Who's made the most money from the Iraq War? One member of Congress last week was naming names — make that one name actually. We have the story in this week's Too Much.
Also this week: We examine the latest money-making scheme from The Donald and take a look at the latest business research on the household distribution of the world's wealth.
Money, they say, can’t buy you health. Good looks? That’s a different story. A new study by the Connecticut-based wealth research firm, Prince & Associates, says that 81 percent of Americans with net worths over $10 million are planning to go under the knife for cosmetic plastic surgery over the next two years. By way of comparison, only 54 percent of millionaires worth under $10 million have cosmetic surgery in their near-term future. Cosmetic surgeons, reports the American Society for Aesthetic Plastic Surgery, last year charged an average $5,263 for tummy tucks and $4,788 for buttock augmentations . . .
Hedge fund billionaire Steven Cohen has shelled out over $300 million on fine art over the past six years. Are deep pockets like Cohen going to keep up that art-collecting pace? That’s the question that has high-
end art dealers in London and New York on pins and needles. Next week marks the opening of the fall art sale season, and auctioneers are worrying that the sub-prime mortgage meltdown — and our current “turbulence in the financial markets” — may be about to pop the art world’s spectacular speculative bubble. One sign of that bubble: Last fall, a New York auction fetched $19.1 million for a Damien Hirst stainless-steel cabinet filled with “6,136 handcrafted and painted pills,” the highest price ever “paid at auction for a work by a living artist.” Hedge fund king Cohen, by the way, already owns a Damien Hirst. He paid $8 million for an artwork made up of “a shark carcass suspended in a tank of formaldehyde.”
Donald Trump has a deal he thinks the people of Scotland can’t refuse. The New York developer wants to build a luxury resort outside of Aberdeen that will feature “the world's greatest golf course.” The resort will also feature 500 million-dollar homes and a 450-bedroom hotel — all on land considered a prime nature conservation site by the Scottish Wildlife Trust. Late last month, locals packed a public hearing to protest the Trump plan. Testified protest leader Michael Foote, a former punk rock record producer: “It is an absolute disgrace that an environmentally sensitive area of national importance should be destroyed to build a gated community for the super rich.” Local officials plan to make a decision on the Trump plan by month’s end . . .
Senator Carl Levin from Michigan has just introduced legislation to plug the tax loophole that generates “huge tax windfalls for companies that pay their executives with large stock option grants.” Under current law, corporations can cost out the stock options they grant one way for shareholders, another — far higher — for the IRS. Levin’s proposed Ending Corporate Tax Favors For Stock Options Act, if enacted, would stop companies from inflating the stock option expenses they deduct off their taxes and raise up to $10 billion a year in new tax revenue. In the process, adds Levin, the bill would “eliminate a tax incentive that encourages corporate boards to hand out huge executive stock option pay which, in turn, fuels the growing chasm between executive pay and the earnings of rank and file workers.” Last year, Fortune 500 CEOs collected 48 percent of their $15.2 million average annual earnings from options . . .
Bad blood between billionaires! Microsoft CEO Steve Ballmer, America’s 16th-richest billionaire, last week ever so politely blasted Larry Ellison, America’s fourth-richest, for overstuffing his pockets. In the fiscal year that ended May 31, Ellison took home over $61 million in new CEO pay from Oracle, the business software giant, and pocketed another $182 million cashing out previously awarded stock options. Ellison is still holding $696 million in stock option gains he hasn’t yet exercised and, on top of that, owns 1.2 billion shares of Oracle stock outright. Ballmer, who owns 4.3 percent of Microsoft’s shares, took home a mere $1.3 million in fiscal '07 CEO pay. With all the shares he owns, Ballmer said last week, he doesn’t need any more big new incentives — and doesn’t see why Ellison needs any either. Ballmer, in an interview, called Ellison’s latest super-sized paycheck from Oracle an “interesting and probably not that considered a decision.”
Inequality
by the numbers
Newly revised!
Quote of the Week
“When you come from a wealthy family, you don’t want to become a doctor and work 18 hours a day.”
Dr. Devi Shetty, one of India's top heart surgeons, explaining why his Bangalore hospital is subsidizing the poor rural families of kids who commit to becoming doctors, Khaleej Times, October 5, 2007
New Wisdom
on Wealth
Peter Wilby, The very rich versus the rich, New Statesman, October 4, 2007. Musings from the UK on why inequality is increasingly becoming a top-tier issue for affluent professionals.
