Friday, June 8, 2012

The Rich Are Different

Meet your new rulers:
I recently was at a dinner in New York City and one of the people there was a very, very successful man who is on the borderline between venture capital and private equity. And this guy went into an extended rant about how he was at a disadvantage because he had to pay 15 percent capital gains taxes. When I was first dealing with venture capitalists in a significant way, the capital gains tax rate was 28 percent, and nobody was complaining. Then they got them reduced to 20 under Clinton, and then later 15 under Bush. Plus, they got a rollover provision so if they took the proceeds of a venture capital investment and rolled it over into a new venture capital investment it was tax-free. At that point, we’ve reached nirvana, what more could there be?

But now we’re in this environment where this guy was loudly and aggressively complaining that he has to pay 15 percent to the government. And if that’s where you’re at, then of course you are going to complain about Dodd-Frank. You are going to complain about everything. If you have already got 96 percent of what you want, why not take the remaining 4? That’s where the culture of American finance is right now, and I think it’s really dangerous for the country.
Interview with author of "Predator Nation: Corporate Criminals, Political Corruption, and the Hijacking of America" (BoingBoing)
Chris Hayes, host of Up w/ Chris Hayes on MSNBC and author of Twilight Of The Elites: America After Meritocracy, put it to me this way, "One of the most pernicious pathologies that our current meritocracy produces is a caste of plutocrats with tremendous power who are convinced they are persecuted underdogs. When you perceive yourself as embattled prey, you cut moral corners."
Plutocracy Democracy (Al Jazeera)
Wall Street has responded — predictably, I suppose — by whining and throwing temper tantrums. And it has, in a way, been funny to see how childish and thin-skinned the Masters of the Universe turn out to be. Remember when Stephen Schwarzman of the Blackstone Group compared a proposal to limit his tax breaks to Hitler’s invasion of Poland? Remember when Jamie Dimon of JPMorgan Chase characterized any discussion of income inequality as an attack on the very notion of success?

But here’s the thing: If Wall Streeters are spoiled brats, they are spoiled brats with immense power and wealth at their disposal. And what they’re trying to do with that power and wealth right now is buy themselves not just policies that serve their interests, but immunity from criticism.
Egos and Immorality (New York Times)
Buy a newspaper and censor its content. This seems to be the policy of San Diego developer and multimillionaire Doug Manchester, who last November purchased the city’s largest newspaper and rechristened it, the UT-San Diego. His editor, Jeff Light has been cutting contributor’s voices left and right.Last Christmas, Manchester, a Catholic, published a front-page greeting, citing Jesus Christ as humankind’s biggest influence. When online readers reacted, many by discussing problems with Catholicism, Light didn’t like what he read, so he closed and erased the comments.In March, Light censored a week’s worth of Doonesbury’s cartoon strip, lampooning a Texas law that forces women to have ultrasounds prior to an abortion.
Book Critic Censored by San Diego Newspaper (Counterpunch)
Morgan himself was utterly contemptuous of public opinion and government policy, and he made no secret of his views. He saw banking as a specialist’s world, best conducted in secret among a handful of trusted men. As biographer Ron Chernow brilliantly described in The House of Morgan, the entire Morgan firm lived according to a “Gentleman Banker’s Code,” which frowned upon branch offices, company names on the door, and the open solicitation of business. “A man I do not trust,” Morgan explained at Pujo, “could not get money from me on all the bonds in Christendom.”

This was hardly a free-market vision of the world, filled with scrappy entrepreneurs and courageous risk-takers. It’s a common misconception that the great tycoons of the Gilded Age were champions of laissez-faire, eager to liberate the competitive impulses of American finance and industry. To the contrary, they spent much of their time figuring out ways around competition—forming trusts, fixing prices, begging for tariff protection, manipulating stock, and rigging corporate boards. The greatest political battles of the era focused on precisely this problem, with industrialists and financiers pushing for concentration while government officials gestured—sometimes feebly, sometimes not—toward trust-busting and small-business competition.
The Boss of Bosses (Slate)
Fourteen miles south, at Will Rogers World Airport, Chesapeake leases a fleet of planes that shuttle executives to oil and gas fields -- and the McClendon family to holiday destinations. On one trip, the clan took flights to Amsterdam and Paris that cost $108,000; McClendon counted the trip as a business expense. In another case, Chesapeake logs show, nine female friends of McClendon's wife flew to Bermuda in 2010 without any McClendons aboard. The cost: $23,000.

Closer to home, McClendon pursues another of his passions: the Oklahoma City Thunder, the NBA franchise in which he owns a 19 percent stake. As with other assets, McClendon has melded his Thunder interest with Chesapeake business. The energy company signed a $36 million sponsorship deal, and it pays up to $4 million annually to brand the stadium Chesapeake Energy Arena.

