Hand-painted python handbags, personal submarines and a Warhol for your office. Not only are the rich getting richer, but the things they like to buy are more expensive.
The explosion of wealth in the U.S. can sometimes make CEO pay look like small change. What’s a $200 million dollar severance package for the head of a Dow component when hedge fund managers are making that kind of money -- or more -- year after year. In 2006, the 25 top-earning hedge fund managers in the U.S. brought home an average of $570 million dollars while three made over $1 billion dollars.
Not only are the rich getting richer, they are also growing in numbers. A recent report from Cap gemini shows that the number of U.S. millionaires rose 8.3% to 2.9 million and 9.5 million worldwide. The report also found that “ultra-high-net-worth individuals” – those with investible assets of $30 million or more, rose 11.3%.
The big-money world of private equity is also creating new wealth. According to the Private Equity Council, a $1,000 invested in the top-quartile PE firms in 1980 would have returned $3.8 million to the investor by 2005. Talk about smart money.
And in case you think the recent market tumult will bring a burst of austerity or prudence, think again.
“Anytime the market enters a volatile state or a bear market, there is always a knee-jerk reaction for the wannabe players, to show they are unaffected”, says Marshal Cohen, chief retail analyst with the NPD group. “Big screen TV’s in every room, jewelry, high-end vacations, upgrades to the kitchen – the luxury market goes up”, says Cohen.
Throwing It Away
Forget about owning a Bentley, Ferrari or private jets -- or all of them, for that matter. They're hardly special anymor. The super-rich now spend their vacations in space and have private submarines.
“Especially in a volatile market”, says Cohen, “the young luxury consumers go out of their way to show they are unaffected. The market acts as an instant trigger, as if the money is burning a hole in their pocket.”
The art market, for instance, is has been smoking hot, driven by new buyers, including such Wall Street types as hedge fund managers. Christie’s International this year recorded the biggest half-year sales in art market history. The auction house netted global sales of $3.25 billion for the first six months of 2007. During that time 358 works sold for more than $1 million, compared with 189 during the same period last year.
“It’s all about taking it to the extremes – because you can”, says Stellene Volandes, senior editor of fashion and jewelry for Departures magazine. Volandes says along with art, autos and vacations, the fashion classics are also making a comeback, like designer Oscar de la Renta, who is “synonymous with opulence and luxury”.
Volandes has also seen an explosion in ready-to-wear pieces, “now you can go to Bergdorf’s and get a $15,000 gown off the rack”, she adds.