomics a decade ago is finally bearing fruit, as directors increasingly focus on profitability, run down cash piles and put investors first. There is still a long way to go (the barbarians remain mostly outside the gate) but buybacks, hostile takeovers and pushy investors getting their way are no longer impossible.

It isn’t just that the government, takeover panel and stock exchange are trying to create a friendly environment for shareholders. As Peter Tasker, co-founder and chief strategist of Arcus Investment, points out, they are pushing at an open door.

Companies overall have net cash, freeing them from the obligations to banks that made them focus on their lenders rather than their shareholders.

Incipient inflation—still supported by negative interest rates at the Bank of Japan—makes holding cash less attractive. The aging population has created a permanent labor shortage. This makes layoffs politically easier since jettisoned workers can find new work quickly. And the desire of the U.S. and Europe to reduce dependence on China makes Japan’s manufacturing base and Pacific location attractive.

“I see a confluence of the incentives for investors put in place by the authorities and the position of Japan geopolitically as being very important, particularly as the yen is so cheap,” Tasker says.

The very cheapness of the yen is the problem, though. Since the start of last year, gains for Japanese stocks over and above the S&P have come only when the yen weakens—which it has done in high style. The currency is approaching 150 yen to the dollar again, worrying policy makers who intervened last year for the first time since 2011 to protect the level. This week, Finance Minister Shunichi Suzuki warned of possible intervention although insisted that it is sharp moves in the yen, not the currency’s level, that the government cares about.

It is natural that Japanese stocks should gain as the currency weakens, since the biggest are global companies such as Toyota Motor and Sony Group that earn much of their revenue overseas. The problem is that when the yen’s moves are stripped out, the Japanese market has matched the U.S. almost perfectly.

This makes it doubly hard to be bullish on Japan in the short run. If the currency strengthens, stocks should fall. And the currency is likely to strengthen if and when the central bank pulls back from super-easy policies in the face of rising inflation (core consumer prices are rising at the highest rate since 1992, before deflation set in).

Worse, it’s really hard to see why Japanese stocks have performed like the S&P, given the huge differences between the two markets. Investors shouldn’t invest in things they don’t understand, and the tight link between the performance of the broadly diversified Japanese market and the tech-dominated, top-heavy S&P is a puzzle.

Maybe it is driven by index and futures traders throwing billions around while ignoring individual stocks, thus creating great opportunities for stock pickers. But this is impossible to prove, and the alternative theory is blind luck, not a great basis for an investment.

One twist to my concerns is that perhaps it’s good that Japan has only matched the U.S. for the past couple of years, because it means many investors haven’t yet bought into the idea that Japan is fixing its stock market. For those of us who think there is a long-lasting change under way in Japan, that means there is still plenty of buyers out there who will eventually join in.

That shows up in stock valuations. Tasker calculates that almost half the benchmark Topix index trades at less than book value, while the index has a forward price/earnings ratio of 14 times, against 18 for the S&P.

True, it’s no longer the screaming bargain it was at below 11 times before Abenomics began, or around 12 earlier this year when Buffett visited Tokyo and said he might increase already-hefty holdings in the country’s trading houses (which have all outperformed the broader market since). But it is at least much cheaper than the U.S.

Japan has plenty of long-run economic challenges, not least a huge government debt load and among the world’s worst demographics, as well as a reliance on central-bank financing. The puzzling link between its stock market and the S&P gives me pause for thought, too.

But for the medium to long run, so long as macroeconomic disaster is averted, the shift toward market capitalism ought to lead to better-run companies that are worth more.

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Italy, Land of Uncollected Garbage, Combines Running With Trash Pickup

GENOA, Italy—Renato Zanelli crossed the finish line with a rusty iron hanging from his neck while pulling 140 pounds of trash on an improvised sled fashioned from a slab of plastic waste.

Zanelli, a retired IT specialist, flashed a tired smile, but he suspected his garbage haul wouldn’t be enough to defend his title as world champion of plogging—a sport that combines running with trash collecting.

A rival had just finished the race with a chair around his neck and dragging three tires, a television and four sacks of trash. Another crossed the line with muscles bulging, towing a large refrigerator. But the strongest challenger was Manuel Jesus Ortega Garcia, a Spanish plumber who arrived at the finish pulling a fridge, a dishwasher, a propane gas tank, a fire extinguisher and a host of other odds and ends.

“The competition is intense this year,” said Zanelli. Now 71, he used his fitness and knack for finding trash to compete against athletes half his age. “I’m here to help the environment, but I also want to win.”

Italy, a land of beauty, is also a land of uncollected trash. The country struggles with chronic littering, inefficient garbage collection in many cities, and illegal dumping in the countryside of everything from washing machines to construction waste. Rome has become an emblem of Italy’s inability to fix its trash problem.

So it was fitting that at the recent World Plogging Championship more than 70 athletes from 16 countries tested their talents in this northern Italian city. During the six hours of the race, contestants collect points by racking up miles and vertical distance, and by carrying as much trash across the finish line as they can. Trash gets scored based on its weight and environmental impact. Batteries and electronic equipment earn the most points.

A mobile app ensures runners stay within the race’s permitted area, approximately 12 square miles. Athletes have to pass through checkpoints in the rugged, hilly park. They are issued gloves and four plastic bags to fill with garbage, and are also allowed to carry up to three bulky finds, such as tires or TVs.

Genoa, a gritty industrial port city in the country’s mountainous northwest, has a trash problem that gets worse the further one gets away from its relatively clean historic core. The park that hosted the plogging championship has long been plagued by garbage big and small.

“It’s ironic to have the World Plogging Championship in a country that’s not always as clean as it could be. But maybe it will help bring awareness and things will improve,” said Francesco Carcioffo, chief executive of Acea Pinerolese Industriale, an energy and recycling company that’s been involved in sponsoring and organizing the race since its first edition in 2021. All three world championships so far have been held in Italy.

