With market fall ranks of millionaires

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© St. Petersburg Times
published September 4, 2002

Did you hear they're making a sequel to what was TV's hottest game show?

They're calling it Who Used to Be a Millionaire?

For the first time in more than a decade, the number of millionaire households in the United States fell -- not just a little but by 11 percent -- to 3.3-million in June 2002 from 3.7-million a year ago.

That means 400,000 households nationwide must suffer the humiliation and disgrace of slipping from "wealthy" to the merely "affluent."

Sound silly? In the bull-of-bull markets of 1996 to 1997, the number of millionaires increased at a 15 percent annual clip. Millionaire households peaked in 2000 at 3.7-million -- the largest number in U.S. history -- and remained flat until mid 2001. That's when the U.S. economy was already running out of steam, still three months before the terrorism strikes on Sept. 11.

The decline tracks millionaires defined as those with more than $1-million in "investable" assets, excluding primary residence, according to a recent study by NFO WorldGroup. NFO, based in Greenwich, Conn. (preferred home to more than a few millionaires), has tracked this type of data since 1981.

Think of the traumatic lifestyle adjustments ahead for these downwardly mobile.

So long, Rolls. Hello, Lexus.

Farewell, Neiman Marcus. Greetings, Nordstrom.

Skip the Grey Poupon. Pass the French's.

Don't laugh (snickering is allowed). This country embraced a 1990s obsession with wealth and conspicuous consumption that spawned Detroit's development of giant SUVs, encouraged the boom in outsized McMansions, generated waiting lists for a watch that cost $44,500 and prompted a sellout in five days of more than 20 boats priced at $18-million apiece at a Fort Lauderdale boat show.

The period was captured in such tellingly titled books as Luxury Fever: Why Money Fails to Satisfy in an Era of Excess or The Overspent American: Why We Want What We Don't Need or -- my favorite -- Affluenza: The All-Consuming Epidemic.

Tuesday's Dow dropping 355 points is the perfect reminder why the country's population of mostly "paper" millionaires is shrinking so fast.

What the bull market giveth, the bear market taketh away.

"I think a decline of that magnitude in one year is significant," says David M. Thompson, "affluent market" research director at NFO Financial Services. Not just for the sheer drop, but for the impact on attitudes among the wealthy.

In the national survey, most people showed a "startling" decrease in confidence about their own finances and the economy over the next six months. Nearly two-thirds said they are more conservative and concerned about preserving wealth rather than growing it.

Translation? Blue-chip corporate bonds are in. Nasdaq stocks with shares under $5 are out.

"We see an increase in people trying to circle the financial wagons," Thompson says. "They are becoming more risk averse."

That's not necessarily a bad thing. The wealthy are not the only investors who became single-minded in their focus on asset growth. (Have you had the courage to look at your stock-heavy 401(k) statements lately?)

As a result, Thompson suggests, millionaires seeking to remain seven-figure households, and former millionaires trying to keep what they have left, are more likely to actively manage their own money and stop using stockbrokers and investment advisers.

By NFO's yardstick, the number of millionaires in the Tampa Bay area (specifically the metropolitan statistical area) rose rapidly in 1990s, then plateaued.

In 1994, the area boasted 25,258 millionaire households. By 1997, the number had grown to estimated 34,892 households. By mid 2000, that number again had increased to 36,500. A year later, the number of millionaire households had crept up 3 percent more (bettering the flat national trend) to 37,700.

NFO's Thompson has not yet analyzed the Tampa market for millionaires with the mid 2002 data. But here's my bet: The numbers are down, but not nearly as much as the 11 percent drop countrywide.

Of note, other slices of the nation's affluent market did not suffer the same damage to their net worth as did millionaires, the NFO study says. The number of "mass affluent" households, those with a net worth between $500,000 and less than $1-million, declined only about 1 percent from the 3.6-million recorded in 2001.

And the "penta-millionaires" -- households in the $5-million-plus category -- actually experienced a modest increase in numbers, from about 480,000 households in 2001 to 483,000 in 2002.

Are plain old millionaires an endangered species? Hardly. Thompson expects a pickup in their numbers by this time next year. As long as:

The Dow doesn't keep dropping like it did Tuesday.

We don't sustain another serious terrorist hit.

Any war with Iraq does not get out of hand.

Hey, nothing comes with a guarantee anymore.

-- Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.

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