By William Patalon III
Managing Editor

I finally understand the Irish fascination with the color green.

Having descended, in part, from some fine Irish stock myself (my mother’s maiden name was “Herron,” formerly “O’Herron”), I’ve always been entranced by Irish legends and lore, history and heritage, and custom and culture.  The color green is a key ingredient of this Irish cultural stew – as anyone who’s ever donned a funny hat and a shamrock pin and drank green beer on St. Patrick’s Day can attest. Green is the color of the uniform that Irish football teams don to do battle on the gridiron. It’s the color of the mother country’s landscape.

And when Ireland was battling Great Britain for independence in the late 18th Century, green signified sympathy – which actually drove Britain to make it illegal for folks to wear anything green.

Green is the national color of Ireland – in more ways than one. And the modern motivation has a lot to do with the so-called “greenback” – otherwise known as money.

The Buck of the Irish

If you’re a business owner or investor, and are looking for an overseas market with a lot of promise, Ireland clearly deserves a look.

According to one investment-research report I studied, Ireland is home to roughly 1,100 multinational companies; the $60 billion worth of products these firms export account for nearly 90% of Ireland's overall yearly total.

Europe in general is a big target for foreign direct investment (FDI) by companies involved in healthcare and drug care, and almost a third of that amount gets invested in Ireland. Indeed, nine of the world’s top 10 drug companies have operations in Ireland, which manufactures most of the Botox drug treatment, or the Pfizer Inc. (NYSE: PFE) Viagra drug, destined for distribution Europe.

Digital technology is also a huge element of the Irish economy. Ireland is the world’s biggest software exporter – even ahead of the United States, which is home to such software giants as Microsoft Corp. (Nasdaq: MSFT), and Oracle Corp. (Nasdaq: ORCL), to name just a few. Those two companies, combined, have a market value of nearly $360 billion.

U.S. companies have long been big investors in Ireland. Indeed, the Irish-American connection remains particularly strong. Intel Corp. (Nasdaq: INTC) has invested $5 billion in a huge chip fab in Ireland. Other big U.S. investors in Ireland include Dell (Nasdaq: DELL) (which alone is responsible for 5% of Ireland’s exports and 2% of Irish GDP), Hewlett-Packard (NYSE: HPQ), and Apple Computer Inc. (Nasdaq: AAPL) has chosen Cork for its chief European software-development and support center. [For a list of some other Irish companies, click here].

Thanks to a truly admirable savings rate – not to mention property values that have soared into the stratosphere – the Irish have become the wealthiest people in Europe, according to a Bank of Ireland (NYSE: IRE) research report released this week.

According to the bank’s yearly report, “The Wealth of the Nation: How Ireland’s Wealthy Will Invest in the Next Decade,” the Irish economy’s total wealth on a per-capita basis places the country second among the world’s eight most-developed nations: Behind No. 1 Japan, and ahead of both the United Kingdom and the United States.

Ireland’s per-capita net wealth rose from $225,400in 2005 to $263,000 last year, a remarkable 16.7% increase, the bank said. The report defines net wealth as property, bank deposits, pensions and investments. Overall net wealth rose $169 billion, or 18.6%, to $1.078 trillion.

The author of the report is Pat O’Sullivan, senior economist at the Bank of Ireland’s Private Banking Group. Much of last year’s surge in wealth was fueled by 20% growth in the value of residential real estate, an important element of the Irish consumer/investor’s personal wealth.

The report doesn’t provide any short-term forecasts. But in response to a journalist’s question at the press conference where the bank released the report, Senior Economist O’Sullivan said the rate of growth will be slowed substantially this year, thanks to slight slumps in share prices and a bit of a retreat in the residential real estate market, “probably in the mid-single-digit” range, which equates to roughly 5%.

Overall, Ireland’s net wealth (which excludes debt) has risen more than 400% since 1995. From last year’s $1.078 trillion, O’Sullivan predicts that net wealth will reach $1.245 trillion in 2010 (an increase of 7.4% from his earlier 2010 estimate of $1.159 trillion, and an estimate based on a “soft-landing in the real estate market this year." He forecasts net wealth of  $1.556 trillion by 2015.

That compares favorably with some projections from the highly respected think-tank, the McKinsey Global Institute, which in a report released earlier this year said that global wealth would soar from $118 trillion in February 2005 to $200 trillion in 2010 – with much of that gain coming from outside U.S. borders. That’s an increase of $82 trillion, or 69.5% in only a five-year period.

Millionaires Everywhere

If you’re planning to become a millionaire, and want to move into a neighborhood with others of your “own kind,” chances are you’ll find a pretty nice one in the Emerald Isles.

In a nation of 4.2 million people, estimates say that there are as many as 100,000 millionaires. At that level, O’Sullivan says that would imply that millionaires make up about 2.5% of the Irish population. For comparative purposes, in both the United Kingdom and the United States, millionaires represent about 0.7% of their respective populations, he said.

Using some basic statistical analysis, O’Sullivan ratcheted down his estimate for Ireland to 30,000 millionaires. That’s up 10% from 2005, the report said.

Now, before I break down the net-wealth ranges of this group, let me take a minute to show you an interesting little fact that might make for some interesting conversation at your next staff or board meeting, dinner party, or night out with friends. We’ll call it “Irish Millionaire Trivia,” and the basic question is as follows: How do you define an Irish millionaire?

Well, that’s easy, according to the Bank of Ireland’s O’Sullivan: Those folks are Irish residents with a net wealth of 1 million euros or better.

Makes sense, right? After all, a millionaire in the United States is a person with a net wealth of $1 million or better.

Do you see the interesting conundrum here?

You see, because of exchange rates, a U.S. millionaire who went over to Ireland or onto the European continent would no longer be a millionaire ($1 million USD. = 745,225 euros…. too bad, Charley, you’re OUT of the club……).

And it hardly seems fair that a European investor has to actually have $1.34 million in U.S. dollars to make the club (1 million euros  = $1.342 million USD). But it’s just one of those fascinating little bits of international financial trivia one uncovers while engaged in some late-night financial analysis.

But since we’re playing in the Bank of Ireland’s ballpark tonight, we’ll stick with their rules. Ireland’s millionaire population breaks down as follows:

• 27,000 millionaires with a net wealth in the range of 1 million euros to 5 million euros ($1.34 million USD to $6.72 million USD).
• 2,700 millionaires with a net wealth in the range of 5 million euros to 30 million euros ($6.72 million USD to $40.27 million USD).
• 300 millionaires with net wealth in excess of 30 million euros ($40.27 million USD).

While Irish household debt rose 20% to $220.3 billion, this was more than offset by the following:

• A 15% gain in cash savings.
• A 26% increase in privately held stocks.
• And an 11% gain in the value of pensions.

According to O’Sullivan, Irish consumers save about 14% of their disposable income – the top rate of any country in Europe. German consumers placed second with 10%, and the British saved just 5%. As for the Americans, well, they save just 1% of their disposable income.

Investors can look at direct investments, such as the bank or some of Ireland’s other public companies. Or you can look to benefit indirectly, invest in firms such as Apple or Dell, which are benefiting from their involvement with the Irish economy.

 

Tags: Green Technology, Ireland