Put another way that means the world lost approximately three times the 2007 U.S. federal budget.

In fact, the revision is even more dramatic given that the report had originally projected that global AuM would reach a record $113.2 trillion.

Aerni, however, emphasized that BCG is bullish in the long term and is "confident that the global economy will come back as it did after the financial crisis of 2001." BCG predicts that global AuM in 2012 will reach an astonishing $138.3 trillion.

One of the more interesting facts presented by BCG is that while the U.S. has far and away the most millionaire households, in 2007 Europe had the strongest growth in millionaire households. From 2002 to 2007, the number of millionaire households in Europe grew 19.1%, whereas in the U.S. it grew 10.2%. For the purpose of the report BCG included the fast-growing regions of Russia and Eastern Europe within Europe.

The region with the second-greatest growth was Latin America, which posted a 15.8% jump in household with more than $1 million in investable assets.

Moreover, there are many markets that are seeing a surge in investable assets. Brazil grew 45.2% between 2006 and 2007, followed by Poland, China, Slovakia and Chile.

The takeaway is that despite the global credit crunch and economic spanking nearly everyone seems to be taking there is still enormous amounts of wealth out there. Let's just hope we don't see too many more years when global AuM sheds more than $10 trillion.

Anyhow, the really useful thing is that in the months I have been doing this I have been reading practically every luxury retailing-related news story printed in English on the net. But, of course, when one reads so much about a single topic one inevitably encounters many different opinions and quite a lot of contradictions. Which takes me, finally, to the subject of this post: Is the luxury retail market in trouble or not?

According to the left-leaning folks at England's Guardian newspaper, it is in deep designer doo doo. A story on August 31, "Luxury brands suffer as rich guard their millions" implies that in London shops such as Armani, Cartier, Louis Vuitton, De Beers and Asprey are seeing a big fall-off in business, a fall-off that will only continue to get worse because there's no way that the uptake in business from developing markets such as Russia, China, et al, can offset the loss in revenue from mature markets like the U.S. Ugh. It looks pretty bad for $5,000 handbag makers.

But wait! Reuters, who keep its political views pretty well under wraps, has a different take. In a story that appeared on August 29, the writer says that "luxury brands show no sign of a let-up in demand." Moreover, as the article points out: "France's Hermes (HRMS), Gucci (GUCG) and Italy's Tod's (TODGF) all published earnings that topped or met market expectations on the back of impressive double-digit sales growth in the first half."

Who to believe?

Like many people, I thought the over-the-top conspicuous consumption that defined the last few years was over. In the wake of our sinking economy, even the wealthy are learning to draw in their horns and keep a more modest profile. That's why the news that French luxury house Hermes (HRMS) has just uncorralled a $490 plush toy horse just seem so, um, gauche.

Don't get me wrong. I am a big fan of Hermes and applaud well-made luxurious items that are designed to be timeless as well as useful. But, I mean, $490 for a little toy horse? This really raises my hackles. It would have been vulgar a few years ago but now it's just downright offensive. Barf.

That means consumers are going to find it much harder to keep on whipping out the Visa to pay for things they can't afford. He points out the affluence experienced by most Americans over the past years was illusory and that in fact the average inflation-adjusted total pay of most of us never increased even though everyone felt rich. As he puts it so well: "Our easy access to plastic is about to dry up - and with it our ability to fake living the good life."

Sure, Saks sells Prada, Jimmy Choo, Oscar de la Renta and a host of other big-name labels but it also sells a lot of other, less well-known brands across a wide range of price points. But unlike brands such as Hermes (HRMS) or Manolo Blahnik (neither of which are sold at Saks), it tries to appeal to too wide an audience. That might have worked when the economy, artificially pumped up by a booming housing market and cheap credit, was roaring along because many of its middle-income customers felt comfortable buying more than they could afford. No longer.

