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Sunday, March 19, 2000

Being rich is a bargain compared to being poor, studies show

 

You'll be relieved to know that the cost of being ultra-rich is going down.
   The Moet & Chandon Luxury Index, sponsored by the champagne maker, trailed the Consumer Price Index by 0.35 percentage points in 1999. The Consumer Price Index is the one that the government uses to track the effects of inflation on those unfortunates who don't employ a live-in butler because they can't afford one, as opposed to those of us for whom butlerlessness was merely a lifestyle choice.
   A live-in butler is one of the benchmarks in the Luxury Index, and it appears that those of you who didn't give your butler a raise last year were in first-class company. The average annual salary for a graduate of the Ivor Spencer International School of Butlers remained $75,000, according to the index. (Psst. Did I mention that I can hear the doorbell ring all the way from the solarium? If interested, call the number at the end of this column.)
   Other necessities that didn't go up in price include 30 grams of Petrossian Beluga Caviar ($75, and it's great on pizza), a bottle of Hennessy cognac ($120, to help wash down the pizza) and a Broadway theater ticket ($90, orchestra seat for "Cabaret").
   A Porsche 911 convertible went up a smidgen, 0.6 percent, to $80,400. That other transportation necessity, the Concorde, went up 6.1 percent ($11,578 round trip, New York to Paris).
   A Jaeger-LeCoultre Men's Reverso Duo 18-carat pink gold watch with bracelet (if you can't pronounce it, you have no business asking) actually went down 8.8 percent. It now costs only $18,050, which is a relief for those of us who consider the Reverso's two faces a necessity because we do so much time zone-hopping on the Concorde.
   A case of the Luxury Index sponsor's champagne went up 7.5 percent ($463.08), but if your portfolio didn't beat that last year, it's time to find a new financial adviser.
   Beer went up only 2.8 percent, according to the Consumer Price Index. The Bureau of Labor Statistics, which compiles the CPI, doesn't report actual prices for the items it compares.
   Here are some other common-folk equivalents from the CPI:
  

Canned fish (tuna, salmon, anchovies, sardines, etc.) the alternative to caviar, down 2.8 percent;
  

Movie-theater-concert tickets, up 9.5 percent;
  

New cars, down 1 percent.
   It doesn't take an economist to explain that the 1.1 percent increase in the price of bread hurts worse than the 2 percent increase in the cost of Teuscher imported chocolate truffles ($50 per pound). Nevertheless, here's how economist Jerome Watters with the Bureau of Labor Statistics in Dallas explains the impact of a rising CPI vs. a rising Luxury Index:
   "THE EFFECTS ON THE AVERAGE CITIZEN ARE GOING TO BE MUCH GREATER PRIMARILY BECAUSE OF THE NEEDS. LUXURY GOODS ARE JUST THAT, A LUXURY. SO IF YOU CAN DO WITHOUT THEM, THEY'RE NOT GOING TO AFFECT YOUR SITUATION THAT MUCH."
   THE LUXURY INDEX IS LESS LIKELY TO MOVE, HE SAYS, BECAUSE "YOU'RE NOT AS AFFECTED BY THE LAWS OF SUPPLY AND DEMAND. WHEN YOU GET INCREASES IN DEMAND, IT'S BECAUSE OF THE WEALTH EFFECT. BUT THAT'S NOT GOING TO AFFECT THE PRICE THAT MUCH BECAUSE, AT THAT LEVEL, THE MARGIN IS ALREADY BIG."
   HE HAS A POINT. THE 8.8 PERCENT DROP IN THE PRICE OF A JAEGER-LECOULTURE REVERSO WATCH DIDN'T SAVE ME A NICKEL AND THE 0.6 PERCENT INCREASE IN THE COST OF THE PORSCHE DIDN'T COST ME A CENT. IF YOUR EXPERIENCE WAS DIFFERENT, AND YOU'RE BETWEEN BUTLERS . . .
  

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Tom Whitehurst

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