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Markets

Don't Get Left Holding the (Hand)bag

Are handbags the tea leaves for the stock market? Or is it the other way around?

Some investors may be sweating over the gyrations in stocks and bonds, but others are fretting about the latest fashion statement in calfskin or crocodile. Ladies with portfolios -- er, closets -- full of the latter have come to view them as storehouses of value, much the same way an Old Masters collector looks at a Rembrandt. Prices are obscene. In December, a Hermes crocodile Birkin fetched $37,000 on Portero.com, a luxury-goods auction site.

Now, economic uncertainty clouds the outlook for handbags, just as it does for stocks. "The era of the it bag -- the one everyone has to have -- has waned," says Stephanie Phair, a vice-president at Portero. Indeed, stock in luxury-handbag maker Coach (symbol COH), after hitting a high in April, is down more than 30%. Are handbags the tea leaves for the stock market? Or is it the other way around?

"Historically, luxury goods bubble at the end of a long advance in the stock market," says Paul Montgomery, of Montgomery Capital Management. When interest wanes in the signature item of an era, it's time for circumspection in the stock market, too.

Though cautious, we're not abandoning stocks. But if you're thinking of recouping capital invested in handbags, now is a good time. Says Marshal Cohen at market research firm NPD Group: "Sell them now or wait 20 years to see them reach the peak they're at right now."