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Of Jaguars, Jewels, Cosmetics and Coins

AH, the profits of vanity.... Lexicographers link the word ``vanity'' to an excessive regard for one's self, looks, or possessions. And who wants to be considered ``vain?'' But in fact, the financial community has long recognized there are profits to be made from vanity, or, at least, a desire to approximate the lifestyle of the rich and famous. Just ask the folks in the cosmetics industry. But for some businesses - such as sellers of luxury cars, as well as rare-coin dealers and yacht builders - there are new problems resulting from recession.

Cosmetics retain fair appearance

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Americans spent $18.5 billion on cosmetics last year, which social workers note would be more than enough to fund the nation's homeless programs. Moreover, the cosmetics industry continues to grow, though at a slower pace in the recession.

According to a recent report by Alice Beebe Longley, an analyst with Donaldson, Lufkin & Jenrette Securities Corporation, the market outlook for the cosmetics industry is ``favorable.'' She notes that personal care stocks have moved upward with the overall market since last November, with careful marketing on the part of many companies helping to stimulate fair rates of earnings growth. Some companies are eliminating underperforming products, adding a new sheen to their main brands. They are also steppi ng up sales abroad where many individuals are not yet as geared to cosmetics as Americans.

Among the big players in the ``personal care'' market are such firms as Avon Products, Gillette Company, International Flavors & Fragrances (IFF), and Helene Curtis Industries.

Analysts see grounds for some caution. Consider IFF. Brenda Lee Landry, an analyst with Morgan Stanley & Co., recently called for a ``hold'' on existing IFF stock (as opposed to a ``buy'' recommendation), because of weakness in the US economy and slower growth abroad. Still, she believes that 1992 will be a better year for IFF than 1991. Some fragrance products, such as Estee Lauder's ``Spellbound,'' continue to win favor among consumers.

Luxury tax blues

As cosmetics are still selling - though at a slower pace - so are ``big-ticket'' vanity items. But expensive boats, cars, and fine jewelry are facing tough challenges. Jaguar sales were off more than 50 percent during the first five months of 1991, compared with a 15 percent decline for car sales in general. Why? Recession-qualms; less disposable income. Also, Congress imposed a sizable new luxury tax last year as part of a deficit-reduction agreement. The tax kicks in at 10 percent of the purcha se price above certain benchmarks, such as above $30,000 for cars, above $10,000 on furs.

Critics of the luxury tax went to Washington last week to make their case for repeal or modification. Hurting business, they said. Members of the Senate Finance Committee listened dutifully - and then went home. Sen. Robert Dole (R) of Kansas wants to repeal the tax. But according to committee sources, repeal is unlikely this year. And even if repeal got through the Senate, it would have an uphill battle in the more liberal House.

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Slow going for collectibles

The economic challenges facing luxury products are rubbing off on the ``collectibles'' market, according to Salomon Brothers. In its new survey of financial returns by asset class, Salomon finds that tangibles and collectibles (ceramics, gold and silver coins, etc.), now rank at the bottom of their roster - with oil, stocks, bonds, and Treasury bills being hot. The only category of collectibles that has held its own is ``Old Masters.''

``There's a finite number of such art works,'' says a representative of Sotheby's, the auction firm. Italian investors have been buying early-Italian paintings. Besides, she adds, old paintings have ``value'' transcending any particular economic era.

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