Events that combine running and trash-collecting go back to at least 2010. The sport gained traction about seven years ago when a Swede, Erik Ahlström, coined the name plogging, a mashup of plocka upp, Swedish for “pick up,” and jogging.

“If you don’t have a catchy name you might as well not exist,” said Roberto Cavallo, an Italian environmental consultant and longtime plogger, who is on the world championship organising committee together with Ahlström.

Saturday’s event brought together a mix of wiry trail runners and environmental activists, some of whom looked less like elite athletes.

“We like plogging because it makes us feel a little less guilty about the way things are going with the environment,” said Elena Canuto, 29, as she warmed up before the start. She came in first in the women’s ranking two years ago. “This year I’m taking it a bit easier because I’m three months pregnant.”

Around two-thirds of the contestants were Italians. The rest came from other European countries, as well as Japan, Argentina, Uruguay, Mexico, Algeria, Ghana and Senegal.

“I hope to win so people in Senegal get enthusiastic about plogging,” said Issa Ba, a 30-year-old Senegalese-born factory worker who has lived in Italy for eight years.

“Three, two, one, go,” Cavallo shouted over a loudspeaker, and the athletes sprinted off in different directions. Some stopped 20 yards from the starting line to collect their first trash. Others took off to be the first to exploit richer pickings on wooded hilltops, where batteries and home appliances lay waiting.

As the hours went by, the athletes crisscrossed trails and roads, their bags became heavier. They tagged their bulky items and left them at roadsides for later collection. Contestants gathered at refreshment points, discussing what they had found as they fueled up on cookies and juice. Some contestants had brought their own reusable cups.

With 30 minutes left in the race, athletes were gathering so much trash that the organisers decided to tweak the rules: in addition to their four plastic bags, contestants could carry six bulky objects over the finish line rather than three.

“I know it’s like changing the rules halfway through a game of Monopoly, but I know I can rely on your comprehension,” Cavallo announced over the PA as the athletes braced for their final push to the finish line.

The rule change meant some contestants could almost double the weight of their trash, but others smelled a rat.

“That’s fantastic that people found so much stuff, but it’s not really fair to change the rules at the last minute,” said Paul Waye, a Dutch plogging evangelist who had passed up on some bulky trash because of the three-item rule.

Senegal will have to wait at least a year to have a plogging champion. Two hours after the end of Saturday’s race, Ba still hadn’t arrived at the finish line.

“My phone ran out of battery and I got lost,” Ba said later at the awards ceremony. “I’ll be back next year, but with a better phone.”

The race went better for Canuto. She used an abandoned shopping cart to wheel in her loot. It included a baby stroller, which the mother-to-be took as a good omen. Her total haul weighed a relatively modest 100 pounds, but was heavy on electronic equipment, which was enough for her to score her second triumph.

“I don’t know if I’ll be back next year to defend my title. The baby will be six or seven months old,” she said.

In the men’s ranking, Ortega, the Spanish plumber, brought in 310 pounds of waste, racked up more than 16 miles and climbed 7,300 feet to run away with the title.

Zanelli, the defending champion, didn’t make it onto the podium. He said he would take solace from the nearly new Neapolitan coffee maker he found during the first championship two years ago. “I’ll always have my victory and the coffee maker, which I polished and now display in my home,” he said.

Contestants collected more than 6,600 pounds of trash. The haul included fridges, bikes, dozens of tires, baby seats, mattresses, lead pipes, stoves, chairs, TVs, 1980s-era boomboxes with cassettes still inside, motorcycle helmets, electric fans, traffic cones, air rifles, a toilet and a soccer goal.

“This park hasn’t been this clean since the 15 century,” said Genoa’s ambassador for sport, Roberto Giordano.

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Americans Are Still Spending Like There’s No Tomorrow

Consumers should be spending less by now.

Interest rates are up. Inflation remains high. Pandemic savings have shrunk. And the labor market is cooling.

Yet household spending, the primary driver of the nation’s economic growth, remains robust. Americans spent 5.8% more in August than a year earlier, well outstripping less than 4% inflation. And the experience economy boomed this summer, with Delta Air Lines reporting record revenue in the second quarter and Ticketmaster selling over 295 million event tickets in the first six months of 2023, up nearly 18% year-over-year.

Economists and financial advisers say consumers putting short-term needs and goals above long-term ones is normal. Still, this moment is different, they say.

A tough housing market has more consumers writing off something they’d historically save for, while the pandemic showed the instability of any long-term plans related to health, work or day-to-day life. So, they are spending on once-in-a-lifetime experiences because they worry they may not be able to do them later.

“It’s not a regret-filled, spur-of-the-moment decision,” says Michael Liersch, who oversees a team of advisers as head of advice at Wells Fargo. “It’s the opposite of that, where I would regret not having done it.”

Liersch cautions that it’s too soon to say whether the spate of spending is a fleeting moment or a new normal. And consumers remain frustrated about inflation as the price of many goods remains significantly higher than a few years ago.

Ibby Hussain, who works in marketing for a financial communications firm, says the Brooklyn, N.Y., apartment he and his fiancée rent for $3,000 a month would cost a million dollars to buy. At current rates, that means around $5,000 a month after a $200,000 down payment, not including property taxes. “And it’s not even that nice of an apartment.”

So, instead of saving for a down payment like he expected to after turning 30 and getting engaged in the past year, he splurged.

First, he bought a $1,600 Taylor Swift Eras Tour ticket and then he spent $3,500 on a bachelor party trip to Ibiza, Spain.

“I might as well just enjoy what I have now,” he says.

A travel boom

Ally Bank, whose online platform started allowing customers to create savings buckets for different goals in 2020, says users create about one-and-a-half times more experience-oriented buckets such as travel and “fun funds” versus those associated with longer-term planning.

Lindsey and Darrell Bradshaw went into credit-card debt to finance a vacation to Maui this past spring. The couple booked the trip only a few weeks after Lindsey, 37, quit her job to be a full-time caregiver to their 8-year-old son, who has special needs.

