Monthly Archives: February 2018

Where Do the Rich Live?


February 26, 2018

The “rich” continue to be the focus of much interest. Whether it be a reality TV show, or the demonization of the 1%, rarely a week goes by without some reference to this generally anonymous segment of society. So where do they live? That question is not to provide material for gossip. The location of the homes of the rich can provide some insight into where money is being made.

Discovering the homes of the rich is not straightforward. They are apparently a secretive lot. According to a recent book, “Uneasy Street” by Rachel Sherman, the greatest fear of the rich these days is “being outed as a member of the 1%”. With the possible exception of “Real Housewives”, it would seem that the days of flaunting your wealth are over. Even so, there is plenty of information on the most likely spots to find rich folks.

Of course the first question is what constitutes wealth? If the answer is based mostly on income, then one of the cities with the “richest” people might surprise you. The area around Washington DC comes in as the number 3 city in the USA according to 24/7 Wall St., who used 2016 data from the US Census Bureau. No doubt DC’s high ranking owes much to the money spent on Federal government politicians and officials, and those employed to serve, represent and lobby them. The 24/7 Wall St. study also concluded the top two places went to California – with San Francisco coming in at #2, and San Jose/Santa Clara rated as the top dog.

If you view wealth as being more influenced by house prices, the answer is very straightforward. Look no further than California for nine of the top ten wealthiest cities in the US, according to Palo Alto came in top, with a median home price of $2.5m (around ten times the median price in Atlanta according to Zillow). The only non-California city to break the top ten was Bethesda, Maryland; no doubt another beneficiary of the wealth of Washington.

For the real wealth, though, we should broaden our search across the globe and look for billionaires. Happily, Forbes provides data on where the world’s 2,000 plus billionaires live. There is probably no surprise that the city with the highest number (82) is New York. More noteworthy is that four of the top ten billionaire cities are in China: Hong Kong, Beijing, Shanghai and Shenzhen. Moreover, the top ten list includes Mumbai in India, and Seoul in South Korea. The economic growth of these countries is making some people very wealthy.

Another surprise in the Forbes list is the appearance of Moscow at #3. Maybe this is the product of the way large chunks of the economy were seized after the fall of communist rule? The influence of the Russians may also partly explain London’s appearance at #5 given that the richest “Londoner” identified by Forbes is a Mr. Blavatnik. I guess if you are a billionaire, you can choose to live wherever you want.

Richard Rushton

20180226 Numbers from Carl

Driving Me Crazy

driving me craxy

February 19, 2018

I was recently driving to see friends in Ocean City, New Jersey. The sign “Welcome to New Jersey” greeted me as I headed over the Walt Whitman bridge from Philadelphia. I was using Google Maps on my phone for directions. Looking down to check the recommended route, I manually enlarged the view on screen to make sure I was in the correct lane as I approached a junction. I glanced in the mirror to see a large police SUV right behind me. I assumed he was about to pass when suddenly the blue lights flashed on. A sinking feeling took hold of my stomach as I struggled to work out my crime.

Deciding that making a break for the State line was not the best idea, I pulled over and waited meekly. The State Trouper adjusted his hat before emerging from his car. His first request was for my driver’s license. Once he saw it was from Georgia he asked: “Do you know this is a hands-free State and I saw you using your fingers to dial a number?” I apologized for not knowing but explained that I was using Google Maps and not attempting to make a phone call. I even offered my phone for him to check. The trooper asked me to wait while he went back to his vehicle.

Returning five minutes later with my license, and a ticket, he announced: “I am going to be lenient. A ticket for using your phone other than hands-free is expensive and comes with points, but I have just given you a ticket for failure to indicate when I pulled you over”. I buried my outrage at this extortion, and accepted that paying the fine and moving on is the best outcome. The authorities have more time and power than me.

This incident got me thinking that traffic violations must provide an easy source of income for cash starved States. A bit of research into the finances of New Jersey confirmed my suspicions. Our tax-exempt bond manager stated that they are generally avoiding bonds issued by this State because of the decline in credit fundamentals, pension funding issues and headline risk. In fact, NJ has had substantial budget deficits the last several years, and has one of the lowest credit ratings of all States as ranked by S&P, Moody’s and Fitch. How long can that sort of financial ineptitude continue, or more to the point, how many traffic tickets do they have to write? In an act of seeming desperation they have even offered $7 billion in incentives to win Amazon’s new HQ2, and the associated tax revenues.

The new Tax Act will create additional pressure on State budgets as wealthier citizens decide if they really want to be residents of high income tax States now that those taxes will essentially have little to no deductibility in many cases. As budgetary mismanagement continues, be aware that you are a potential source of tax revenue when you are driving in a State like New Jersey!

Nick Hoffman