WSJ: New Luxury Goods Set Super-Wealthy Apart From Pack

[question everything]

The Wall Street Journal

Making Waves

New Luxury Goods Set Super-Wealthy Apart From Pack

Rising Riches Stir Rivalry For Ever-Bigger Yachts; Waiting for a Maybach
An Echo of Louis XIV's Court

By ROBERT FRANK
Staff Reporter of THE WALL STREET JOURNAL
December 14, 2004; Page A1


(snip)

Megayachts have grown in size from a typical length of 80 feet to 110 feet in the mid-1990s to well over 150 feet today. The market for luxury yachts has more than tripled since 1997, with some boats costing well over $100 million. Dozens of boats longer than 200 feet are now under construction. The most expensive Mercedes used to be the CL600, which cost about $100,000 in the late 1990s. Last year, the Mercedes group, part of DaimlerChrysler AG, introduced the Maybach 62, which sells for more than $350,000. This year, it started selling the SLR, which is priced at over $450,000 and has a long waiting list. Not to be outdone, Volkswagen AG's Bugatti unit is about to introduce a sports car priced at more than $1 million. Watch makers Patek Philippe, Rolex and Breguet are selling watches priced at more than $200,000, and limited-edition watches can now run in the millions.

(snip)


The luxury boom stems from a huge increase in personal fortunes. The wealth held by millionaires world-wide rose to $28.8 trillion as of the end of 2003, according to a separate Capgemini-Merrill study, up 11% from $26 trillion in 2001. That's more than the annual gross domestic products of the U.S., Japan, Germany, France and the United Kingdom combined. Those at the very top appear to be doing especially well recently. The wealth controlled by individuals in North America with more than $30 million in financial assets -- such as stocks and bonds, but not including real estate -- jumped 45% to $3.04 trillion in 2003 from $2.1 trillion in 2002, according to Capgemini-Merrill.

A generally rising stock market over the past decade, soaring executive compensation, higher real-estate values and lower taxes on the wealthy are all cited as explanations for the rising wealth. Also, more and more entrepreneurs who started family businesses after World War II are cashing out because of industry consolidation, creating what private bankers like to call "major liquidity events." Today's instant multimillionaires tend to be younger than the rich of the past, and more likely to splurge on lifestyle goods to differentiate themselves from hoi polloi affluent people.


Edward N. Wolff, a professor of economics at New York University who studies wealth, likens modern-day big spenders to nobles at the court of France's Louis XIV, who reigned from 1643 to 1715. To ensure the nobles' loyalty, Louis continually raised the "entry price" of being in his court, requiring them to wear increasingly expensive clothes and keep larger and larger homes. The nobles' need for greater wealth made them even more dependent on the king's good graces, and left them less money to spend on arms. Today, Mr. Wolff says, it's the wealthy themselves who are bidding up the price of being on top. "For the wealthy to keep their status, they have to compete in terms of luxury consumption," Mr. Wolff says. "The mere fact that this group can pay these prices becomes an indicator of social standing."

(snip)

Yachts do give their owners one important value: exclusivity. Norberto Ferretti, chairman of the Ferretti Group, one the world's top yacht builders, says his customers like the privacy and freedom that comes with cruising on a yacht. Entertaining guests on a yacht is "much more special than just bringing them to your villa," he says. Best of all, yachts separate the seriously rich from the merely well-off. "Rich people can go to a beautiful hotel and pay $3,000 a night for a suite," he says. "The trouble is, when you go down the elevator, you're in the lobby with people who paid twenty times less. My clients don't like that."

(snip)

Write to Robert Frank at [e-mail]

URL for this article:
http://online.wsj.com/article/0,,SB110297517061098911,00.html

[Us vs Them]

1. This is a great article

for reasons to incite class wars.

[Paul Hood]

2. Link only available to subscribers.

Seems fitting considering the subject matter.

[question everything]

3. I know. This is why I try to select the few paragraphs that convey

the message.

[Elwood P Dowd]

4. Time to bring back the guillotine

and storm the castles.

[Us vs Them]

5. Voting against your own interest.

I think it$B!G(Bs pretty fucked up that we live in a system where the richest people in the country spend millions of dollars on millionaire toys, meanwhile some of the poorest people in the country have to literally sign their lives to the Armed Forces in order afford a roof for their family, and THEY BOTH VOTED FOR THE SAME MAN.

[question everything]

11. Just think how many armored vehicles all these

expenses could provide. And jobs of the ones who do the armoring.

[aquart]

6. These people are insufficiently taxed.

[Muzzle Tough]

7. Here's an example of the law of unintended consequences.

I'm a civil libertarian who voted against Bush in 2000 and again in 2004, and I read a lot of the libertarian websites. I thought you might be interested in this:

http://www.worldnetdaily.com/news/article.asp?ARTICLE_ID=22008

Here's the story. It started with the 1990 Omnibus Budget Reconciliation Act, the deal by which the first Bush broke his "read-my-lips" vow to not raise taxes. Seeking money and "fairness," the central planners on Capitol Hill decided to soak the well-heeled buyers of luxury items -- big-ticket furs, fancy cars, aircraft, jewelry and yachts -- with hefty excise taxes.

An extra $31 million per year in "luxury taxes" would flow into the federal coffers said the Joint Committee on Taxation. Instead, the yield was half that, $16 million, and without delay the tax destroyed 7,600 jobs in the yacht industry, 330 jobs in the jewelry business and 1,470 jobs in aircraft manufacturing -- all officially documented by the same Joint Committee on Taxation.

But more than that, the job losses cost the government a total of $24 million in lost income tax revenues and unemployment benefits in fiscal 1991 -- a net loss, on top of destroying careers and businesses, of $8 million!

[Bozita]

8. If not for the rich, we wouldn't even be alive!

You gotta love worldnet.

[aquart]

10. Don't tax the yachts. Tax the rich.

Sales taxes are regressive. Get it off the top of their unearned income. And then tax the excessive bonuses. $250,000 base salary and $17,000,000 annual bonus? Tax the flaming hell out of them.

Executive over-compensation is destroying American business. And creating a class of people who have so much excess that the only thing left to buy is an election.

[Sara Beverley]

9. It's those tax breaks, stupid!

You can build a yacht and charge it off to business!