“We did not have the money and we were like, ‘Let’s just do this anyway,’ ” says Darrell Bradshaw, a 39-year-old general contractor in Seattle.

The trip cost about $10,000, including three, $1,000 last-minute plane tickets, 10 nights at a $385-a-night 4-star resort and several elaborate meals.

Even though the family decided to cancel subscriptions and cut back on dining out to help offset the bill, they say they have no regrets—especially since they got to see Lahaina just a few months before it was decimated by deadly wildfires.

Fears about a changing climate are driving some people to try to see places before they’re gone. In a monthly Deloitte survey of 19,000 global consumers, climate change was the only topic among 19 different concerns that respondents reported feeling significantly more worried about over the past year.

Josh Richner says he greatly lowered his retirement contribution to afford a cross-country trip that included a $7,000 Alaskan cruise so his family could see the ice caps, which have been melting at a rapid clip.

“I’ve never spent that much on a trip before,” says the 35-year-old, who says the splurge was also motivated by the pandemic and a health scare.

About six months ago, Richner and his wife decided to sell their Columbus, Ohio, home to travel the country with their two young children. Working for National Legal Center, a law firm that helps consumers resolve debt, he knows the potential consequences of living in a way that gives priority to the present. But he isn’t worried.

“I just hit a point where the thing that we had been talking about maybe hopefully doing some day, we’re going to do it now,” he says. “I’m not going to worry about money anymore. I don’t have it in me.”

Splurge purchases

Consumers might not be able to keep splurging forever. Labour strikes and student loan repayments could both lead people to pull back. Rising gas prices could also deter travel.

For those who study spending, however, the robustness up to this point has been a surprise.

In the New York Federal Reserve Bank’s August SCE Household Spending Survey, households reported spending 5.5% more than last year. The share of households that said they made at least one large purchase in the previous four months increased to 64% from 57%, its highest reading since August 2015.

“Normally at a time when you have higher inflation, but also higher interest rates, you don’t expect spending to hold up so well,” says Wilbert van der Klaauw, an economic research adviser on household and public policy at the Fed.

Rather than funnel all their spare change into a house or retirement account, Candice and Jasmine Kelly started a bucket-list fund after attending back-to-back funerals a few months ago. The couple adds a few hundred dollars from their paychecks each month into the fund, which they have used to try fancy restaurant tasting menus and buy Jasmine her dream designer handbag.

Instead of waiting to have fun when they retire, Candice, a 26-year-old management analyst in Charlotte, N.C., says the couple is trying to do the opposite. They want to enjoy their money while they’re young—even if it means working longer.

“All the rules that exist around money and lifestyle are just things people made up, so we’re playing a different game, and honestly I think we’re having more fun,” says Candice.

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Jean Arnault Has New Goals for Louis Vuitton Watches. Profit Isn’t One of Them.

Jean Arnault was standing in a gilded, mirrored room of Paris’s Musée d’Orsay showing off Louis Vuitton’s newest watch model to a clutch of experts one July morning. The thin unisex watch, named the Tambour, is available in finishes including stainless steel, yellow gold and rose gold, he explains, and was the result of almost two years of work.

But the most valuable Tambour in the building wasn’t on display with the others. It was on Arnault’s wrist.

His version was made of a rare metal, tantalum. Tantalum gave the watch its gunmetal colour, though the metal’s hardness also meant that the watch took twice as much time to manufacture. This made it “insanely expensive” when he bought it, Arnault told me, though he refused to reveal what he paid.

“We’re only going to make one,” Arnault, 24, adds. “That’s it. It’s the only one.”

Jean, the youngest son of LVMH chief Bernard Arnault, has been fascinated by the opportunity in rare-materials watches for a while. The Swiss watchmaker Audemars Piguet began using tantalum in some of its watches, including the Royal Oak, beginning in the 1980s, before the younger Arnault was even born. “Incredible watches,” he says. “[Some] have rose-gold accents. Stunning.” But he says he wouldn’t feel comfortable selling a simpler, three-hand watch like the Tambour to the general public for anything near the eye-watering price he paid for his.

“Even though it costs us that much, it would be taking the client for a fool,” he says.

With Arnault, who is learning the ropes of his father’s luxury’s empire, Louis Vuitton has bet on a 24-year-old to turn itself into a player in high-end, mechanical watchmaking.

Two years ago, when he first joined Louis Vuitton’s watches division as marketing and development director, Louis Vuitton watches ran a wide gamut. They ranged from watches costing hundreds of thousands of dollars to quartz timepieces that sold for around $4,000. These are “something that could be done by a machine, almost,” says Arnault, sitting in his corner office at the Louis Vuitton headquarters in Paris’s 1st arrondissement, overlooking the Pont Neuf. On a shelf is an 18th-century French clock and a limited-edition Marc Newson–designed hourglass with blue steel nanoballs, made in collaboration with De Bethune.

Now Arnault has decided to eliminate the entry-level Tambours. His thinking was that instead of producing more affordable collections, Louis Vuitton needed to play in a different class. So the new iteration of the timepiece ranges in price from $18,500 to $52,000, putting it in competition with similar creations from the likes of Audemars Piguet and Vacheron Constantin. Nearly a third of the Tambour’s watchcase has been shaved off, making it much sleeker. Inside there is a proprietary movement, made in collaboration with Le Cercle des Horlogers, a specialist movement workshop just outside La Chaux-de-Fonds, Switzerland.

The average price of a Louis Vuitton timepiece overall will jump fivefold to over $20,000. But it’s a challenge much more daunting than adjusting the price point.

“We’re not going to make a ton of money with this,” Arnault says of the company’s strategic about-face. “It’s not going to be highly profitable at all, but it’s really about making sure that we switch the message completely.”

Building a pedigree in watchmaking—which Louis Vuitton embarked on only two decades ago—is particularly challenging. Watch fans are deeply conservative, with models that have been around for decades like the Rolex Daytona, the Omega Speedmaster or Audemars Piguet’s Royal Oak still among the bestsellers globally. Vacheron Constantin’s origins trace back to 1755, while Patek Philippe was founded in 1839. Rolex has been around since 1905.

