Saturday, November 27, 2010

Fritter and Waste

The New York Times is infamous for its articles expressing sympathy for people who have suffered the fall from being truly wealthy to being, say, merely upper middle class. I hardly know what to make of this one. The opening suggests that the subject of the article is living a modest, meager existence, which in fact appears to be true... for now. It then explains,
It is a far cry from the life that Mr. Martin and his family enjoyed until recently at their Adirondacks waterfront camp at Tupper Lake, N.Y. Their garage held three stylish cars, including a yellow Aston Martin; they owned three horses, one that cost $173,000; and Mr. Martin treated his wife, Kate, to a birthday weekend at the Waldorf-Astoria, with dinner at the “21” Club and a $7,000 mink coat.

That luxurious world was fueled by a check Mr. Martin received in 1998 for $14 million, his share of the $600 million sale of Martin Media, an outdoor advertising business begun by his father in California in the 1950s. After taxes, he kept about $10 million.
The article goes on to describe various indulgent and wasteful decisions that largely frittered away that inheritance, with an allusion to the housing market as if to suggest that this was simply a case of bad luck. Having poured more than half of the inheritance into building a luxury home, which is nonetheless subject to a seven figure mortgage, a prospective buyer has offered them barely more than they owe. But if they accept the offer and they're lucky they'll end up with six figures in the bank, which puts them in pretty rare company these days.

Did this heir never heard the admonition, "Don't spend the principal"? I know, that oversimplifies economic reality. Sometimes it's necessary and even sensible to spend part of the principal. But not on six figure cars and racehorses, and self-indulgent luxury housing that, even in a good market, could not reasonably be considered as an investment with a sale unlikely to result in massive losses. There is no reason a family of four cannot be set for life based on a $10 million after-tax windfall.

In seeing how people handle (and mishandle) money, I have come to the conclusion that if you redistributed all of the nation's wealth equally among its citizens, you would be back to the same, skewed wealth distribution within two generations, possibly one. Many among the wealthy would object to this "wealth redistribution" not because they reject that probable outcome, but because in their hearts they know that regaining their wealth and privilege would require luck, sacrifice, and possibly even hard work. That is, once wealth again approaches its current distribution, there would be a significant shift in who ended up wealthy and who ended up less privileged.

3 comments:

  1. Geez, I hope his wife didn't have to give up her $7000 mink coat. B****.

    Anywho, I think the NYT clearly needs ME writing for them so that I can, periodically, pop up to say, "Uh yeah, I teach some kids who don't know where their next meal is coming from or where they'll be living next month. STFU about your mink coat." I love doing that and it's always such a great buzzkill!

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  2. The wife can't be all bad...

    "... Mrs. Martin continues to work as a substitute teacher with autistic children at an Adirondacks elementary school: a $12,000-a-year job she loves in a place she says she is hesitant to leave."

    As for the house they were building....

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  3. TeacherPatti, I think employing people who get their rocks off yelling at others and who take pleasure out of making other people feel like shit is more Fox News's metier. Good luck with the gig!

    What struck me about the NYT's take is how much of the 'boo hoo, they're poor' was coming out of the NYT writer's mouth and not the people profiled. From the quotes, they were pretty upfront that they were dumb, spent a lot of money, unfairly blamed one another and got jacked by the housing market largely as a result of their own foolish spending. It's the reporter's characterization of what they said - not what they actually said - that whines about the Fall From Grace.

    I'll take "why I don't subscribe to the NY Times anymore" for $500, Alex.

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