Luxury jewelry store chain Tiffany & Co. (TIF) is trading lower today as Wall Street awaits its fourth quarter earnings report on Monday, but by most accounts analysts are expecting to see strong earnings from the company.

Going into Monday's earnings report, analysts are forecasting the company to report $1.13 a share. For the same period last year Tiffany had earnings of $0.85 per share, so if it is able to match analyst estimates it would mark a very respectable 32% jump year over year.

The hotel market may be straining in the United States and Europe under the weight of new capacity financed during the real estate boom, but the situation is much different in Latin America.

According to travel industry research firm PhoCusWright, international, regional and independent hotels are popping up all over the continent, with both large and small projects in the works to tap into growing demand in the region. In the cities, where it's tough to find real estate, old neighborhoods are "reinventing themselves," PhoCusWright reports, in order to take advantage of the market's potential.

Coach Inc. (COH) is one of those plays that makes you smile, due to its sweet-spot market position, and it goes without saying that I'm reiterating my buy rating for the company's shares, first recommended on April 13, 2009, at a price of $18.22.

If you bought COH in April 2009, you're up an impressive 90%. If you didn't, don't fret: there's more upside ahead with Coach.

The first estimates for the holiday shopping season have come in. MasterCard (MA) Advisors unit SpendingPulse, which tracks retail spending, puts the result at a year-over-year increase of 3.6%. This includes all form of payment and does not factor in gas and auto sales. The increase comes relative to the 2008 holiday season, which was the worst season in decades for retailers thanks to the global financial crisis.

Says Kamalesh Rao, director of economic research at SpendingPulse, "Last year the economy and consumer spending were in free fall. This year we're talking about an environment that has stabilized, that has seen a leveling off." But, that doesn't mean it's turned the corner yet. Holiday spending isn't enough to cure what ails us.

It's time to re-enter the retail sector, from an investment standpoint, but only selectively, and a good starting point is Williams-Sonoma Inc. (WSM).

The argument here is that higher-end retail chains like Williams-Sonoma will bounce back sooner than general consumer retail. Hence, the "frugal consumer" trend remains in force, but high-end consumers, encouraged by a recovering U.S. economy, will start to part with a few more bucks at the mall in 2010.

Upscale shoppers aren't doing enough for Saks (SKS) this holiday season. The luxury retailer, which has been struggling with sales for the past two years, is moving into less expensive products as a way to bring customers in the door, even though it's putting its brand at risk. If the wealthy continue to stay at home, Saks will have to look for revenue where it hasn't had to play in the past.

Brand experts, according to a Reuters report, don't think it's a good idea for Saks to stray from its traditional area of expertise. Pushing lower-priced items and using gift cards and coupons to bring people inside -- not to mention discounting -- could cost the company in the long term. Milton Pedraza, chief executive of the Luxury Institute, told Reuters, "All these tactics erode the halo effect of a luxury brand."

MasterCard Advisors (NYSE: MA) service SpendingPulse says luxury and electronics sales headed upward last month, in a pleasant deviation from what became the norm all too long ago. A few other product categories posted gains as well – showing stability, if not a recovery. But, at this stage of the game, we'll take what we can get, right?

Luxury sales, not including jewelry, gained 3.4% year-over-year – that's an increase of $891 million. Last September, luxury goods suffered a 9.4% decline. Yet, this category is still below its September 2005 level of $94 million. Jewelry sales gained 1.2% relative to last year, compared to a year-over-year decline of 5.8% a year ago. Compared to apparel sales, this is a profound turn. In September 2008, the clothing category was off 5.7%, and this September, it was down only 2.9%.

Bain & Co., a leading consulting firm, estimates that luxury goods sales will fall 20% in the first half of 2009 before stabilizing in the second half. In all, Bain expects luxury goods sales will fall 10% for the year. In October, Bain was forecasting a drop of just 7%, but conditions have deteriorated quite a bit since then.

