Contact: Kathie Dibell, Public Relations
717-524-3260; [email protected]
Professor Elton McGoun
Phone: 717-524-3732
Bucknell Professor Likens High Fashion to High Finance
LEWISBURG, Pa., Feb. 19 -- Investors seeking to understand high finance should examine haute couture because finance and fashion styles are often cut from the same cloth, says a Bucknell finance professor.
For starters, there's power and sex, says Elton G. McGoun, associate professor of finance. "Although the couture and investment industries are both interested in profit, profit is not the main motivation for either. Especially at its high end, haute couture, fashion is about the creation or recreation of a self-image of power and sex. And at its high end, professional investment, so is finance."
Some money is sexier and more powerful than other. "Power and sex come from the investment of money, not its consumption; it is not money that matters, but where it comes from," McGoun said. "Thus the successful bond trader is more powerful than the lottery winner, and the international currency dealer has more sex appeal than a dissolute heir."
Finance and fashion are about change, McGoun said. "Both are industries in which change is desirable and where it is possible to profit from anticipating and/or effecting appropriate amounts of it. Popularity must not occur too soon to profit from the original design but soon enough that the original design be recognized as the precedent."
However, when the sales clerks start wearing couture knock-offs or passing along stock tips, it's time to design new dresses or exit the market, he said. "When a design becomes popular, it is no longer fashionable. Likewise, successful investment must be fashion-anticipating. The only way to make money is to take an unconventional position that later becomes conventional -- you believe that the market price ought to change, act upon your belief before it does, and profit when the change occurs. When an investment becomes popular it is no longer profitable."
If the consumers don't have the funds to be big players in either finance or fashion, they can still involve themselves. "If they can't afford an Armani suit, they can at least buy a Gucci tie," McGoun said. "Perhaps we weren't able to buy any of the Netscape IPO, but we can put a few dollars in the Fidelity Technology Fund."
McGoun compares the mushrooming number of mutual funds to designer jeans. "Just as more and more couturiers have been licensing their names to accessories and related products, more and more mutual funds are being created. These mutual funds are labeled like designer jeans -- creating the insidious impression that Dreyfus and Evergreen California municipal bond funds differ, when they are likely to be no more different from Calvin Klein and Bill Blass and marketed the same way."
Consumers can get in on the action even if they don't buy mutual funds or a Perry Ellis scarf by simply fantasizing, McGoun said. "We can read fashion magazines and see ourselves exquisitely dressed in exotic locations or scan financial publications and imagine fabulous success in buying, selling, hedging, speculating -- the financial press as Victoria's Secret catalog for S&P Midcap Index Option fetishists."
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(Editor's note: McGoun's observations on finance and fashion were first made in the International Review of Financial Analysis. He can be reached at 717-524-3732; e-mail, [email protected].)
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