Is wealth moving East for good?

Of course, America will always be minting millionaires and billionaires. Just as in Europe, the wealthy will always be with us. The question is growth. The U.S. is unlikely to snap back to the millionaire and billionaire growth rates of the 2000s anytime soon. Slower economic growth, sideways-moving markets and slower credit will ensure that.

Meanwhile, in India and China, the rich are racking up huge gains, in both wealth and populations.

The latest Forbes India list shows the number of billionaires doubling to 52–largely on the back of a more than 75% jump in Indian the stock market.

In China, new data show that the number of Chinese millionaires is expected to hit 450,000 this year and nearly double to 800,000 in four years.

“China is arguably the most explosive wealth market in the world, as rising income and a high savings rate will continue to spur development,” says Boston Consulting Group’s Greater China partner Frankie Leung.

The shift can already be seen in the luxury economy. Rolls Royce said today that sales of its pricey rides are picking up markedly in Asia. “We’re fast coming out of the financial crisis, and China and India look like they will lead the way out in 2010 on a feel-good factor,” said Rolls-Royce Asia Pacific regional chief Colin Kelly in New Delhi, where the company was unveiling its new Ghost model.

The company expects to sell more than 400 cars in the region next year, he said, with China accounting for half that.

What this all means is that “Richistan,” a country of financial immigrants, increasingly will be filled with new arrivals from China and India. Americans will simply become a much smaller part of the population.

Do you think America’s will lose its wealth supremacy?

But a version of the show in India, called “The Big Switch,” has become an instant hit.

In the American and British versions, millionaires went incognito into poor or lower-middle-class communities and sought out good Samaritans. At the great unveiling, the rich revealed themselves and wrote checks to the do-gooders.

It has moved to fertile ground in India, which has lapped up reality shows like “American Idol” and, most famously, “Who Wants to Be a Millionaire.” In the “The Big Switch,” young Indians–i.e., attractive, wealthy female Indians–spend a month in a slum. To compete, 10 rich contestants are paired with 10 slum dwellers and asked to perform menial tasks like shining shoes at railway stations and selling goods at traffic stops. Points are given for each task. The rich contestants who wins gets one million rupees ($21,600), which goes to their poor partner.

For a country with glaring wealth disparities, the trading-places gimmick has attracted a wide audience.

“When you bring in people from the richest strata and put them with the poorest of the poor, it makes for great television,” said Zarina Mehta of UTV Bindass, which airs “The Big Switch.”

Sunny Sara, 28, a nightclub owner in Mumbai and a participant in the show, said her month in the slum was a life-changing experience. “There was no running water, no air conditioning, none of the amenities I was used to. I missed my BlackBerry and my bikes,” she said.

The show also included a former Miss India.

My question is why Americans haven’t taken to the show like the U.K. or India. Do other countries derive more entertainment from watching the wealthy brought down to their level? Have Americans lost interest in the wealthy no matter what they do?

Why do you think the show is big in India but a flop in the U.S.?

According to the poll, fully 57% of respondents favor taxing people with incomes of more than $250,000 a year for expanded health care. Only 36% opposed a wealth tax. (The $250,000 level was previously considered by the House. The new House bill proposes setting the tax bar even higher, for those making $500,000 a year or more.)

Taxing the wealthy was the only plan supported by a majority of Americans in the poll. Other proposals — like taxing drug companies or medical-device makers, or taxing “Cadillac plans” — were resoundingly opposed by the respondents.

The poll will no doubt be used by Democrats in the House and some in the Senate to push their wealth-tax plan.

I’m not advocating for or against the tax. But the poll should be put into proper context.

First of all, it’s not unexpected Americans would prefer the wealthy to buy them better health care. It’s like asking Americans if they would prefer that everyone on the Forbes 400 list buy them a turkey for Thanksgiving. My guess is that they would support it. Call it sugar-daddy policy.

What’s more, at a time of high unemployment, flat wages and so much destroyed wealth, most Americans don’t see themselves hitting the “wealthy” tax threshold anytime soon. They feel safe that the new tax won’t affect them. In fact, when asked if they would pay for health care with a tax on all Americans, a whopping 75% were opposed.

So the lesson here is that Americans like it when someone else is buying. The trouble is, when tax receipts from the wealthy fall short of the costs –- as they inevitably will -– it will be the rest of America that has to help pay the health-care tab.

This isn’t a post about the age-old scam in a world of multibillion-dollar ponzi schemes.

Instead, it is about the kind of pitch the wealthy are attuned to these days. Seeking strong but stable returns, rich individuals are increasingly turning to investments in infrastructure projects like bridges, tunnels and energy-producing assets. According to this Reuters article, “The super rich are fast realizing that bets on bridges and wind mills can provide steady long-term returns and offer them an alternative that’s safer than equity and often more exciting than government bonds.”

Investing in infrastructure used to be the purview of big institutions. Now rich individuals are getting into the game. So, why is infrastructure the new black for the rich?

For one, the rich have had it up to here with abstract, complex, “now-you-see-it-now-you-don’t” investment products. Roads and bridges really are more concrete: They can be seen and touched.