The Wall Street Journal reports (subscription required) that "The U.S., which accounts for roughly a third of luxury-goods sales, is one of the worst-hit markets. Bain expects U.S. sales of high-end clothing, accessories, tableware, cosmetics and jewelry will drop by 15% this year. That compares to expected sales declines of about 10% in both Europe and Japan."

At the beginning of every downturn, it seems that some analyst claims there is a haven for luxury retailers, still, especially the classic retreats of the very, very rich -- like Tiffany & Co (NYSE: TIF). And then: reality. In this current era, "reality" equals the collapse of many of America's most storied financial institutions; the companies whose deal gifts and corporate tokens were, more often than not, wrapped in Tiffany's iconic blue ribbon.

With far fewer investment banks to hold Christmas parties and bonuses not rolling as they typically do, shoppers, it seems, avoided pricey baubles as gifts. Holiday sales were down 21%, Tiffany reported today, and it lowered its forecast for the fiscal year's earnings, down to a range of $2.25 to $2.30 per share. Its fourth quarter ends on January 31, and Tiffany CEO Michael Kowalski expects the depressed luxury retail environment to continue well into fiscal 2009.

This comes following a late November prediction that 2008 EPS would come in as much as 28 cents below analyst's estimates, between $2.30 and $2.50 a share.

Tiffany's stock sank as much as $2.00 per share on the news during the day, but by market close, had rebounded to only a few cents' decline, down 0.23% to $21.95. This may be a buying opportunity, however; after having recorded a five-year low of $16.75 in November, the stock has been climbing slowly up from its nadir. Will luxury look to have its heyday again? Perhaps.

Mastercard (NYSE: MA) has a little unit that looks at consumer spending every month. The view from there is pretty ugly.

According to The Wall Street Journal, "MasterCard SpendingPulse says luxury sales dropped 20% in October from a year earlier." Put another way, the rich are getting poor. Spending on all goods costing more than $1,000 dropped considerably.

The rich are supposed to be able to keep a little money on hand for the holidays. In all likelihood that money was in the stock market. Or, some of the people who drive BMWs lost their jobs as Wall Street has downsized.

What do the numbers say about the middle class and poor? One can guess, that with personal income running flat to down, they will not even be able to buy coal to put in their stockings this holiday.

Santa may as well stay at the North Pole.

Douglas A. McIntyre is an editor at 247wallst.com.

While big ticket luxury may be a bit of a stretch for many investors right now, small luxuries are still within reach. Rocky Mountain Chocolate Factory (NASDAQ: RMCF) stands ready to provide sweet relief from bitter financial news. RMCF manufactures an extensive line of premium chocolates, fudge and other confectionary marvels. It also franchises stores to spread temptation far and wide. The company reported 1Q 2009 record sales of $26.6 million, up 2.4%. Net earnings declined by slightly more. The end results is flat diluted EPS of $0.16.

RMCF continues to expand its franchise model. The company opened 8 new franchise locations in 1Q alone, and plans to open a total of 35-40 new franchise locations in FY2009. Franchise, royalty and marketing fees helped counteract the negative effects of sharp cost increases for chocolate and sugar. The company has no current plans to increase franchise fees given the tough times in the retail sector. Nor will the company provide FY2009 guidance, citing macroeconomic uncertainties. The company did declare its 20th straight quarterly dividend of $0.10. The stock trades right around $9, down 50% from its 52-week high of $18.04. RMCF may be a viable stock for bargain investors. No matter the state of the economy, chocolate is NOT a discretionary purchase for some people. Just make certain that due diligence includes extensive sampling of the entire product line. Expand your portfolio and your waistline at the same time.

Shares of companies like Coach (NYSE: COH) were flying high when more people than ever were flocking to waste their money on stuff they couldn't afford.