Craig Karger, a former lawyer in New York City who collects watches and runs the blog Wrist Enthusiast, said Louis Vuitton faces an uphill battle in competing with heritage brands that focus solely on watches. “I wouldn’t personally invest 19,000 euros [about $20,300] in a steel Louis Vuitton watch, as nice as it is,” Karger says.

Louis Vuitton is hardly alone in moving upmarket in recent years, says Jeff Fowler, CEO of e-commerce watch website Hodinkee. The trend in the Swiss watch industry is clear: There are fewer watches for sale, and those that are for sale cost more—in part a reaction to the introduction of the popular Apple watch in 2015, says Fowler. The watch was so successful and ubiquitous, he explains, that it brought renewed consumer focus on timepieces, and resulted in the Swiss watch industry regrouping around higher-end products.

Founded as a trunk manufacturer by a French carpenter in 1854, Louis Vuitton has successfully expanded into categories like high fashion, menswear, jewellery and fragrances. Watches currently account for a tiny fraction of Louis Vuitton’s sales, meaning Arnault can afford to take a risk.

“Vuitton is going to have to build demand up over time,” says Fowler. “It’s not given to you.”

Jean Arnault is closely watched in the luxury industry. He is the fifth child of Bernard Arnault, the 74-year-old who built LVMH over the past four decades by buying up rival luxury firms while cultivating generations of designers. In recent years, the company has ridden a global surge of demand for luxury goods. This has cemented its position as one of the most valuable listed companies in Europe. It has also helped the elder Arnault, who is CEO and controlling shareholder, compete with Elon Musk for the title of the world’s richest person.

Growing up in the west of Paris, Jean Arnault attended a prestigious Jesuit school where one of his teachers was Brigitte Macron, now the wife of French President Emmanuel Macron. Like his siblings, he was carefully introduced to the family business, joining his father on his Saturday morning rounds to the group’s main boutiques. He would also tag along on official LVMH trips, including to China. As a teenager, however, Arnault was into cars, planes and engines. He used to tell his family that he wanted a career in Formula 1. But when he worked at the McLaren Technology Centre while studying mechanical engineering at Imperial College London, he realised it wasn’t the place for him.

“You work at the end of the day for something, which is making tenths of seconds of gains for a car to go around a track,” he says. “There’s a lot of moving parts…. I realised then that I wanted to work on [the] product as a whole.”

Bernard Arnault has always encouraged his children to pursue their interests, starting with their early roles at the conglomerate. Delphine, his oldest child, had an eye for product development, and spent some time at John Galliano’s eponymous label before joining Dior. Antoine, who loves literature, worked in the advertising department at Louis Vuitton. Alexandre brought contemporary artists to Rimowa when he was CEO. For Jean, as it was for his brother Frédéric, the passion was watches.

During his journey to McLaren in Woking, a sleepy town an hour outside of London, Jean used the time to delve into blogs about mechanical watches. He then did his fourth-year project on a component of Tag Heuer’s watches. The Swiss brand is also part of the LVMH empire and is run by his brother Frédéric, who is four years older than Jean. The two of them would frequently discuss the watch industry as well as Frédéric’s business plans—and he even allowed Jean to work on a few mechanisms.

In early 2020, Jean spent a week at Louis Vuitton’s watchmaking plant near Geneva, as he was trying to decide which of the group’s brands he would join. Michel Navas, one of the brand’s master watchmakers, recalls that Arnault spent some time taking apart and putting together a watch. At one point, Navas gave the young man a screw to clean and polish, which Arnault did with a fine abrasive. A colleague told Navas that he was going too far by assigning Arnault menial workshop tasks.

“Hang on, he’s clearly enjoying himself,” Navas answered. “He seems to love craftsmanship.”

By the time Arnault joined LVMH, following stints at Morgan Stanley and McLaren, he already had built an enviable personal watch collection. Today it includes a vintage Patek Philippe from the 1920s, a rare François-Paul Journe prototype and even a big, bulky modular timing system that was once reportedly used in a German nuclear power plant.

At Louis Vuitton, Arnault’s first public move was to establish a new watchmaking prize, which the company plans to award every two years starting in January 2024. Arnault convened a committee of watch experts and aficionados to decide on the winners, including Rexhep Rexhepi, a young watchmaker from Kosovo who founded his own label, Akrivia, in 2012.

When Arnault came to visit in early 2021, the two of them spent a couple of hours talking about watches in the atelier’s small meeting room, which looks over the garden. Rexhepi was impressed. He later agreed to a collaboration with Louis Vuitton, producing a double-sided chronograph that will be released this month. The model, limited to 10 pieces, exposes the watch’s inner workings on one side, with a white enamel dial on the other.

If Rexhepi agreed to work with him, it was in part due to the impression he’d formed back in their first meeting, when he noticed that Arnault was wearing a Journe watch.

“Oh,” Rexhepi thought, “he has good taste.”

Alongside the prize, Arnault was working on bringing high watchmaking into Louis Vuitton’s stores. Since 2011, the brand has owned La Fabrique du Temps, the atelier co-founded by Navas and Enrico Barbasini, situated in Meyrin outside Geneva. It has become synonymous with innovative, complex watch movements, but these were being used in only a handful of Louis Vuitton offerings.

On just his second day on the job, Arnault sat down for coffee near Geneva with Navas and Barbasini. “We need to stop doing quartz,” Arnault recalls them saying, referring to the fashion-oriented watches Louis Vuitton sold.

Arnault grew convinced that Navas and Barbasini were right. He pitched the idea of repositioning Louis Vuitton’s watches to his father and Michael Burke, then the brand’s CEO. Arnault wanted to upgrade the Tambour, a mainstay of the brand since 2002. He felt there were issues beyond its quartz mechanisms: It was far too chunky, for one, and its big lugs seemed outdated. Both men were cautious, he says. They wanted to ensure that a new model was ready before they signed off on any strategic shift.