To compound matters, Saks, like many other department stores, became over-dependent on customers who used inhouse charge cards to pay for their merchandise. And believe me, when belts get tightened the first thing many people ignore or choose to pay the bare minimum on is their inhouse charge cards. So that pool of customers has shrunk considerably.

And while many luxury brands, such as the aforementioned Hermes or Jimmy Choo, have actively expanded their reach into developing markets such as Russia and India, Saks remains a purely U.S. play. This has hurt Saks because it is these developing markets that are spurring much of the revenue growth in the luxury fashion and accessories business these days. Another problem, albeit a more psychological one, is that even when Euro-laden shoppers hit U.S. stores they are less inclined to hit the big department stores. The reason? In my opinion it is simply because most shoppers would rather have a shopping bag or a shoe box that says 'Chanel' than a bag or box that says 'Saks,' which has little overseas brand resonance. If one is going on a shopping spree, one wants as much cachet as possible to go with their new purchases.

The last and possibly biggest problem with Saks announcing a wider loss and 3.5% revenue drop-off to $669.2 million is that much of the department store world works on consignment. Company buyers place orders with designers in advance of each season. If the store fails to sell what it orders, that means that it takes longer for the designers to get paid. That in turn makes the designers more wary about working with the store in the future because they have their own bills to pay too. And if Saks suddenly finds itself unable to offer the range or chic its remaining customers expect, they will ultimately go elsewhere. Of course, Saks has been around a long time and has weathered worse storms, but it would seem that if they haven't already, they may want to start looking at commercial space in Shangai and Moscow.

Sales in Europe, the Middle East, Africa and Asia-Pacifc increased 21 percent. And while sales are down in North America and parts of Europe, emerging markets, such as Russia, Turkey and Eastern Europe are positioned for growth.

This must come as more good news to shareholders who have seen the company perform well over the past few years. On Thursday the stock price closed up 13.99% to $51.25. In addition to its flagship brand, it also owns Clinique, Aveda, M-A-C and Bobbi Brown. Even better, the company said that it expects sales to rise between 6% and 8% in constant currency, which implies sales between $8.39 billion and $8.54 billion, and expects profit between $2.57 to $2.72 per share.

It's been a rough couple of years for the label. Founded in 1968 by Jil Sander, it became famous for its minimalist designs and palette, which women found to be stylish, practical and flattering. Even though the company had gone public on the Frankfort exchange in 1989, Sander realized that to keep growing the brand she would need deeper pockets and so in 1999 sold 75% of the company to Milanese fashion giant Prada. But management and creative differences with Prada CEO Patrizio Bertelli --and husband of the company founder's grand-daughter and chief designer Miuccia Prada--led to Sander leaving the company and without Sander the label suffered. When Prada sold it to London-based British private equity firm, Change Capital Partners in February 2006 for an estimated $120 million, the label was heavily in debt and a shadow of its former self.

Today Jil Sander is in better shape and CCP is reportedly looking to unload Sander and profit from its original investment. As Woollard blogs: "Vogue UK reports that Change Capital Partners is looking for offers off around 200 million euros which is believed to be double what they may have bought the company for. This on a company that, for the year ended January 31, announced profits of 6 million euros on sales of 131 million euros."

The question, of course, is who would buy it? Another private equity group is unlikely--unless they already owned other labels that they could then combine their holdings together and sell the whole thing off at a premium. Permira Advisers, which owns Valentino Fashion Group, comes to mind. But more likely might be one of the big luxury conglomerates, such as Moet Hennessy Louis Vuitton (LVMH) or PPR SA (PRTP), which might see Sander as a good fit to their existing stables. One of the reasons why the Prada relationship fell apart was that Sander disliked the strategy it was taking by developing secondary lines and a bridge collections, two courses she had always opposed. But with Sander gone and the company performing well under the creative direction of Raf Simons, that is no longer a concern to potential acquirers. A third possibility is that Sander herself may step back in, with third-party backing, to retake control of her eponymous brand.

