WhyDo the Ultra-Wealthy Matter to Us?

Theultra-wealthy populate the highest levels of the public and private sectors. Inrecent decades they’ve increasingly collaborated into omnipresentpublic/private partnerships across a wide range of industries supposedly forthe purposes of financial and operational efficiency.

Thisefficiency is essentially the public/private partnerships’ financial &political protection and serves their objectives neatly. Private industry servesthe needs of the shareholders while the government serves the needs of thegeneral public. Because certain projects are unacceptably too big and risky forprivate firms to undertake and which government agencies lack the know-how, theaforementioned arrangement is made so that the project is “too big to fail.”

Inbasic terms the government provides generous tax incentives and paves the legalroad to private firms so that projects can be undertaken. The private firm andits shareholders profit while the taxpayers, under the illusion that it’s aprivate undertaking, assume the risk.

Thewealthy in both realms include policymakers, captains of industry, powerfulfinanciers, de facto public relations and publicists in the form of themainstream and social media influencers in the media all of whom have more andbetter information to make better decisions well ahead of us mortals.

TheCanary in the Coal Mine

Forthis reason the ultra-wealthy are the proverbial canary in the coal mine whenthere’s an upcoming seismic shift in the global economy and subsequent shift asto how and where they will invest their assets.

Thisseismic shift through various economic reports and anecdotal tales, indicatethat the wealthy are no longer pursuing the highest return or most favorabletax havens rather seeking a safe harbor for the purposes of wealth preservation.Government policies can “vaporize” their assets literally overnight andmaintain those policies indefinitely.

Thewealthy fervently want to avoid what happened to their Saudi counterparts when in2017 Prince Mohammed Bin-Salman (MBS) held them hostage in luxurious hotelsuntil he “extracted” what he needed under the guise of cracking down oncorruption. The hiring of 87,000 armed IRS agents in the US provides a clue asto the length at which a government may seek to aggressively enforce tax lawsand perhaps more.

“Whoare those guys?”

Theaforementioned phrase as repeated by a puzzled Paul Newman and Robert Redford beingpursued by an elite posse in the classic Butch Cassidy and the Sundance Kid, applies to the regularworld citizenry as to who and how many of the ultra-rich, beyond those whointentionally are in the lime light, and where they reside. The next series ofcharts provide a profile of the ultra-wealthy.

Thefollowing chart entitled The World’s BillionairePopulationprovided by Billionaire Census by Altrata/Wealth-X and presented by VisualCapitalist chart provides the demographics of the billionaire communityglobally by country and their net worth and underscores the stupefying global wealthinequity by city. A quick summary of the status:

·      There are 3,311billionaires globally whose net worth is $11.8 trillion.

·      This figure increased in2021 by 3% while the wealth of the total group increased 18%!

·      Billionaires account for11.8% of the world’s GDP.

·      Billionaires’ net worthincreased 90% in the past 10 years.

TheTop 20 Billionaire Countries

Thefollowing chart entitled Top 20 Countries byUltra-High Net Worth Individuals provided J. Davies, R. Lluberas and A Shorrocks,Credit Suisse Global Wealth Databook 2022 indicate country-specific breakdownof the ultra-wealthy.

TheTop Billionaire Cities

Finallythe following chart entitled The Top 10 BillionaireCitiesprovided by Visual Capitalist presents the crème of the crème top 10 billionairecities.

“Onthe Road Again”

Thefollowing chart entitled Millionaire Migration provided by Henley &Partners and presented by Visual Capitalist indicate the top 10 countriesgaining and losing High Net Worth Individuals (HNWI) defined as those with atleast $1 million in liquid financial assets. For this reason, this chartprovides a deeper & broader base of wealthy individuals, not just thesuper-rich.

 Henley& Partners project that there will be 88,000 migratory millionaires. Thelargest millionaire migratory outflows in gross numbers are Russia (15,000),China (10,000), Hong Kong (3,000), India (8,000) and Ukraine (2,800). Forobvious reasons the war in Ukraine has compelled the wealthy to migrate whileChina+Hong Kong have become high-risk for the targeted wealthy.

TheUAE has experienced the largest inflows because the government has created anextraordinarily friendly investment and tax environment for the wealthy.

Aconfluence of major events already in play are arriving at the crossroads atthe same time which could represent a nasty market crash and trigger aneconomic downfall.

·      Food insecurity and severeinflation as a result of droughts, floods, projected poor harvests, andstubborn logistical problems.

·      Escalating risks in the Russian-Ukrainewar which are raising the risk of severe winter energy shortages in Europe.

·      The possible cut-off ofUkrainian agricultural wheat exports and the interruption of planting and subsequent2023 spring harvest.

·      Political instability anduncertainty in major legislative and national elections in developed countriessuch as Italy, Brazil, UK and US and how the respective new leaderships willwork together not only as sovereign countries, rather also through theirrepresentation in international organizations ranging from Nato to humanitarianones.

·      The impacts of government-imposedtax and interest hikes, and sanctions based on political rather than economicmotives.

ThePre-Positioned Wealthy

Evenbefore the pandemic the wealthy have been aggressive in changing their asset allocationto greater cash holdings and jurisdictional diversification.

Nonethelessjust because they have far better access to better an almost beyond the horizonquality of information, this doesn’t mean that they have Nostradamus orCassandra-like vision. Historically events have gone sideways, known as BlackSwans, which often sink all boats.

Withrespect to physical mobility, many of the wealthy hold multiple passports andresidence permits with access to gated-community residences throughout theglobe as par for the course.

SuperGrowth for the Super Rich

Indeedfollowing the adage, “The rich get richer” is true. It always has. The networth and liquid assets of Larry Lunchpail have eroded their savings thanks to intensiveand unabated inflation against stagnant paychecks, but the net worth of the super-richcommunity has been growing in leaps & bounds throughout the pandemic.

Thefollowing chart entitled The Global Super-Rich Clubis Growingprovided by Knight Frank | The Global Wealth Report 2022 articulates, byregions, the impressive growth of this class whose net worth is at least $30million.

Thefollowing chart entitled The Global Wealth Pyramid in 2021 provided by CreditSuisse 2022 Global Wealth Report breaks the Gini index which measures economicinequity.

Theseries of aforementioned charts underscoring the continued and unequal unabatedgrowth of the ultra-wealthy will in all likelihood lead to the inevitableexplosion of social unrest in developing and developed countries.

Conclusion

Statisticallythere’s already a huge disconnect between the merely wealthy and the rest ofhumanity. The struggling global economy has reached its Icarus moment at whichpoint social media will gleefully accentuate this economic gap provoking evengreater social instability.

Present-daywe’re experiencing the “calm before the storm” as late fall and winter looms.For this reason whatever one’s financial situation, preparations for food &personal security should take immediate and urgent priority for the roughperiod ahead.

© Copyright 2022 Cerulean CouncilLLC

The Cerulean Council is a NYC-basedthink-tank that provides prescient, beyond-the-horizon, contrarian perspectivesand risk assessments on geopolitical dynamics and global urban security.