I'm sure its been a matter of grave concern to you that the rich are not quite so rich as they were in 2007 before the Financial Crisis of 2008. You can rest assured, for the wealthy are on the rebound. The New York Times is all over this important story—The Well-Off Are Spending Again, But Carefully.
“People are fed up, and they want to have a good time,” said Rina Anoussi, a Manhattan travel agent who handles high-end clients. They don’t want Italy 101. They want more exotic destinations like Kenya and Tanzania.”
But Ms. Anoussi, who operates her own company under the Tzell Travel Group, said her customers were still wary about overspending. They “argue like carpet dealers in Istanbul looking for the best deals,” she said. “They want to know, ‘What can I get if I book through you.’”
Although most of you are not going to be traveling to exotic locales anytime soon, there is an infinitesimal chance that you will profit from the rich spending more money again. After all, they have almost all the money, and according to a theory called Trickle Down Economics that was very popular early in our Imperial Decline, some of this cash may flow through the economy and reach your front door. Ronald Reagan, a "B-movie" actor who played "the Gipper" in Knute Rockne All American, was a big believer in the salutary effects of trickle down. George W. Bush revived the theory early in the last decade.
For example, you may be an unemployed machinist who makes specialty parts used in motorboat yacht engines. So news like this should cheer you up considerably—
Business is also creeping back for hotels, yacht rental companies, jet brokers and jewelry stores — purveyors of the luxury goods that once seemed immune to a downturn but then took a megahit with the economy.
At Sabre Yachts in South Casco, Me., a good year once meant building and selling about 180 luxury sailboats and powerboats priced from $400,000 to $1.5 million. Last year, sales sank to well below 100, said Daniel Zilkha, who has owned the company for 15 years.
“This was by far the worst downturn since the luxury tax nearly wiped out the boat builders in the very early 1990s,” Mr. Zilkha said. “Business is picking up relatively slowly, but it feels as if the recovery has substance.” This year, the company expects to build as many as 120 boats. The yacht charter business was similarly hard hit last year and is also starting to show signs of life for the coming summer, when wealthy customers want boats to cruise in the Mediterranean. Still, Shannon Webster, who runs a charter business in Flagler Beach, Fla., described the current climate as a “Mexican standoff because smart buyers know they can wait a bit and boat owners are evaluating what they may have to give up to get customers.”
“Everybody has cut back somewhat,” Ms. Webster said. “Even people who rented a 225-foot boat are saying, ‘Can I get something that is 50 feet shorter?’ “
The bonanza does not stop with a surge in yacht building. The Times (via the AP) also notes that Wall Street Has returned Triumphant to the Hamptons.
Wall Street’s elite are once again splurging on multimillion-dollar estates in the Hamptons — Long Island’s summer playground for the ultrarich — where sales have more than doubled over the past year, The Associated Press reported.
In a report released Thursday, Prudential Douglas Elliman Real Estate found that home sales in the Hamptons in the first quarter of this year were up 173 percent over the same quarter in 2009. The agency also found that the median sales price on the 396 homes sold rose almost 35 percent to $908,500 from the same period a year ago. For homes priced in the top 10 percent of the market, the median sales price increased about 34 percent from the same period a year ago to $5.48 million.
”It’s as active in the Hamptons as I have ever seen,” Alan Schnurman, a high-end real estate developer, told The Associated Press. ”It has to be because of Wall Street. You have these young billionaire hedge fund managers who all want to buy.”
Even if you don't profit directly from the spending of the rich, you will certainly profit indirectly from their purchases of luxury estates and really big boats. Consider this:
Suppose a $1000 new dollars are spent in the economy during the 1st quarter. Perhaps the 80% of us with 15% of the wealth spent $100 less—it was a tough 3 months—but the 20% of us with 85% of the wealth spent $1100 more. More spending means a bigger GDP, and a bigger GDP means we're all better off.
So if the rich are on the rebound, it's Good News for all of us. It's just that stupid simple.
Comments