MArk Lamb | Wednesday, 29 April 2009

Healthy, wealthy and wise

Weekly international investment round up to 28 April 2009

• The economic downturn bites the mega-rich

• Mexico struggles following the outbreak of swine flu

These are tough days for the very wealthy with even the mega-rich feeling the pinch, although there may not be too much sympathy heading their way.
The UK has announced plans to increase the top rate of income tax to 50 per cent for those earning more than Stg150,000 per year, this move will see their country’s top earners taxed higher than their French, German and American counterparts. According to the Institute for Fiscal Studies some 350,000 people in the UK earn above this level and under the newly announced measures another three quarters of a million who earn more than Stg100,000 will also be worse off through the scrapping of personal tax-free allowances.
However, the move has gone down surprisingly well among the British public who blame much of their economic woes upon the rich city fat cats and their uncontrolled risk taking. The new tax changes are set to be implemented next April and seem to be a populist measure ahead of the forthcoming general elections. Those upset enough to consider leaving the UK to work elsewhere may not have it so easy in America either as President Obama looks likely to increase their current 35 per cent US top rate of tax for those earning more than $372,950 per year.
According to the recent Sunday Times Rich List iconic entrepreneur Richard Branson is reported to have lost more than half his wealth during the recent slump and is unfortunately down to his last Stg1.5 billion; while Formula 1 motor racing supremo, Bernie Ecclestone, has lost over Stg930 million of his own wealth but both still rank in the UK’s list of 43 billionaires.
According to a wider survey conducted by Forbes, the number of worldwide billionaires has shrunk by 30 per cent, down to 752 from the 1,125 reported last year. Hardest hit seem to be those located in Russia such as Kirill Pisarev and his Partner Yuri Zhukov who have each lost an estimated 90 per cent of their once enormous wealth as shares in their real estate firm, PIK, have dramatically fallen. Fellow Muscovite and billionaire property developer Sergei Polonsky has also seen his wealth collapse but is hopeful of a recovery and has sworn to eat his tie if Russian property prices do not increase by 25 per cent this year.
At least these poor billionaires have their health which is in contrast to many in Mexico following a deadly outbreak of swine flu. Not only could the health of the nation be seriously affected but the economic impact could be disastrous for the country. According to official figures tourism is Mexico’s third largest source of foreign currency behind the oil industry and money sent home from Mexican-expats while consumer spending in Latin America’s second biggest economy accounts for half of all domestic demand. Mexico’s peso together with its bonds and stocks fell on the news of the outbreak with even Corona beer maker Modelo’s share price falling 9 per cent to 39.53 pesos.
Following heightened fears of a possible worldwide pandemic, as investors, sometimes we should all remember Virgil’s wise saying that ‘the greatest wealth is health’.



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Mark Lamb: Healthy, wealthy and wise


29 April 2009

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