Right at the top of the market, predictably, all the lower-end retailers thought they'd get into the act. Gap (NYSE: GPS)'s Banana Republic introduced a high-end line, and so did Coldwater Creek (NASDAQ: CWTR), Cache (NASDAQ: CACH) and AnnTaylor (NYSE: ANN). According to the Wall Street Journal (subscription required), the economic downturn gave the companies a strong rebuke. Cache is closing some of its Cache Luxe stores and Coldwater Creek is giving up on its high-end aspirations.

But I don't think it's the economic downturn that doomed these product launches. Luxury clothing is in a tough spot, but it's certainly fared a lot better than upper-middle market companies like Liz Claiborne (NYSE: LIZ) and Coldwater Creek. Rather, I think companies are using a pretty familiar tactic: blame failed strategies on the economy and minimize the impact of tactical errors made by seven-figure executives.

Here's why the strategy failed: taking a brand and raising the quality/price-point is extremely difficult. The reverse is easy, but trying to convince people to pay Coach-like prices for Banana Republic clothing -- even if it's of similar quality -- is a strategy that's destined to fail. Banana Republic has established itself at a certain price point and while people would be thrilled to get the brand at a lower price, most people willing to pay more will want a bona fide luxury label.

The conventional wisdom is that luxury couturiers tend not to be impacted much by broader economic woes. The high-end consumer they cater to isn't likely to be impacted to the point that they cut back on their Coach, Inc. (NYSE: COH) and Louis Vuitton.

But that not be so true anymore. As luxury goods have found a wider audience, the financial status of their average consumer has declined. Now a lot of people are buying this stuff who can just barely afford it, or can't afford it. If you called Suze Orman on her "Can I afford it?" segment and asked if you could put a Coach bag on your credit card, she'd probably use her magical powers to have you struck by lightning. Unfortunately, it seems that many people are buying luxury goods this way.

MarketWatch reports that "After three consecutive years of double-digit percentage growth, retailers that cater to those shoppers are suddenly dealing with leaner forecasts. Now their sales are on track to rise only 4% to 7% this coming holiday season, according to the Luxury Institute, a New York-based research group."

This is great news. You have to be a complete moron to be buying Coach bags if you earn $60 thousand a year, the average household income of the lowest quarter of the company's shoppers. Apparently people were getting high off of soaring home prices and, now that they're declining, they're realizing that the party is over.

The shift in recent years toward a larger group of less affluent shoppers buying luxury items changes the profile of these stocks. They're no longer something you can count on to stay strong in the face of broader economic weakness.

The rapidly developing economies led by China, India and Russia, are making the folks at jeweler Cartier salivate with even grander plans to promote themselves as the world's premier jewelers. They have unveiled bobbles and bangles suitable only for the super wealthy. In the past, this might have been the territory of the U.S., Western Europe, Japan and the Middle East. But the game has changed.

Cartier is not the first luxury house to look east. A Japanese or Chinese aesthetic has starred in collections from Giorgio Armani to Aquascutum, while the craze for embroidery and pattern filling runways owes a debt to India. ... The reasoning is clear: the wealth of the world's richest people -- who have at least $1 billion ready to invest -- rose to $32.7 trillion last year, up 11.4 percent, with China and India leading the way, the latest Merrill Lynch Cap Gemini World Wealth Report showed.

It's a sad tale. According to a piece in today's New York Times, hedge fund managers and private equity titans aren't spending big for palatial mansions like they did just a few months ago.

The problem? The threat of increased taxation on private equity could mean a sharp decline in paydays. In addition, hedge funds have provided lackluster returns of late and there is a growing realization that the enormous fees make it very difficult for most to outperform the market.

The recent draw-downs have shaken the confidence of some managers: When your fund is trailing the market, you might feel weird going out and buying a $70 million penthouse. Even though they're still fabulously rich, their confidence and swagger is gone: it's a psychological thing.

Some large funds even have psychologists/psychiatrists there to help their traders/managers!