Friday, June 27, 2008

Global Millionaires - the Shift from West to East

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In October we discussed the Global Millionaire Boom [Oct 18: The Global Millionaire Boom] highlighting the growing concentration of worldwide wealth into fewer and fewer hands - the "Americanization" of the world if you will. What's good for the goose... ?

"What these number disguise is the globalization of inequality everywhere in the world," says Charles Derber, professor of sociology at Boston College and author of Corporation Nation. "This is the phenomenon of the rich getting richer. And it's not a phenomenon to be happy about—that's my reaction."

We truly have entered a gilded age of the haves and the have nots (excellent CNBC special last night by the way - "Untold Wealth - the Rise of the Super Rich")

According to new Internal Revenue Service data announced last week, income inequality in the U.S. is at its worst since the 1920s (before the Great Depression). The top percentile of wealthy Americans earned 21.2% of all income in 2005, up from 19% in 2004, while the bottom 50% of wage earners earned 12.8% that year, down from 13.4% a year earlier.

But even within that dynamic, the US share of global millionaires is slowing as the emerging economies mint the newly wealthy.Reverse Colonization 101
  • The U.S. is losing its market share of global millionaires.
  • The population of millionaires grew five times as fast in emerging markets as it did in the U.S. last year, according to a survey released Tuesday. That was the largest divergence between the U.S. and the big emerging markets since the comparisons were first published in 2003.
  • The number of millionaires in Brazil, Russia, India and China jumped 19% in 2007, compared with growth of 3.7% in the U.S., its slowest growth since 2002.
  • The U.S. still dominates the millionaire economy world-wide. It has more than three million financial millionaires, defined as those with investable assets of $1 million or more. That's up 100,000 from 2006.
  • Yet emerging markets captured the bulk of the millionaire growth last year, with Brazil, China, India and Russia adding 133,000 new millionaires, for an 817,000 total. India's millionaire population grew 23% last year, the fastest in the world.
  • Indians already hold four of the top eight slots on the Forbes billionaire list, while Mexico's Carlos Slim has surpassed Bill Gates to claim the No. 2 spot. Warren Buffett is No. 1; Mr. Gates is No. 3.
  • Mega-yacht makers, once devoted largely to the U.S. and Europe, are now doing a brisk business in Russia, India and Brazil. Burgess, the yacht-brokerage firm, said that emerging markets will probably account for half of its business in five years, compared with about a third today.
  • The numbers point to an economic reality: Tomorrow's rich are more likely to come from the East than the West.
  • The surge in oil and commodity prices, the shift in financial flows to faster-growing emerging markets, the higher savings rates abroad and the decline in the dollar have all fueled a boom in new millionaires and billionaires in countries once known for their extreme poverty.
  • At the same time, America's wealth-creation machine is sputtering because of the financial crisis, debt crunch and decline in real-estate prices.
  • According to the World Wealth Report, wealth is becoming concentrated increasingly among the rich -- especially the superrich. The population of the superrich, or those with $30 million or more in investable assets, increased 8.8% last year globally, while their fortunes grew by a disproportionate 14.5%.
If you are going to invest in the consumer, look overseas ... or find someone catering to the upper 0.5% in the globe. Stress and social acrimony will only exaggerate as global competition among the world's poor and middle class, for resources, will only intensify. Hopefully the ultra rich bless us from behind their walls with some crumbs in the decades to come :)

Go East young man!

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