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
said.
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
worth.
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
"uptight."
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
firm.
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
year.
"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
angry."
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.
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