Are the Rich Really Getting Richer?

Citing new Internal Revenue Service data, on Friday, the Wall Street Journal reported that the richest 1% of Americans earned a postwar record of 21.2% of all income in 2005, up from 19% a year earlier, reflecting a widening income disparity among different classes in the nation.

Underneath the headlines, and what I find interesting are the sources of income. The rich get richer, and stay that way by participating in the capital markets. This group saves enough money to put it to work and benefits from the work their capital can perform, not just the sweat of their own brows.

For those already investing, the real question is how can I profit from this news and these data points?

My answer to the "rich getting" richer investment thesis is twofold:

How do they keep making more money?

How do they spend their excess cash?

The ETF world is already set with products addressing both investing themes.

The first product that directly benefits from investment is the Claymore/Clear Global Exchanges, Brokers and Asset Managers ETF (EXB). The constituents of the underlying index are the very institutions that invest capital and profit from the investments, trades or both. These firms make money when the markets go up or down, although many make more as markets rise. I covered some of the specifics in a previous post.

The next product addresses the second way of benefiting from the rich - how they spend their money. The product is the Claymore/Robb Report Global Luxury ETF (ROB) which focuses on luxury companies. I provided a more complete view of this index last week.

What both products also address is that this is not a phenomenon limited to the United States. In fact, China already has the second highest concentration of billionaires, and the globe is minting new millionaires daily.

As investors, we seek to leverage this data as published by the IRS, data many of us already instinctively knew and had read in similar reports from Merrill Lynch/Capgemini, and others. It is good to know there are products readily available to capitalize on the investment thesis.

Disclosure: Mr. Corn is CEO of Clear Indexes LLC which consults to Curtco media for the index tracked by the Claymore/Robb Report Global Luxury ETF (ROB). Clear Indexes also publishes the Clear Global Exchanges, Brokers and Asset Managers Index which is tracked by the ETF (EXB). Mr. Corn owns shares of (ROB) and (EXB).