By January 2022, Arnault had three prototypes of the new Tambour to show Burke and, most important, his father. Bernard Arnault has a hands-on, detail-oriented approach. He has been known to ask staff to go back to the drawing board if a design doesn’t meet his exacting standards.

A no from Arnault “has happened in the past many times,” says Jean. “It has happened to me since with products that were supposed to happen in the future but aren’t happening now…. Whether it be Michael [Burke], Pietro [Beccari, the Louis Vuitton CEO] and obviously my dad, they have a vision that we don’t have.

“Later on, once the emotions are gone and the process has been canceled, you say, ‘OK, they were right,’ ” he adds.

But this time, the meeting lasted only around five minutes. “In, out, boom—done,” the younger Arnault recalls. Bernard Arnault’s approval put the repositioning in motion. Louis Vuitton is retiring many existing models, Jean Arnault said, as well as reducing “tremendously” the number of Louis Vuitton stores that sell watches.

Since each Tambour will now be entirely handmade, Arnault says production of the Tambour would be “more in the hundreds than the thousands,” though he declined to give an exact number. He also says Louis Vuitton wouldn’t riff on the product. “We’re asking for a significant chunk of money from these people,” he says. “I don’t want to jeopardise their investment by releasing a green dial, by releasing a purple dial, by releasing a different metal. The desirability that will come from these five references will be the same over a long period of time.”

At a summer gala to celebrate the launch of the Tambour, held at the Musée d’Orsay, Arnault was surrounded by partygoers and stars, including Alicia Vikander, Michael Fassbender and Bradley Cooper, who appears in the new ad campaign to promote the Tambour. Signs of the broader Louis Vuitton brand’s reach were everywhere. Outside the museum, a giant billboard hung on the side of the museum showing Rihanna and her baby bump in a Louis Vuitton ad campaign.

“This is the pinnacle of what we can do, and the beginning of an amazing journey,” Arnault told those gathered. “Hopefully you’ll remember this moment as a historic moment for us.”

These days, Arnault splits his time between Louis Vuitton’s high watchmaking site near Geneva and the brand’s headquarters in Paris, where he tends to stay on weekends. In his spare time, he pursues what he calls his “unfortunate” passion for cars. “I’m trying to understand more,” he says. On Instagram, he sometimes shares photos of himself with his girlfriend, Zita d’Hauteville, the daughter of Eric d’Hauteville, who owns a watch brand and is also a French count, and Isabelle de Séjournet, an arts consultant. The two are pictured together traveling to Japan, or enjoying a meal together at a pizzeria in Naples. In one of her recent posts, d’Hauteville is taking a photo of herself in the mirror while Arnault is in the background, bent over double, chasing after her dog, Ovni.

Meanwhile, Bernard Arnault is never far away, sometimes asking senior executives how his youngest son is doing. He also has monthly lunches with his five children at the LVMH headquarters to talk shop and check in.

Jean encouraged his father to visit Louis Vuitton’s high watchmaking hub near Geneva. When Bernard Arnault did so, a few months after Jean had started, he was impressed, asking Navas during a tour of the facility whether he could take photos with his cellphone.

“Mr. Arnault, this is your house!” Navas said.

After the tour, Bernard Arnault sat with Jean, Navas and Barbasini for coffee. He asked Navas and Barbasini about their career history. Both men listed a host of prestigious names, including Swiss watchmaker Gérald Genta.

Arnault senior turned to his son. “Genta—we own this, right?”

Jean says he told him they did. LVMH had acquired the brand as part of its acquisition of Bulgari in 2011. Genta had released a few editions over the years since, but not much was going on with the brand.

Arnault senior turned again to Navas and Barbasini, asking them whether they’d like to bring back the brand. The two men briefly looked at each other before accepting. “Hell, yeah, we’ll do it,” Jean Arnault recalls them saying. He invited Genta’s widow, Evelyne, to visit Louis Vuitton’s watchmaking hub, and she quickly got on board with the relaunch. Hundreds of her late husband’s designs were never produced—and now they will serve as inspiration for the brand’s new creations, the first of which will be available next year.

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Profiting From the Pet Boom

Humans may not be acquiring pets at a pandemic-induced pace anymore, but they still are spending plenty on food, supplies, and services to take care of the furry members of their families.

Investors in public and private markets have their eyes on all that pet-care spending. Increasingly, consumers have gone beyond buying kibble to snapping up premium products and services that ensure their pets are living healthy, environmentally friendly lives. It’s a trend familiar to anyone who has followed the growth in eco-friendly wellness products and services for humans.

The shorthand for this phenomenon? The “humanisation of pets,” according to Milwaukee-based Baird.

“What that meant 10 years ago was you started to see the premiumisation of the quality of the diets and the emergence of grain-free brands and premium, cleaner-labeled food brands,” says Spencer DePree, a director in Baird’s global consumer and retail group. “That certainly is true today, but you’re starting to see that expand into other parts of the lifestyle of the pet.”

The entire pet economy is valued at about US$130 billion to US$140 billion, divided into four main categories: nutrition, products and supplies, healthcare, and services, according to Baird. Nutrition products snag most consumer dollars, but the so-called humanisation trend touches all of them.

Australia, Canada, and parts of Europe are leading the pet-market conversion to “non-traditional, more premium food and nutrition,” says Scott Ehlen, a director in Baird’s global consumer investment banking group. For the U.S., it’s a question of “how quickly, not if,” the trend will take hold, Ehlen says.

Penta spoke with DePree and Ehlen about what’s driving the growth in pet-related purchases and some of the companies on their radar screen.

Proactive vs. Reactive

One reason for the uptick in purchases of healthier pet products is consumers have realised they can proactively keep their pets happy and free from illness. The simplest step is to provide them with a diet that won’t lead to health problems in future years, and, as with humans, mix in nutritional supplements and treats with health benefits, such as dental care.

