Why the Wealthy Are Worried About the Economy

Posted: 17 Apr 2012 12:19 PM PDT

By most accounts, the wealthy should be feeling great about the economy and their finances.

: Everett Collection

Stock markets are still up for the year. Incomes for the highest earners are rebounding to pre-crisis levels. There's little sign that Congress will raise their taxes. And the top one percent of earners captured 93% of the income growth in 2009 and 2010, according to Saez-Picketty.

And yet, the wealthy remain downbeat on the economy. According to a new report from Spectrem Group, 80% of millionaire investors (those with $1 million or more in investible) cited the sluggish economy as a concern in the first quarter of 2012 compared to 70% in the same period in 2011.

Among investors with more than $5 million in investible assets, the top concerns are a little different. These penta-plus investors cite the national debt (82%) and the contentious political environment (80%) as the chief concerns, followed by the economy.

More than 60% of the $5 million-plus investors are worried about maintaining their financial position – way up from 44% last year. The number of penta-plus and millionaire investors who say they “feel wealthy” is also down form last year.

Taxes are weighing on the minds of both wealthy and affluent investors. Fully 70% of the $5 million plus investors are worried about higher taxes, and 65% of millionaire investors are worried. On the flip side, a minority in both groups plan to change their investments based on tax increases.

“With the unemployment rate remaining high, the continuing volatility in the stock market and gasoline prices, and a high-stakes presidential election looming, wealthy investors are anxious about the country's outlook,” said George H. Walper, Jr., president of Spectrem Group.

All of which makes sense for average Americans. But shouldn’t the wealthy be feeling better?

In the end, the survey points to one of the strange disconnects between Richistan and the rest. While the wealthy appear to be doing well from the outside, they remain anxious and pessimistic on the inside.

No More Nouveaux Bordeaux for Nouveaux Riche

Posted: 17 Apr 2012 09:48 AM PDT

One of the more rarefied markets of the rich is the “en primeur” system, also known as the wine futures market.

: Bloomberg News; A bottle of 1863 Chateau Latour

Each year, French chateaux sell vintages just months after the grape harvest, with the wine still in barrels. Merchants and investors buy the futures and take delivery of the barrels years later, when the wines are more mature and closer to drinking age.

The system was originally created to give chateaux money to finance their next year's wine production. But like many of today's trading markets, “en primeur” has become financialized, prone to wild speculation, manic price swings and over-pricing. As wine prices have soared in recent years, the system also cut the producers out of some of the gains, since they're essentially pre-selling their wines.

Now, one of France's more elite wine-makers is pulling out. Chateau Latour said it is no longer going to offer its wines to the “en primeur” system. Instead it will hold them until years — perhaps even up to a decade — after production.

It's stated reason is that too many of the newly rich in Asia are drinking Latour wines before they're mature. Apparently, the thought of a rich Hong Kong wine-buyer quaffing a 2009 Latour with their dumplings was simply too much to bear. So Latour is holding its wine until its time.

“From the 2012 vintage onwards, our wines will only be put on the market when they are ready to be drunk,” Frederic Engerer told the press. “Unfortunately, our wines are all too often drunk young. They keep for a long time and there is no point opening them too soon.”

Yet money is clearly a factor. The 1982 vintage Latour sold for about $400 a case en primeur. Now each bottle is selling for more than $1,000 – a 30-fold gain that went largely to investors and merchants, rather than Latour.

With so many newly rich Asians paying so much for the blue-chip wines, it's only a matter of time before the other top wine-makers also demand more of their cut.

How do you think newly rich Asians are changing the wine market?