The Wall Street Journal-20080112-The Buzz- Best of WSJ-com-s Money Blogs
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The Buzz: Best of WSJ.com's Money Blogs
[From Deal Journal, MarketBeat and Wealth Report]
How the Rich
Define Rich
---
For 45%, Magic Number
Is $5 Million or More;
8% Claim $100 Million
A net worth of $1.4 million will put you in the top 5% of Americans, according to the Federal Reserve. To the wealthy today, however, having $1 million -- including the value of your homes and certain retirement assets -- seems like chump change.
Just as there are two economies -- the rich and everyone else -- there also are diverging definitions of rich. There is America's definition (that top 5%) and the wealthy's definition.
A new survey by Chicago-based Spectrem Group asked affluent households -- those with investible assets of $500,000 or more -- how much it takes to be rich. Of the respondents, 45% said $5 million or more, 25% said $25 million or more, and 8% said $100 million. (It's a safe bet that the 8% lives in Manhattan or Silicon Valley.) Only 22% said $1 million is enough to be rich.
Previous studies have shown that when people are asked how much it takes to be rich, they always give a number that is twice their current net worth or income. Those with $100,000 in incomes say $200,000, while those worth $5 million say $10 million.
All of these studies show that when it comes to defining rich, Americans of all income levels always look up, rather than down.
-- Robert Frank, The Wealth Report
wsj.com/wealth
Data Points
At Countrywide
The data from Countrywide Financial on loan delinquencies is instructive -- and watching these figures, and those from other lenders, will be an important data point on the economy in coming months.
The 30-day delinquency rate at Countrywide rose to 7.2% in December, compared with 6.52% in November, and while December is usually a bad month for delinquencies, this jump was much higher than usual.
Analysts are looking to see if these figures continue to deteriorate, because it will signify that as the credit crunch has waned as the primary problem for mortgage and other financing companies, the weakening economy has moved to the forefront of the industry's woes.
Stone & McCarthy Research Associates notes that an initial rise in delinquencies came as the unemployment rate was falling, suggesting that the rise in bad loans was more "a function of the poor quality of many mortgage loans, along with higher short-term interest rates." However, a rising unemployment rate is a worry since it is a more "traditional" reason, as Stone & McCarthy puts it.
"Given the weakness in labor markets, we think delinquency and foreclosure rates will continue to climb from current levels," they write.
-- David Gaffen, MarketBeat
wsj.com/marketbeat
Foreign Buyers:
Recession-Proof?
Let's say the bears are right and the U.S. economy falls into a recession. Will the U.S. mergers-and-acquisitions market perform as it has in the past? Or will foreign buyers ride to the rescue?
Typically, acquisitions by foreign firms dip when overall U.S. deal making slips, and vice versa. That was the case in 1991, for instance, when overall U.S. deal volume slid 27%, and the value of U.S. acquisitions by foreign buyers fell 59%, according to Thomson Financial.
But with all the money sloshing around foreign-government funds and the dollar weak, will foreign buyers prop up the U.S. M&A market this time? Perhaps not.
First, concerns about economic growth in Europe are increasing. If borne out, they would most definitely put a damper on any deal making in the U.S. by foreign firms.
Should economic growth remain strong in Europe, no one really expects all those shoppers flying in from overseas to replace the U.S. consumer, so why should we expect foreign buyers of corporations to be any different? For sure, the weakening dollar makes U.S. targets more appealing and may trigger some deals. But more often than not the weaker dollar is seen as an added bonus to getting a deal done that already makes sense for strategic reasons.
And don't forget that acquisitions by foreign buyers surged from 1998 to 2000, a period of relative strength for the U.S. dollar. Meanwhile, 2002, 2003 and 2004, which started the dollar's current slide, proved to be slow years in the U.S. for foreign buyers.
-- Stephen Grocer, Deal Journal
blogs.wsj.com/deals