“That’s something you’ve seen in human wellness over the last five to seven years,” DePree says.

In pet food, that’s led companies to go beyond making grain-free kibble to producing fresh foods and to offering “toppers,” such as fish oils or freeze-dried raw meat. Companies are even developing foods that don’t rely on traditional beef and poultry proteins, such as Berkeley, Calif.-based Jiminy’s insect-based pet foods—a company backed by venture capital, according to private-markets data company PitchBook.

“Their value proposition is pretty impressive when you just look at the energy consumption that goes into producing a pound of beef,” DePree says.

As people spent more time at home with their pets during the pandemic, they also realised their furry companions have a lot of downtime. Humans that have returned to the office want to make sure their pets stay happy and active, so many are putting their dogs in daycare facilities with cameras that allow them to check in to see how their pup is doing.

“It’s not a kennel, it’s doggy daycare, where it’s analogous to taking your child to daycare,” Ehlen says.

There are a handful of franchisors backed by private equity in this sector including Dogtopia, which Ehlen says is one of the larger companies with at least 200 franchisees and more in the pipeline. An investment vehicle formed by the New York-based private-equity firm Red Barn Equity Partners with funding from institutions and family offices made a major investment in 2020 in the company, which offers daycare, boarding, and spa facilities, according to a news release.

Pet grooming is another area that’s prime for investment. Ehlen says he takes his own dog to a groomer who keeps track of appointments on a paper calendar. “It’s impossible to get a hold of her, impossible to schedule,” he says.

“A vast majority of the market continues to exist in that state in 2023,” Ehlen says. “You’re finally starting to see folks realise that this is a huge market, it’s a non-discretionary market, it’s going to be around forever. It’s just in desperate need of investment, of capital, of innovation.”

The ‘Pet’ Play in Food

The importance of pets to the economy is evident within the four major consumer products companies—Mars, Nestlé, Post Holdings, and General Mills. All include pet foods among their brands; Post, in fact, made a push into the business in February by purchasing Nature’s Way and Rachael Ray Nutrish, among other more standard pet food brands, from J.M. Smucker Co. for $1.2 billion.

For an investor interested in the growth of premium natural pet food, the only pure public-market play is Freshpet, based in Secaucus, N.J., DePree says.

While bigger companies have grabbed more market share, independent, private companies are “still the birthplace of new brands, new innovation, and that could be coming from either new companies or new product lines,” he says. “When the category validates itself or the scale hits, then you may see one of the bigger players jump in through an acquisition.”

Independent companies in the natural pet food space include the Farmer’s Dog, based in New York, which is backed by venture capital, according to Pitchbook. Denver-based Alphia, a pet food co-manufacturer that supplies other companies, was bought late last month by PAI Partners, a private-equity firm, from another PE firm, J.H. Whitney, according to a news release.

In March, the specialty pet food brand Natural Balance, announced it would merge with Canidae, which makes premium sustainable pet food, a news release said.

Before the stock market became more volatile last year, there was a “big queue of folks circling the wagons,” DePree says. Considering that the large consumer products companies are still trying to figure out how to grow this market, “over the next 18, 24 months, you’ll see some more stories become public.” For now, he says, “the demand for ways to play ‘pet’ outstrips the supply.”

The Internet-of-Things for Dogs

Pets aren’t exempt from humans’ obsession with tech, either. The latest pet-tech trends range from fitness trackers to food-monitoring devices that not only monitor how much and when your pet is eating, but also automatically order more food when you’re running low, DePree says.

Old-tech—such as electronic fences that keep dogs confined to a designated space—are being replaced by devices considered more humane and able to collect data on a pet’s behaviour, Ehlen says.

An example is Halo Collar, which uses wireless GPS and allows owners to set up zones to contain their pets wherever they are. The company, based in Woodcliff, N.J., and co-founded by dog psychologist Cesar Millan and tech innovator Ken Ehrman, was backed in May by Utah-based Decathlon Capital Partners, which provides revenue-based financing.

Most innovations in the pet economy so far have focused on dogs, but Ehlen and DePree say companies also have their sights on improving the lives of cats.

“If anyone is doing any innovation in cat, it’s alongside dog, but now you’re starting to see a more purpose-driven and specific sort of focus on the category,” DePress says. But he chides, “cats might be insulted at the humanisation concept—they probably hold themselves in a higher place.”

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Claude Monet Water Lily Painting, Never Shown Publicly, Could Fetch at Least $65 Million

A water lily painting by Claude Monet of his Giverny gardens is expected to achieve at least US$65 million at Christie’s November sale of 20th-century art in New York

Le bassin aux nymphéas, or water lily pond, painted around 1917 to 1919, is a monumental canvas extending more than six-and-a-half feet wide and more than three-feet tall, that has been in the same anonymous private collection since 1972. According to Christie’s, the painting has never been seen publicly.

The artwork is “that rarest thing: a masterpiece rediscovered,” Max Carter, Christie’s vice chairman of 20th and 21st century art said in a news release Thursday.

A first look at this thickly painted example of Monet’s famed and influential water lily series will be on Oct. 4, when it is revealed in Hong Kong.

The price record for a Nymphéas painting by Monet was set in May 2018 for Nymphéas en fleur, another large-scale work that had been in the collection of Peggy and David Rockefeller. That painting sold for nearly US$85 million.

The current work for sale is guaranteed, Christie’s confirmed. The auction house did not provide further details on the seller.

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Is China’s Economy Stabilising? Why September’s Data May Disappoint.

China’s economic recovery isn’t gaining the momentum money managers are awaiting.

Data from China Beige Book show that the economic green shoots glimpsed in August didn’t sprout further in September. Job growth and consumer spending faltered, while orders for exports came in at the lowest level since March, according to a monthly flash survey of more than 1,300 companies the independent research firm released Thursday evening.

Consumers’ initial revenge spending after Covid restrictions eased could be waning, the results indicate, with the biggest pullbacks in food and luxury items. While travel remains a bright spot ahead of the country’s Mid-Autumn Festival, hospitality firms and chain restaurants saw a sharp decline in sales, according to the survey.