The New York City-based company reported that revenue rose 20% to $781.5 million from $652.1 million last year. Excluding the benefit of a weaker dollar, sales rose 16%. Thanks to strong sales and a weaker dollars, profits for the quarter ended June 28 rose to $213.5 million, or 62 cents per share, from $160.6 million, or 42 cents per share last year.

Despite saying that the quarter showed the company's "ability to generate profitable growth in challenging times," Reuters also reported CEO Lew Frankfurt as saying: "'While our new fiscal year has just begun, we believe that the consumer malaise in the U.S. will remain well into calendar 2009, significantly impacting our business.'" He added: "'Accordingly, we will plan cautiously until we see concrete evidence of a change in consumer behavior.'"

That's the good news. The company, which has enjoyed a good run over the past few years, has steadily moved its image increasingly upscale, a move which seems to have benefited their performance as many mid-tier companies struggle. In recent days top-tier luxury companies such as LVMH, Hermes, PPR and Richemont have all announced strong earnings in the last quarter.

But Coach still doesn't quite fit in with these companies and others at the high-end of the luxury scale because the price point on its products tend to trail behind the Fendis, Pradas and Guccis of the world. It's a paradoxical way of thinking, because one would assume that in tough times people would gravitate towards less expensive products that still offered good quality. But so far that doesn't seem to be the case. That's because it's the middle range consumers and below who are being hardest hit. The wealthy, for the time being at least, whether in Moscow, Mumbai or Manhattan, are still buying the brands they always have. And, as I have blogged out before, the high end brands have more cachet than ever now because unlike in the past, only the truly well-off can afford them.

The wine & spirits division includes some of the world's most high-end brands such as Dom Perignon, Moet, Hennessy, Chateau d'Yquem, Krug, Veuve Clicquot, Ruinart, Belvedere and Chopin vodkas, and Glemorangie single malt whisky. LVMH also owns Fendi, Dior, Louis Vuitton, Tag Heuer and Marc Jacobs, among others.

In trading on the Paris bourse, the company's share price fell 0.41% to €68.03.

But the concern is that Gucci, which accounted for slightly over 6% of sales in Q2 and is PPR's most high-profile luxury brand, is still struggling to re-establish itself as a top tier fashion house. As Sara Gay Forden, author of 2001's House of Gucci(HarperCollins), writes on Bloomberg: "The return of profit momentum doesn't necessarily mean a revival in the label's cachet." These issues stem from the well-publicized departure of former chief designer Tom Ford and group CEO Domenico de Sole in 2004 over disputes concerning creative control. The team of Ford and de Sole returned Gucci to profitability after years of losses and also made it one of the hottest fashion brands in the world.

In addition to the absence of a dominant designer like Ford--Frida Giannini, who joined Gucci as handbag design director in 2002, is currently creative director--there are two areas of concern: first, is the perception that brand is trying to use its high-end identity to flog more middle-price products. Canvas GG Joy purses and bags, introduced in 2007 and which sell for around $540 or so a pop, have earned the scorn of many in the fashion world who regard them as unworthy of the brand.

Second, is Gucci's small foothold in developing markets such as China and India. While the company has plans to expand in these nations, it is still overly dependent on the U.S. and Europe for the majority of its sales. Chief rivals Moet Hennessy Louis Vuitton (LVMH), Hermes (HRMS) and Richemont (http://investing.businessweek.com/research/stocks/snapshot/snapshot.asp?symbol=rifz) have already established solid beach-heads in these booming economies and have seen a commensurate rise in sales.

PPR SA's shares finished the day on the Paris bourse at €66.60, up 5.25% on volume of 1.3 million.

But like its competition Moet-Hennessy Louis Vuitton (LVMH) and Richemont, investors don't seem particulary pleased with Hermes' news. Despite strong sales, LVMH's share price is down about 12% from a high in May and Geneva-based Richemont (RIFZ), owner of Cartier, Montblanc, Alfred Dunhill and other luxury brands, saw a sharp drop in June and July before rebounding slightly. Hermes saw its shares fall back 6.96% today.

