Atelier 3, article 12

© Blaine Harden :
IHT, April 2, 2001
                                   Stock Market Plunge Hits the Rich, Too (Sort of) 
                                                                          by  Blaine Harden

                                  NEW YORK Yes, the rich do feel something when the stock
                                  market tumbles, but it would be imprecise to call it "pain."

                                  Allow a veteran Upper East Side butler, who manages homes in
                                  Manhattan, East Hampton and Colorado, to explain the subtle
                                  shadings of unease that have descended recently on the Silk
                                  Stocking district.

                                  The butler, who noted that he would be fired if he or his employer
                                  were identified by name, said he had stopped pouring '89 Chateau
                                  Palmer ($195 a bottle) at dinner parties, downshifting instead to a
                                  slightly more shallow and marginally less complex '89 Chateau
                                  Talbot (about $40 a bottle).

                                  Though if there is a connoisseur among the guests, the butler
                                  added, he pours the better Bordeaux.

                                  Instead of using an East Side florist who charges $300 for a
                                  dining-room arrangement, the butler eliminates the middleman and
                                  drives to the flower market himself to buy something equally
                                  delightful for $100.

                                  Laundresses are not being hired this summer for some of the finer
                                  homes in the Hamptons, he said. Many maids will find that they
                                  must wash clothes themselves, he said.

                                  Government statistics do not measure how the rich pull in their
                                  wings when markets turn bumpy, but it is safe to assume that the
                                  current downturn has caused little upset, at least so far, in the living
                                  standards of the well-to-do, said Edward Wolff, an economist at
                                  New York University who edits the Review of Income and
                                  Wealth, an academic journal.

                                  He said that while the rich have lost a great deal of money in the
                                  stock market in recent months, those losses are coming out of the
                                  enormous gains they piled up in the past decade.

                                  "They are certainly better cushioned" than the middle class, he

                                  By at least one key measure of financial stability, the rich are sitting
                                  prettier than they have been since the early 1980s. The relation of
                                  debt to wealth for the top 1 percent of American households was
                                  just 3.3 percent in 1998, according to Mr. Wolff's analysis of a
                                  Federal Reserve Board survey of consumer finances. The surveys
                                  are done every three years, and data for 1998, the most recent
                                  year available, are still considered a strong indicator of wealth.

                                  The surveys show a substantial decline in indebtedness among the
                                  rich since 1983, when debt amounted to 5.9 percent of their net

                                  For the middle class, the indebtedness trend has flowed in exactly
                                  the opposite direction. Fed figures show that debt as a percentage
                                  of net worth for the middle class rose to 51.3 percent in 1998,
                                  from 37.4 percent in the 1980s.

                                  "It means that the very rich are in a much more secure position
                                  now than they were 20 years ago, and downturns in the economy
                                  are not going to really threaten their wealth position," Mr. Wolff
                                  said. "The middle class is much more vulnerable."

                                  Howard Rubenstein, a public-relations man who has been doing
                                  damage control for New York's rich and powerful for more than
                                  four decades, said the market tailspin was making the rich

                                  Brooding about stock-market losses, he said, has begun to sour
                                  dinner-party chitchat on Fifth Avenue.

                                  But Mr. Rubenstein said that the extremely rich, at least so far,
                                  were still extremely rich, and that they did not anticipate, even in
                                  their darkest moments, being anything else.

                                  "Some of them are cutting back symbolically," he said. "They are
                                  saying, 'We got to show everybody it's time to tighten belts.' Some
                                  are cutting back on lawyers, public relations and advertising. They
                                  are telling their staffs to cut back on car services and take Yellow
                                  cabs. Some are having sandwiches instead of going to restaurants.
                                  These people didn't get where they are by being frivolous."

                                  With some pleasure, Mr. Rubenstein noted that he was finding it
                                  much easier in recent weeks to get reservations at the best
                                  restaurants in New York.

                                  With considerably less pleasure, a Manhattan chauffeur spoke of
                                  being on the losing end of these "symbolic" cuts.

                                  "The guy who I am driving cut my salary in early March," said the
                                  chauffeur, who also said he would lose his job if he were identified
                                  by name. He said his boss worked on Wall Street at an investment

                                  The chauffeur, who has been driving a Mercedes-Benz S 500 for
                                  the last two years, said that his base salary had been $57,000, but
                                  that with overtime in 1999 and 2000 he made about $95,000 a

                                  "The guy put me at a flat salary of $40,000 and he said no
                                  overtime," he said. "He sent me a letter saying it was because the
                                  market was blah, blah, blah. I threw the letter away, I was so

                                  For those hoping to understand how the downdraft of a falling
                                  stock market can rattle America's rich, the weather vanes in and
                                  around New York are worth watching.

                                  About 20 percent of the 275,000 American households worth
                                  more than $10 million live in the New York area, Mr. Wolff said.

                                  At Ermenegildo Zegna's flagship store on Fifth Avenue, sales of
                                  $2,000 Italian suits have slumped.

                                  "The consumer who would have bought four suits last year will buy
                                  three now," said Djordje Stefanovic, fashion and public relations
                                  director for the clothing company.

                                  Sales of Chateau Petrus, a legendary Bordeaux that, depending on
                                  the vintage, sells for between $300 and $1,200 a bottle, have
                                  declined at the Sherry-Lehmann wine shop on Madison Avenue.