And although policy makers have shown their willingness to stabilize the property market, the data showed another month of slower sales and lower prices in both the residential and commercial sectors.

Even more troubling are the continued problems at Evergrande Group, which has scuttled a plan to restructure itself, raising the risk of a liquidation that could further destabilise the property market and hit confidence about the economy. The embattled developer said it was notified that the company’s chairman Hui Ka Yan, who is under police watch, is suspected of committing criminal offences.

Nicole Kornitzer, who manages the $750 million Buffalo International Fund (ticker: BUIIX), worries about a “recession of expectations” as confidence continues to take a hit, discouraging people and businesses from spending. Kornitzer has only a fraction of the fund’s assets in China at the moment.

Before allocating more to China, Kornitzer said, she needs to see at least a couple quarters of improvement in spending, with consumption broadening beyond travel and dining out. Signs of stabilisation in the housing market would be encouraging as well, she said.

She isn’t alone in her concern about spending. Vivian Lin Thurston, manager for William Blair’s emerging markets and China strategies, said confidence among both consumers and small- and medium-enterprises is still suffering.

“Everyone is still out and about but they don’t buy as much or buy lower-priced goods so retail sales aren’t recovering as strongly and lower-income consumers are still under pressure because their employment and income aren’t back to pre-COVID levels,” said Thurston, who just returned from a visit to China.

“A lot of small- and medium- enterprises are struggling to stay afloat and are definitely taking a wait-and-see approach on whether they can expand. A lot went out of business during Covid and aren’t back yet. So far the stimulus measures have been anemic.”

Beijing needs to do more, especially to stabilise the property sector, Thurston said. The view on the ground is that more help could come in the fourth quarter—or once the Federal Reserve is done raising rates.

The fact that the Fed is raising rates while Beijing is cutting them is already putting pressure on the renminbi. If policy makers in China wait until the Fed is done, that would alleviate one source of pressure before their fiscal stimulus adds its own.

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Frank Stella’s ‘Abra I’ to Lead at Christie’s Post-War to Present Sale

More than 280 modern and contemporary artworks will be up for sale Friday at Christie’s Post-War to Present auction in New York.

The live sale, which will be held at Christie’s Rockefeller Center sale room, has a low estimate of more than US$27 million and will be led by Frank Stella’s Abra I, 1968, which is estimated to fetch between US$1.2 million and US$1.8 million, according to a news release from Christie’s.

“Abra I is a fantastic example by Stella, a large-scale canvas from the protractor series,” says head of sale Julian Ehrlich. “It engages so many crucial aspects of his practice, including scale, geometry and color, and has appeal to established post-war collectors and others who are just coming to historical art.”

Ehrlich, who has overseen the semiannual Post-War to Present sale since its first March 2022 auction, says his goal in curating the sale was to “assemble a thoughtful and dynamic auction” with works from both popular and lesser-known artists.

“With Post-War to Present, we really have a unique opportunity to share new artistic narratives at auction. It’s a joy to highlight new artists or artists who have been overlooked historically and be a part of that conversation in a larger art world context,” he says.

Joe Overstreet’s ‘Untitled’, 1970
Christie’s

Works from a number of female artists who were pioneers of post-war abstract painting, including Helen Frankenthaler, Lynne Drexler, and Hedda Sterne, will be included. The auction will also include pieces from a group of Black artists from the 1960s to present day, including Noah Purifoy, Jack Whitten, and David Hammons, in addition to a Christie’s debut from Joe Overstreet (Untitled, 1970) and an auction debut from Rick Lowe (Untitled, 2021).

“The story of art is necessarily diverse,” Ehrlich says. “The sale itself is broad, with more than 280 works this season, and it has been fun to think through artists inside and outside of the canon that we can put forward as highlights of the auction.”

In addition to Abra I, other top lots include Tom Wesselmann’s Seascape #29, 1967, (with an estimate between US$800,000 and US$1.2 million); Keith Haring’s Andy Mouse, 1986, (also with an estimate between US$800,000 and US$1.2 million); and Jack Whitten’s Garden in Bessemer, 1986 (with an estimate between US$700,000 andUS$1 million).

“I think of the Post-War to Present sale as being especially dynamic … in the best case, even for someone deeply embedded in the market, there should be works which surprise and delight and are unexpected, as well as celebrated market-darlings and art-historical greats,” Ehrlich says.

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Meta Unveils New Mixed Reality Headset in Push for Traction on Metaverse

Facebook parent Meta Platforms on Wednesday announced the release date of its coming Quest 3 mixed-reality headset and new Ray-Ban smart glasses along with a bevy of AI assistants for its social apps.

“The limits of your physical space are going to be able to expand,” Meta CEO Mark Zuckerberg said when announcing the new products. “You’re going to be able to be a part of much larger worlds.”

The company is hoping the devices will jump-start its push to bring users into the so-called metaverse, an effort on which it has spent billions of dollars and seen limited returns. Apple is set to release its Vision Pro headset in 2024, years after Zuckerberg renamed the company in an attempt to focus on what he’s said may be the next emerging computing platform.

The Quest 3 will place an emphasis on the ability for users to work or play in apps that overlay virtual objects within users’ physical spaces, Zuckerberg said. The headset will begin shipping to users on Oct. 10, with preorders for the $499 device starting on Wednesday. Zuckerberg said the device will place emphasis on the ability for users to work or play in apps that project virtual objects within users’ physical spaces.

Zuckerberg said the company designed the device to have the “world’s best immersive content library.” As part of the presentation, Zuckerberg showed a demonstration of a Lego game and announced that Meta has joined with Microsoft to bring Xbox Cloud Gaming to the device in December. Additionally, Microsoft 365 will come to the Quest by the end of the year, Zuckerberg said.