Second, the returns are actually quite good by current standards. Reuters says the target returns from infrastructure range from 12% for listed funds to 18% for unlisted, private-equity type investments.

The cash flow from infrastructure also is often inflation-linked, so the investment can be a hedge against rising costs and prices.

The projects span the globe, from windmills in Europe to roads in the U.S. and India.
Here is the big question: If you were a wealthy investor, would you buy the Brooklyn bridge?

What other big pieces of infrastructure would you buy if you could?

But the foundation’s latest ground-breaking–on a new headquarters building–is bound to raise some eyebrows.

According a blog post by Kristi Heim of the Seattle Times, the Gates Foundation is in the middle of building a 900,000-square-foot headquarters, comprised initially of two six-story, boomerang-shaped buildings on 12 acres near the Seattle Center.

The estimated cost: $500 million.

That is more than three times what nearby Russell Investments paid for its 42-story headquarters tower to house its staff of 900 and manage more than $200 billion in assets.
Neighboring Amazon.com, with more than $19 billion in revenue and more than 20,000 employees, recently paid $700 million to lease about 800,000 square feet, with an option to double it.

The new building is being done in the new shade of Green, with a living roof on the parking garage and a million-gallon rainwater storage tank to reduce water use. The project is aiming for a Gold rating in LEED Certification, an environmental building standard. And it will have an interactive Gates museum–an 11,000 square-foot center telling the story of the founders and the foundation’s work. (You can follow the construction on this Web cam.)

I don’t doubt that the Gates Foundation needs an important space. It employs nearly 800 people, has an endowment of more than $34 billion and awarded more than $2 billion in grants last year. It is expected to get even bigger in the coming years–to more than 1,000 staffers–with further contributions from the Gates and Warren Buffett.

But $500 million for a charity headquarters?

You can see the public-relations hit coming. Shouldn’t that money have gone to the foundation’s work? Wouldn’t that $500 million have been better spent on malaria research or schools in Africa? And with so much empty commercial space around Seattle, couldn’t they have found something effective and cheaper?

I’ve always been of the view that the wealthy are free to spend as they choose–especially when it comes to charity. There is no doubt that Mr. Gates has been the greatest American philanthropist since John D. Rockefeller Jr. And sensitive to the potential for criticism, Mr. and Mrs. Gates have pledged $350 million of their personal funds to the endowment to be put toward the building.

But one of the central tenets of the new wave of private foundations and venture philanthropy is to spend charitable dollars more efficiently that the established charities. The Gates Foundation headquarters, even if done for the right reasons, may be sending the wrong signal.

For its part, a representative for the foundation said: “The Bill & Melinda Gates Foundation budgeted for its new headquarters with a few key priorities in mind–we wanted to create a carefully designed workspace that would foster good collaboration among our staff, and we also wanted to have a campus large enough to accommodate major partner and grantee convenings, something we are currently unable to do within our smaller office sites around South Lake Union. Finally, Bill and Melinda wanted a campus that would be a lasting urban amenity for Seattle.”

The spokesperson added that “This is an important investment for the foundation, and long-term owning our headquarters will be more cost efficient than leasing multiple office sites over the long-term, as we do now.”

Do you think they could or should have spent less?

Are you covered? For how much?

That is the question the mystery owner of a Veyron is probably asking after he accidentally drove the car into a lagoon. According to an article in The Daily News of Galveston County, the driver, who understandably refused to give his name, was in Galveston on Wednesday to look at some real estate. At 3 p.m. local time, a low-flying pelican distracted him as he traveled north on Interstate 45, just south of the hurricane levee near Omega Bay.

The man “jerked the wheel, dropped his cell phone, and the car’s front tire left the frontage road and entered a muddy patch, which foiled his attempt to maneuver away from the lagoon,” according to the article. “The Veyron’s powerful engine gurgled like an outboard motor for about 15 minutes before it died.”

As to that insurance coverage question, remember that the Bugatti Veyron–depending on the year–sells for $1.6 million to $2 million.

Below watch video of the Bugatti being towed out of the water. For video of how a Veyron really is supposed to move, click here to see the folks at the BBC’s “Top Gear” show take it for a spin.

He is the Ferrari-loving, bling-wearing, Versace mansion co-owner who worked in a sealed “Bat Cave” and who is suspected of stealing hundreds of millions of dollars from investors who bought legal settlements from him since 2005.

No one has been charged. But the FBI towed away his Ferrari spider convertible this week and seized his mansion and yachts, along with 44 boxes of documents. They are now seeking information from former Rothstein investors. Meantime, the Jerald reports, Rothstein is staying at an undisclosed location under federal surveillance.

The latest intelligence on the scam involves $57 million Mr. Rothstein is accused of taking from a Southeast auto magnate. The case seems like a “Richistan” version of the classic Nigerian email scam.

According to the Miami Herald, auto dealer Ed Morse was fighting with his interior decorate over a $2 million bill. He hired Mr. Rothstein to fight it. Mr. Rothstein told the Morses he won the case and was entitled to a $23 million judgment.