One of the reasons for investor concern is that there has been much speculation recently over a possible sale of the company. However, at the annual meeting in June the Hermes family, which controls the majority of the company's voting shares, reiterated that it was not for sale. But the other concern, and this is what it shares with it LVMH and Richemont, is that it is impossible to know how the long good times will last.

To be sure, Hermes has done a terrific job of managing its business and brand but it remains to be seen if they will be able to continue to post such strong growth for the third and fourth quarters--and beyond. It is entirely possible that on the strength of demand from the still-wealthy and developing economies, the second half of 2008 could be as rosy as the first but because the company does not issue forecasts, investors cannot be blamed for striking a cautious tone.

One of the primary attractions for these yachts is that because labor is much cheaper than in Europe, which is still the dominant player in the yacht-building business, so are the yachts. Of course, cheap is a relative term: a 12-meter yachts still sells for around $12 million.

But what is most interesting is that many Asian buyers have been extremely brand-conscience, usually preferring to opt to pay more for the status of owning a well-known brand than a less-pricey version. Could it be that as more Asians are becoming wealthier they are trusting their own tastes more and feeling more confident about their luxury purchases? If that is the case, will European and American brands be able to maintain their cachet in Asia, or will Asians begin to prefer buying locally and spending less? If that's the case, it could be worrying for Western luxury companies that have expanded so rapidly in Asia and which recently have grown more dependent on Asian consumers to drive their bottom lines?

On the other hand, as the IHT points out, with lower prices comes lower quality. And that is something that demanding customers, wherever they live, won't tolerate.

Burberry's stock price is unfashionably up.

British fashion-house Burberry Group PLC (BRBY) continues its stellar 2008. Back in May it announced that it had posted a 15% gain in second-half profit, and now for its third quarter it has reported that revenues were up 14% and that retail sales had increased 4.5%. That's great news but what makes it truly remarkable is that its success is derived primarily from increased sales in the U.S. at a time when many other luxury brands are struggling in the States. Kudos to CEO Angela Ahrendts. Her strategy to expand in the U.S. is clearly paying off.

I was skeptical about both the brand and the strategy when I blogged about it in May. But clearly many well-heeled fashion fans dig what the company is doing. Shareholders are digging it too. The company closed up 4.63% to 440.75 p on the London Stock Exchange.

The problem is that the Dow sank below 11,000 for the first time in two years this week. While it climbed back above that mark today it still means that billions of dollars in wealth has been wiped out around the world since its high of 14,164 on Oct. 9, 2007. That means that even the wealthy are more likely to feel the economic pinch that had previously been felt primarily by those hurt by the real estate slump and the ensuing credit crunch.

The presumption when the economy first began to tumble was that at the very top life would continue much as before, with the uber-wealthy still shopping at Cartier, buying Ferraris, summering in the Hamptons and traveling first-class. These people, the reasoning went, would be unaffected because they were already so rich.

But now many of them are a lot less rich than they had been before. Sure, for those lucky enough to be worth a billion or more that will probably remain true (although some of them may be a little more quiet about it). But for others, especially retirees who believed their nest eggs were large enough to ride out the biggest storm, that may no longer be the case.

And while the Richemonts of the world can still actively develop new markets in rapidly growing states like China, Russia, India, Dubai and others, the loss of revenue from "mature" markets like the U.S. and the EU will cause them real pain. After all, nearly every luxury brand in the world counts the U.S. as its No. 1 market. If sales here slip meaningfully, they won't be offset anytime soon by their newer markets. (And a weak dollar doesn't help either.) To be sure, these areas will continue to grow--and it's a good bet the U.S. will come back--but it's likely that before then there will be some shakeout in the luxury industry. Some brands will survive, some won't, and still others will be acquired for cheap. What will be interesting to see is whether the luxury sector's newest clients could one day become its newest owners.

If anyone has any hunches about which ones will make it and which ones will fall, please leave a comment below.