July 04, 2007

More Millionaires Than Ever Before!

THERE ARE NOW 9.3 million millionaires* on God's green earth, according to the latest edition of the World Wealth Report from CapGemini and Merrill Lynch. Out of these, a full 3.2 million are located in North America, while approximately 95,000 of the worldwide total have investable assets in excess of US$30 million. Roughly 40,000 of those 95,000 individuals are located within North America, according to the report.

Based on my analyses from previous years (see below), this is in line with what I had expected to see for this year. Once again, the number of super-wealthy individuals is about one percent of the overall total of the rich population, thus suggesting the distribution of wealth among the rich remains pyramid-like in shape.

Unfortunately, this year's report doesn't break down the bands inside that pyramid. However, if we work from the assumption the distribution remains about the same in past years, we can derive certain calculations from that. In prior years, roughly 90 pc of the report's North American millionaires had between $1 million and $5 million in assets, while the remaining 10 pc had more than $5 million. About a third of that latter group had more than $10 million in assets (representing 3.33 pc of the total) while a third of that third (about 1.25 pc of the total) had more than $20 million in assets. Those with over $30 million represented 0.8 pc of the total millionaire population in the United States.

This time around, we can see the highest band has expanded slightly, but I would be shocked if there was any major difference in terms of the overall wealth distribution. So, with 3.2 million North Americans with more than $1 million in investable assets, we can deduce there are about 320,000 with more than $5 million, and roughly 105,000 with more than $10 million. That's out of a total population of roughly 300 million Americans and 30 million Canadians. As that works out to roughly 125 million households, we can thus estimate that roughly one out of 40 North American households has more than $1 million in investable assets -- which sounds about right compared to previous years. (It's actually an improvement).

The long and short of all this is that the bar is getting higher, but it isn't rising so fast that those trying to jump it are ending up face-first on the mat. The addition of nearly one million North American millionaires over the past five years is a good sign that social mobility is continuing -- and that those of us who aren't millionaires will benefit from their wealth. After all, many of these newly-minted millionaires spend their money on weird and outlandish things, which spurs the economy, which in turn boosts the holdings of everyone else.**

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* Arguably, there are more than 9.3 million, as the World Wealth Report only counts those with more than $1 million in investable assets, a designation that excludes the value of one's primary residence. However, if you're like me, you view your primary residence as a sort of "Oh my God, I lost my job" type of bank that you can draw on in emergencies. Of course, my primary residence is rented, so I'm out of luck there -- but hey. The housing market is ... well, interesting right now.

** As a member of the ... well, as my friend Matt famously put it, the upper middle lower class, I approve of ridiculous spending which boosts my own portfolio.

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Posted by Benjamin Kepple at July 4, 2007 09:39 PM | TrackBack
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