Published: Tuesday, August 5, 2008
Even the wealthy feel pinched
The rich are asking personal shoppers to look for bargains
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Associated Press
Private jet broker Justin Sullivan, on board a Gulfstream IV he leases, has noticed that some wealthy clients have switched from private jets to smaller propeller airplanes and are picking up sandwiches on their own instead of having in-flight meals catered.
The rich are sharing your financial pain -- and contributing to it.
It may have taken longer and it may not be as acute, but there are early hints that the economic slump is crimping the lifestyles of the wealthy.
They are investing more conservatively, spending less on luxury goods and are being more thrifty with their credit cards. Many are asking their personal shoppers and private-jet travel providers to seek deals rather extravagances.
That news may produce a shrug from many people who have lost their jobs or homes in this economy. The problem is that when the wealthy get stingy, it trickles down to the rest of us.
"It's a sluggish economy, and its difficulties are felt all over," said Joseph DiRenzo, a married 38-year-old father of three who left a hedge fund two years ago to enter commercial real estate.
DiRenzo says he's feeling the hit in many places, especially in the value of his six-bedroom, seven-bath house on Long Island's upscale Gold Coast in Muttontown, N.Y. He has cut the price twice in the 12 months it's been on the market. It can now be had for $7 million.
To be sure, the poor and middle-class are being hurt more, but upper-crust thriftiness could reverberate across the rest of the economy.
The 10 percent of households with the highest incomes account for nearly a quarter of all spending, according to data compiled by research firm Moody's Economy.com from a 2006 federal survey.
Other government data show households in the top one-fifth of the U.S. population ranked by income earn about half of all total personal income before taxes -- an imbalance that gives the wealthy immense economic clout, said Sara Johnson, an economist at the research firm Global Insight.
It doesn't help when the rich are also pinching pennies.
"A lot of our clients stop by a deli on the way to the airport, rather than have a catered meal on the plane" costing $50 per boxed lunch, said Justin Sullivan. Sullivan is the founder of Regent Jet, an Andover, Mass.-based broker that buys blocks of aircraft time to trim costs for high-end clientele whose multi-leg itineraries can sometimes exceed $100,000.
Trevor Gilman, a professional pilot, says his charter service out of western Massachusetts' Berkshires Mountains has flown about half as many miles so far this year compared with the same time last year. Consequently, the service hasn't replaced a handful of employees who recently found other work or retired.
Unity Marketing, a Stevens, Pa.-based firm whose clients include retailers in the more than $322 billion U.S. luxury goods market, said its latest poll of affluent people nationwide found a 20 percent decline in spending on luxury goods in this year's second quarter, and the lowest luxury consumer confidence level in the nearly five years the survey has been conducted.
For most Americans, the choice has been whether to give up small indulgences to help defray the rising cost of food and fuel.
For the wealthy, the choices have been different.
"People are examining, 'Do you keep the yacht, do you go to the classic car auction, do you take the private jet?'" said Joseph Montgomery at Wachovia Securities. "Those sound like nice problems to have, but at the same time, they are issues."
It may have taken longer and it may not be as acute, but there are early hints that the economic slump is crimping the lifestyles of the wealthy.
They are investing more conservatively, spending less on luxury goods and are being more thrifty with their credit cards. Many are asking their personal shoppers and private-jet travel providers to seek deals rather extravagances.
That news may produce a shrug from many people who have lost their jobs or homes in this economy. The problem is that when the wealthy get stingy, it trickles down to the rest of us.
"It's a sluggish economy, and its difficulties are felt all over," said Joseph DiRenzo, a married 38-year-old father of three who left a hedge fund two years ago to enter commercial real estate.
DiRenzo says he's feeling the hit in many places, especially in the value of his six-bedroom, seven-bath house on Long Island's upscale Gold Coast in Muttontown, N.Y. He has cut the price twice in the 12 months it's been on the market. It can now be had for $7 million.
To be sure, the poor and middle-class are being hurt more, but upper-crust thriftiness could reverberate across the rest of the economy.
The 10 percent of households with the highest incomes account for nearly a quarter of all spending, according to data compiled by research firm Moody's Economy.com from a 2006 federal survey.
Other government data show households in the top one-fifth of the U.S. population ranked by income earn about half of all total personal income before taxes -- an imbalance that gives the wealthy immense economic clout, said Sara Johnson, an economist at the research firm Global Insight.
It doesn't help when the rich are also pinching pennies.
"A lot of our clients stop by a deli on the way to the airport, rather than have a catered meal on the plane" costing $50 per boxed lunch, said Justin Sullivan. Sullivan is the founder of Regent Jet, an Andover, Mass.-based broker that buys blocks of aircraft time to trim costs for high-end clientele whose multi-leg itineraries can sometimes exceed $100,000.
Trevor Gilman, a professional pilot, says his charter service out of western Massachusetts' Berkshires Mountains has flown about half as many miles so far this year compared with the same time last year. Consequently, the service hasn't replaced a handful of employees who recently found other work or retired.
Unity Marketing, a Stevens, Pa.-based firm whose clients include retailers in the more than $322 billion U.S. luxury goods market, said its latest poll of affluent people nationwide found a 20 percent decline in spending on luxury goods in this year's second quarter, and the lowest luxury consumer confidence level in the nearly five years the survey has been conducted.
For most Americans, the choice has been whether to give up small indulgences to help defray the rising cost of food and fuel.
For the wealthy, the choices have been different.
"People are examining, 'Do you keep the yacht, do you go to the classic car auction, do you take the private jet?'" said Joseph Montgomery at Wachovia Securities. "Those sound like nice problems to have, but at the same time, they are issues."
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