The world’s non-wealthy households haven’t done so well over the last half-dozen years, says a new report released last week by a major global business consulting company.
From 2001 through 2006, reports the Boston Consulting Group, the non-wealthy of the world — those households holding less than $100,000 in financial assets — saw the total value of their assets slightly decline.
Over those same years, the consulting group’s new Global Wealth 2007 documents, total world wealth actually increased, up a brisk 7.5 percent just last year alone
So where did all that new wealth end up? At the top. So far this century, the 16.5 percent of global households with at least $100,000 to invest have seen their assets soar 64 percent in value, to $84.5 trillion.
A huge chunk of that wealth has settled in the portfolios of millionaire households, those families with at least $1 million in “assets under management” — a wealth scorecard calculation that excludes personal residences as well as jewelry, artwork, and other luxury collectibles.
These millionaire households, just 0.7 percent of the globe’s total households, now hold over a third of the world’s wealth. Where will you find these millionaire households? Nearly half hail from North America, with about a quarter from Europe.
The data for the new Boston Consulting Group report come from 62 countries that represent over 96 percent of global GDP. The authors also surveyed 111 wealth managers, who together oversee client accounts worth $9.9 trillion.
The newly released Boston Consulting Group figures match up fairly consistently with global wealth stats released this past June by researchers with Merrill Lynch and Capgemini. That study counted, world-wide, 9.5 million “high net worth individuals” with over $1 million in financial assets.
The Boston Consulting Group, using a different survey methodology, places the global millionaire total at 9.6 million.
Managing the assets of these wealthy, the new Boston Consulting Group report finds, can be an enormously lucrative line of work. The 111 wealth managers BCG surveyed boasted an astounding “median pretax profit margin of 34.7 percent.”
Last Tuesday, at a House hearing on contracting out in Iraq, Vermont Congressman Peter Welch had a simple question. He wanted to know how much the top executive at Blackwater, the most controversial of the Iraq War private security contractors, made last year.
That executive, Erik Prince, didn’t want Welch to know. At last week’s hearing, he refused to reveal exactly how much he has personally pocketed from the $1 billion in federal contracts that have gone to Blackwater since the Iraq War started.
Prince even refused to reveal how much in corporate profit Blackstone has tallied since the war began.
“We're a private company,” the Blackwater CEO disdainfully told lawmakers, “and there's a key word there — private.”
Prince would eventually acknowledge that he took home “more than $1 million” last year. The actual figure, Welch suspects, runs far higher.
“There's probably nobody who's made more money individually on the war in Iraq than Mr. Prince,” the Vermont lawmaker noted after the hearing. “You look at those inflated charges on no-bid contracts and it's pretty clear that the taxpayer is getting ripped off and Mr. Prince is getting rich.”
How inflated have Blackwater’s charges been?
“We know that sergeants in the military generally cost the government between $50,000 to $70,000 per year,” House Oversight Committee chair Henry Waxman observed at last week’s hearing. “We also know that a comparable position at Blackwater costs the federal government over $400,000 — six times as much.”
Waxman’s committee didn’t delve last week into remedies for the deadly fiasco that private security outsourcing in Iraq has become. But the Institute for Policy Studies and United for a Fair Economy, in their latest annual CEO pay report, have an imaginative option to offer.
Congress, suggests Executive Excess 2007, could opt to deny contracts “to all firms that pay their top executives over 25, 50, or even 100 times what their lowest-paid workers receive.”
This past August, Rep. Janice Schakowsky from Illinois introduced legislation that nudges Congress in that direction.
Schakowsky's Patriot Corporations of America Act, now co-sponsored by 14 other lawmakers, would grant preferential contracting treatment and a 5 percent tax break to corporations that meet a variety of good-corporate-behavior criteria.
Among the criteria: executive pay. To be eligible for preferential contracting consideration, corporations would have to provide no executive compensation that “exceeds 10,000 percent”— that’s 100 times — of the pay of the company’s lowest-paid worker.
Stat of the Week
Sixteen Manhattan apartments this year have sold for over $20 million. Another 45 $20 million-plus units still remain on the market. Overall, 3 percent of the apartments sold so far this year in Manhattan have gone for over $5 million.
Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954.
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E-mail: editor@toomuchonline.org.
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