Ultra Wealthy Starting to Spend Again, But Quietly
In an interesting new article Laura M. Holson of The New York Times looks into the current spending habits of the very wealthy. Fed up with pretending to be paupers, bankers and bankers' wives are finally splashing out on luxury items, such as new cars, new vacation homes and jewelry. But with all the fury on Main Street at the huge bonuses being handed out on Wall Street, wealthy bankers are still keeping their luxury purchases on the down low.
Last year, investment bankers and their spouses kept their wallets shut during bonus season, first, out of panic, and later, fearing mobs with torches would descend upon their gated estates.
Now, after a year of self-imposed austerity and in what is shaping up as a spectacular bonus season, the Wall Street crowd is shaking off what one luxury retailer called its "frugal fatigue." Unlike earlier spending sprees, however, the consumption will be a lot less conspicuous.
On Wednesday, Morgan Stanley said it was setting aside $14.4 billion for salary and bonuses, or $235,000 per employee. A day later Goldman Sachs said it would pay an average of $498,000, with top producers at each of the two banks earning in the millions.
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Suzanne Johnson, the general manager of Saks Fifth Avenue's flagship store, said many wealthy customers were suffering from what she called "frugal fatigue." After a year of looking, they are ready to treat themselves. Next month, Saks is holding an event at its Kiton men's wear boutique where made-to-order suits can cost as much as $21,000. It will feature Kiton's craftsmen and is timed to bonus season, she said.
She recalled, too, a couple -- the husband was a banker -- who came in last month and looked at a pair of earrings from the Roberto Coin Cento collection that cost about $5,000. Days later he returned and bought them for his wife. "They are turning 'looking' into an 'impulse buy,'" Ms. Johnson said. "It is about inner self-gratification rather than letting people know how rich you are."
Polls show that Americans are very unhappy with the bank bailouts and the huge bonuses that the bailed out companies' executives continue to receive. Yet at the same time, our economy is driven by spending. After 9/11, for example, many waiters, busboys, limo drivers and other workers became unemployed when people stopped dining out in Manhattan.
Restaurants, hotels, automakers and retailers can't stay open when people -- especially the middle class and the wealthy -- stop shopping, so even more jobs are lost. Which brings us right back to the biggest problem facing our economy today: the lack of jobs. Until more jobs are created, this situation isn't going to improve.