The Quest 3 “is going to be the best value spatial computing headset on the market for a long time to come,” said Meta Chief Technology Officer Andrew Bosworth, adding that the device features no wires or a battery pack, a shot at Apple’s Vision Pro device. That headset will cost $3,499.

Meta will also release the second generation of its Ray-Ban smart glasses on Oct. 17 for $299. The Wall Street Journal had previously reported that the devices would arrive as soon as this fall.

The second generation Ray-Ban smart glasses will allow users to livestream their perspective to their followers. The new smart glasses will include a 36-hour battery life and will be available in more Ray-Ban models than its predecessor.

The device will also come equipped with Meta AI, an artificial-intelligence assistant announced by Zuckerberg on Wednesday. Users will also be able to point at objects or landmarks they are looking at and ask Meta AI for information about it.

“Smart glasses are the ideal form factor to let an AI assistant see what you’re seeing and hear what you’re hearing,” Zuckerberg said.

Meta AI is built on the company’s Llama 2 large-language model and is a general purpose AI assistant that can answer user questions within Messenger, WhatsApp and Instagram. Meta AI will be able to provide users with real-time information through a partnership with Microsoft Bing, Zuckerberg said.

Additionally, Meta announced that it will also release 28 AI chatbots that users will be able to interact with. Meta joined with a number of celebrities, including Tom Brady, Paris Hilton and Snoop Dogg, whose faces provide facial expressions as users interact with the chatbots. The Journal had previously reported that Meta would release AI chatbots with personalities.

“This is our first effort at training a bunch of AIs that are a bit more fun,” Zuckerberg said, adding that they will have a number of limitations that will become apparent to users.

Zuckerberg said the AI chatbots will be released in a limited beta mode on Wednesday.

In addition to the chatbots, Zuckerberg announced EMU, an AI model capable of taking users’ text prompts and turning them into images within five seconds. EMU, which won’t be open sourced, will be integrated within Meta AI and will roll out to English-speaking users over the next month, starting on Wednesday. The image-generating model will allow users to create custom stickers they can send to friends, and it will also allow users to edit their images on Instagram next month, Zuckerberg said.

—Meghan Bobrowsky contributed to this article.

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Your Online Account May Have Been Breached? Don’t Just Sit There. Do Something.

How do consumers respond when their online accounts are exposed to hackers? Many of them simply don’t.

Data breaches at major firms have become all too common, with more than 110 million user accounts exposed in just the second quarter of 2023. Yet our research found that nearly two-thirds of U.S. consumers would return to a site after they were notified of a breach—with only the bare minimum of precautions, like changing their passwords.

Almost a quarter of the roughly 200 people we surveyed said they would return to the compromised website with no changes to their behavior at all. Only 10% said they wouldn’t go back.

Even people who had cybersecurity training within the past 90 days—in other words, people who should be primed to protect themselves—took risks. In this subsequent study, over a quarter of roughly 500 people said they would return to the breached website while taking the absolute minimum security measures, and only about 9% would take more-complicated steps such as setting up two-factor authentication. And they would do that only if they experienced real financial consequences, like fraudulent charges on their credit cards.

Why wouldn’t people protect themselves? Many of the consumers we surveyed believed that there were few—if any—alternatives to the websites they used frequently, and all websites seemed to be affected by data breaches. Why bother beefing up security? Likewise, some people said they would stick with a compromised site because they had put so much time and effort into their presence on it—a classic sunk-cost fallacy.

Since doing nothing may put your finances and personal information at risk, what should you do in case of a breach? Based on my experience as a researcher in this domain and guided by input from customers recovering from data breaches, I recommend the following actions.

The first steps

Take each data-breach notification seriously. Immediately change passwords on the affected sites and sign up to follow the updates from the breached firm. This is also a good time to ensure your passwords are unique and not being used across several sites.

Find out what kind of breach it is. Some breaches violate your privacy—such as stealing your playlist or viewing preferences—but may not be as damaging as other hacks. So they may just require a simple password change on the affected site. Even the breach of encrypted password data, such as in the LastPass data breach, while serious, isn’t an immediate threat.

On the other hand, things like compromised credit-card numbers, financial data and personally identifiable information need stronger attention. Even seemingly innocuous breaches of social-media networks may reveal data that can be used to impersonate you and perhaps be used to invade the privacy of those around you. For instance, hackers might be able to figure out your “forgot password” questions on websites by learning where you grew up, the names of your pets and more.

The next steps

Set up push notifications for financial data. When you’re notified of data breaches that involve credit cards or payment information, review the transactions on the affected accounts, going back to the previous payment period. Whether or not there has been unusual activity, protect yourself by adding mobile push notifications for credit-card transactions—an option offered by most credit cards, online-payment mechanisms and banks. Most notifications happen in real time, so consumers affected by data breaches can quickly identify and contest improper charges.

Use free credit monitoring. Some credit cards and banking firms such as Discover and Chase provide free monitoring of consumer credit and provide monthly updates of noteworthy events and changes. Some go further and provide benefits such as removal of your personally identifiable information found on public sites, including data brokers. Using these services is an easy way to identify and report fraudulent activity, as well as protect against identity theft—so review this data regularly if your information has been exposed.

Enable dual-factor authentication on all of your accounts. This is a good practice in general but is especially important for anyone affected by data breaches. With dual-factor authentication, you enter your password as usual but then confirm your identity using a personal device, typically a mobile phone. This limits someone from logging into the account with a stolen password.

If your social-media platform has been breached

Along with enabling dual-factor authentication, there are a number of steps you should take in the event of a social-media breach.

First, change the password and log in with the new one. Check the login-activity page to see if anyone other than you has logged in, and then look for the option to delete all other active sessions—so every other device that is currently logged in is effectively logged out.

Also review all direct messages, posts, and comment activity on the account, and report anything suspicious. If it affects other people, let them know. Finally, pause or temporarily deactivate the account, if that is an option, to make it even tougher for hackers to get access.

Rajendran Murthy is the J. Warren McClure Research Professor of Marketing at the Rochester Institute of Technology’s Saunders College of Business.