Monday, June 06, 2011

Millionaires next door

Percentage of families with at least $1 million USD in investible assets (excludes primary residence). Data from BCG Global Wealth 2011 Report. ***

1. Singapore 15.5%
2. Switzerland 9.9%
3. Qatar 8.9%
4. Hong Kong 8.7%
5. Kuwait 8.5%
6. UAE 5%
7. United States 4.5%
8. Taiwan 3.5%
9. Israel 3.4%
10. Belgium 3.1%
11. Japan 3%
12. Bahrain 2.6%
13. Ireland 2.3%
14. Netherlands 2.3%
15. UK 2.2%

*** Wealth is defined as total assets under management (AuM) across all households. AuM includes cash deposits, money market funds, listed securities held directly or indirectly through managed investments, and onshore and offshore assets. It excludes wealth attributed to investors’ own businesses, residences, or luxury goods.


esmith said...

The problem here is the claim that the study "excludes primary residence."  I'm pretty sure that it doesn't. In Hong Kong in particular, the primary residence is the dominating asset, which accounts for most of the assets of its residents, due to the epic HK property bubble, which brought real estate values in Hong Kong to levels which were only seen by American realtors in their fevered nightmares. (For example, how does $4,000,000 USD for a 1,700 sf apartment sound to you in a city where median family income is $30,000 USD?)

Once you exclude the primary residence and all other domestic real estate, only 1.3% of its residents hold more than HK$5M (USD$700,000) in liquid assets.

Here's a reference:

esmith said...

And an even bigger problem is whether it's even valid to compare net worth of residents of US and, say, Singapore (unless we're talking about the numbers of ultra-millionaires, with net worth in excess of, say, USD $10M.)

The median age of a millionare in the U.S. is around 55. This person is about ten years away from starting to draw on Social Security and, more importantly, Medicare - one of the most generous retiree healthcare systems in the world, which is, by law, prohibited from rejecting to cover any service solely on the basis of cost (and, consequently, being simultaneously the most expensive and having the highest cancer 5-year survival rates in the world.)

The net present value of eligibility for Medicare for a typical U.S. household has been estimated to be right around the $1M mark.

It follows that, even if Qatar has more people with $1M in liquid assets than the United States, it's not a valid comparison unless Qatari retiree healthcare is as generous as ours.

RKU1 said...

The net present value of eligibility for Medicare for a typical U.S. household has been estimated to be right around the $1M mark.
Well, I haven't been following the Medicare debate in detail, but isn't that the reason pretty much everyone---Left to Right---agrees the current Medicare system is totally unsustainable?  And if so, then isn't the true NPV very much lower?  If there are something like 100M American households, then they allegedly have total Medicare NPV of $100 trillion.  Does that really make sense given the total GDP and the huge deficits?

Suppose Congress tomorrow passed a statute raising SS benefits to $1M per year for everyone starting in 2015.  Would that really vastly increase the actual wealth of all American households?...

steve hsu said...

But, but, I thought BCG only hired the best and brightest? ;-)

David Backus said...

Pension assets?  Some of this is going to depend on how pensions/retirement is handled.  

esmith said...

Assuming mean life expectancy of 80 years, $100 trillion is 8% of GDP. (At the moment we spend less, around 5% or 6%, but that's about to change as baby boomers are starting to retire.) Is it sustainable for a country to spend 8% of GDP on retiree healthcare indefinitely? I think it is.

Medicare is unsustainable in a sense that we can't continue running the system as is without tax increases or spending cuts elsewhere (and there's not much of "elsewhere" where sizable sums could be saved), even if healthcare costs were stable - just because the system will need to take care of many more people 20 years from now. And healthcare costs aren't stable: they've been growing faster than GDP for a while now (there obviously has to be a ceiling, since we can't spend more than 100% of GDP on healthcare, but no one knows where it is).

5371 said...

That concept of net present value is ridiculous. I think 99% of people would rather take a million bucks up front and pay for their own treatment for the rest of their lives, in Thailand if necessary. 

Sam H said...

Interesting. I wonder what this would look like if each US state were looked at. I am guessing that if New York were considered a country, it would be very close to the top/ 

RKU1 said...

Well, although I’m straying far outside my area of expertise, maybe here’s another way to look at the allegedly huge NPV of American health care benefits.  From everything I’ve read in the newspapers, America has about the most expensive and inefficient health care systems, which spends by far the most money for mediocre results.  So the greater the inefficiency, the greater the dollar asset value of those who are guaranteed by the government to receive it.  I’m not sure this makes sense as a way of measuring the true wealth of Americans. 
Similarly, American public school systems are insanely expensive and inefficient, while American children are guaranteed the right to attend them free of charge.  So the more inefficient and expensive they become, the greater the wealth of the American people?
Here’s a historical analogy.  Suppose the old USSR had passed a law guaranteeing everyone an orange a month from the government.  Since oranges were so absurdly difficult to obtain and valuable, the NPV of the (black-market) Ruble price would have been a gigantic asset to most people.  But would the guarantee of an orange a month really have made people so rich by world standards?...

Sam H said...

MtMoru said...

Did someone mention that where homeownership is less common millionaires will be more common ceteris paribus? Or do all those rent payments have the same PV as mortgage payments?

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