What hasn't been previously disclosed is that McClendon mortgaged his future proceeds from the team to secure two bank loans. The AKM unit, the jet flights and the Thunder relationship are part of the lavish but leveraged lifestyle that McClendon has built through Chesapeake, America's second-largest natural gas producer.
The lavish and leveraged life of Aubrey McClendon (Reuters)
To recap, Choupette has two more personal maids, and two more meals (per day) with Karl Lagerfield, than you probably ever will. Also, unlike your cat, Choupette has a working knowledge of touch-screen technology. As if these revelations were not brilliant/borderline-depressing enough, Lagerfeld also concedes that when he is out of town, he enlists Choupette’s maids to keep records of her day-to-day routine. “When I am not there, the maids take down, in little books, everything she did, from what she ate to how she behaved, if she was tired and if she wasn’t sleeping. […] We have almost 600 pages. […] It could be funny to make a little book of Choupette’s diary.” Sigh.
Karl Lagerfeld’s Cat Has Personal Maids, an iPad, and a More Glamorous Existence Than You (Vanity Fair)
Their wardrobes are packed with haute couture and designer accessories but for the world's super-rich shopping is no longer enough: lavish one-of-a-kind travel adventures are the latest status symbol. Helicopter skiing in Alaska or a getaway to luxury goods group LVMH's exclusive hideaway in the Maldives are the current trends for the growing number of millionaires, according to a report.

It predicts that, despite the eurozone crisis, spending on luxury goods will hit $1.5tn (£975bn) this year as the wealthy look for novel ways to spend their riches.

The study by Boston Consulting Group (BCG) identifies a shift from "owning a luxury to experiencing a luxury" with bespoke treats now accounting for more than half of the $1.4tn spent on luxury goods and services last year. Luxury sales have boomed in the last two years as the industry recovered from the hiatus caused by 2008 global financial crisis, which provoked a sharp fall in conspicuous consumption.

The sector has also been buoyed by the growing number of millionaire shoppers in markets such as China and Brazil, who are picking up the slack as consumers in traditionally important luxury markets such as western Europe, Japan and the US continue to spend more cautiously. "The gap in income inequality is growing, which is unfortunate, but there are more and more millionaires every year," said Jean-Marc Bellaiche, a BCG senior partner who heads the firm's luxury practice.

Bellaiche said sales of luxury experiences grew 50% faster than demand for physical goods last year. The trend is explained, in part, by demographics – as the consumers who drove the luxury boom in the 1990s start to retire, he said. "They do not want to own new things, so are the primary customers for experiential luxury offerings," he said. Their options are not limited to exclusive safaris and spas, they can book themselves in for a five-star hospital stay where they will be waited on by a butler and the en suite facilities include a marble bath.
World's super-wealthy spend their riches on luxury travel adventures
Many commentators have noted that overindulging wealthy kids is bad for their character; but few have noted the new goal of "no obstacles" in private education. It is not just that wealthy US kids have a range of costly extras to choose from in school; but these schools are being forced to weed out any experience the kids might perceive as negative. Bullying is wrong; but private schools are so attentive – I would say, overattentive – to kids' group dynamics, that administrators sweep in and underemployed, wealthy, stay-at-home parents often meet, to nip in the bud any social combativeness, perceived exclusion, or random aggression. The hierarchical, aggressive physical horseplay at recess, which some educators note is a normal part of boys' and young mens' development, is, in other schools, forbidden.

Children raised this way are often very nice; but they are notably passive and indecisive. Many parents in this demographic can attest to how hard it is to get such a child off the couch, or to initiate an activity that is not presented to him or her intact. Many college administrators describe the vacillation and need to text parents constantly, that such children, now young adults, display. I was personally shocked to see several hundred University of Arizona students, children of wealth, rampaging, noisy and drunken, through the corridors of a Mexican hotel at 2am. When I asked the fraternity and sorority leaders to take some kind of action, I was told – nicely and sincerely – by each student "leader" I contacted, "So sorry, there is nothing I can do; I am just one person." This passivity and powerlessness fit the pattern: if everything is handed to you, you won't develop the skills and muscles required to initiate, find inner resources, or experience mastery.
This pampered private school elite can only lead to US decline (Guardian)
Blair and Kristin Richardson are selling their summer home in Alberta, Canada, and we certainly hope you're ready for it.

The estate sits on over an acre of land in a gated community, and is reminiscent of a European castle. The main house has 6 bedrooms and 9 bathrooms, and has nifty things like a hidden staircase, an elevator, a waterfall and four 26-ft totem poles.How did the couple afford it? Probably their careers in finance. Blair used to be the president of Morgan Stanley Japan and vice-chairman of Morgan Stanley's Asia operations, the WSJ reported. Kristin used to be a bond trader, and now sits on the Smithsonian National Board.
A Former Morgan Stanley President Is Selling His Breathtaking Castle-Like Estate For $11 Million (Business Insider)

I guess I have class envy. *sigh* Meanwhile: Earth Tipping Point Study In Nature Journal Predicts Disturbing And Unpredictable Changes. Nothing to see here, move along.

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