Mr. Rothstein said all they had to do to get the $23 million money–alleged to be in a Cayman Islands account that a judge had authorized the family to seize–was to post a bond 2 1/2 times larger than the judgment, or $57 million, which could be wired to Mr. Rothstein.

It turns out, Mr. Morse had actually lost the case and Mr. Rothstein fabricated court documents and the award to get the cash. It is unclear whether Mr. Morse got any of the money back.
The case is one of many the FBI is looking into.

It is easy to say Mr. Morse, 88 years old, was blind to an obvious scam. But Mr. Rothstein had been a family friend. And they had done business together before, and Morse family members serve on Mr. Rothstein’s charity.

The saddest part is that the Morse family spent two generations building their fortune from a string of car dealerships in Florida and Alabama. Now it is likely that a good chunk of their fortune went down the luxury drain of Mr. Rothstein’s lifestyle.

If so, America must have about 140 million millionaires.

Of course, America doesn’t have near that number. But, a report by the Center for Responsive Politics shows that 237 members of Congress–or 45% of the total–are self-reported millionaires.

California’s Congressional delegation contains the richest. Car-alarm-king Darrell Issa (R., Cal.) is the top-ranking member by wealth, according to the Center, with a net worth in the range of $164 million to $337 million. California Democratic Rep. Jane Harman is second, in the range of $112 million to $377 million. Wisconsin Democrat Herb Kohl is No. 3, at a range of $163 million to $265 million.

Sen. Jay Rockefeller (D., W.Va.) has long been viewed as the richest person in Congress. But just as with the rest of the economy, his old money fortune, now put at between $60 million and $128 million, has been dwarfed by the nouveau.

What does it mean for America to have so many rich men and women in Congress?

The right says it shows hypocrisy, since Congress seems to be succumbing to its worst wealth-spreader instincts to over-tax, over-regulate and over-criticize the wealthy. The latest evidence of this is the House health-care bill, which would impose a 5% tax on the gross income (yes gross income) of those earning $500,000 or more.

The left says the numbers show that Congress is a collection of wealthy elites who do their best to protect the rich and powerful, and that this is why they haven’t gone far enough on taxing the rich or regulating Wall Street.

My guess is that the numbers tell a simpler story. Getting elected takes boatloads of money these days, and it is getting tougher to raise money the old fashioned way, from lobbyists and pork-seekers. There are more millionaires in Congress because, increasingly, it takes a personal fortune to get elected.

Do you think the number of millionaires in Congress has affected policy?

But for the new generation of rich Chinese, American military schools are seen as the disciplined training grounds for tomorrow’s economic warriors.

An article in China Daily says more and more wealthy Chinese parents are turning away from pamper-parenting and opting for the tough-love of pre-college military academies in the U.S.

“Good education doesn’t mean letting your child enjoy privileges, especially our boys,” said Song Wenming, an entrepreneur in Jinhua, East China’s Zhejiang province. “They should be raised in tough conditions to know what to fight for in the future.”

(This is, of course, the country with the famous proverb: “Beating is a sign of affection, cursing is a sign of love.”)

Mr. Song sent his 17-year-old son to Valley Forge Military Academy (VFMA) in Pennsylvania. A few years ago, there were no Chinese kids at Valley Forge. Now there are 28.

The daily routine is rigorous: physical training, marching, shining shoes and badges, ironing clothes and ties, memorizing codes and rules, learning to take a bath in seconds flat, getting yelled at by seniors. The article says 10 of the 13 students who joined Valley Forge have asked for transfers.

Mr. Song’s son was more positive: “The endless training and scolding are just ways to build up our character, they are not personal.”

I’m surprised the wealthy Chinese can’t find schools at home to put them through endless drills and psychological batterings. Why not just join P.L.A.? Perhaps getting toughened up in the U.S. is more socially acceptable.

Do you think military schools are good for wealthy children? Do you think the Chinese will gain advantages from all those U.S. drills?

The 12,000-square-foot giant is the highest-priced residential listing in Chicago. Oh and by the way, it’s raw space.

Mr. Wrigley, age 46, is also selling his 11,013-square-foot, Italianate mansion on Lake Michigan in Lake Forest. That’s priced at $14.5 million.

The question is why is he selling now?

Mr. Wrigley’s realtor said Mr. Wrigley is looking for a smaller space. That’s understandable given that 12,000 square feet can feel a bit roomy, even for a family. It’s entirely possible he came down with a case of Oversized Home Syndrome.

Or perhaps, like lots of rich people today, he just wants to downsize on real estate. He has an $11 million beach house in North Palm Beach, Fla. And an $11.53 million property in Aspen, Colo.

But few sellers would dare sell high-priced homes in the current housing market unless they needed to. The top of the luxury market — i.e., $14 million pads in Chicago — is under growing pressure as the American wealth machine grinds to a halt. Even with stocks up, there simply aren’t as many multi-millionaires today who can afford eight-digit properties.

Mr. Wrigley led the sale of his family’s chewing gum empire to Mars Inc. for $23 billion in cash in 2008. So presumably he has plenty of liquidity.

Why do you think Mr. Wrigley is unloading his Chicago palaces? And will they sell at the current prices?