The holiday season is traditionally the time when society extends a helping hand to the less fortunate among us. But this December, thanks to the world's continuing economic unease, we've got a whole new class of "poor" people to worry about.
They're called billionaires – or, even more tragic, "ex-billionaires" – and, according to Forbes magazine, they've taken a bigger financial hit in the past 15 months or so than in any year since the magazine started tracking the fortunes of the world's richest people back in 1987.
In fact, the most recent Forbes survey found that the total number of billionaires around the globe plunged from a record 1,125 in early 2008 to just 793 in March 2009 – a net decline of 332, or 29.5%. Even worse, the total net worth of the world's recognized billionaires plunged 45.4%, from $4.4 trillion in 2008 to just $2.4 trillion this year (numbers are based on stock prices and other values assessed in mid-February). That translates to an average net worth of just $3 billion, down 23%, or $910 million, from 2008.
At least 373 people joined the ranks of "ex-billionaires" (355 as a result of business misadventures or declining asset values and 18 who died), while only 41 climbed onto the billionaire list – 38 newcomers and three who regained spots on the 10-figure list they'd lost earlier.
The overall losses, in both numbers and value, eclipsed those from the worst previous downturn – from 2001 to 2003. That decline, which was triggered by the bursting of the dot-com bubble and subsequent bear market and fanned by the turmoil following the 9/11 attacks, saw an 11.5% decline in the number of billionaires (from 538 to 476) and an 18% drop in net worth (from $1.72 trillion to $1.41 trillion).
The word "bubble" has a lot to do with what caused the latest billionaire blowout, but it also explains why there were so many super-rich individuals to start with. The number of billionaires almost doubled from 2003 to 2007 (946), then shot up by another 179 from 2007 to 2008 as new technologies blossomed, business boomed, stock markets soared and bubbles swelled in real estate, commodities, banking and financial services. Then, the bubbles started to burst, with the collapse of the U.S. housing market triggering a financial-sector meltdown and a market collapse that quickly spread to every corner of the globe.
Indeed, the Forbes analysis indicates real estate was likely the major culprit in reducing the ranks of billionaires, with more than 250 of the "exes" registering substantial losses due to shrinking property values, which also accounted for drops in net worth among many of those who stayed on the list.
A prime example is India's Ramesh Chandra, who had a 67% stake in Unitech Ltd., India's second-largest listed real estate company. When the property market crashed, it lost 90% of its value and Chandra's net worth nosedived from $9.6 billion to just $600 million.
Real estate also played a role in the fortunes of this year's biggest loser. India's Anil Ambani, who ranked No. 6 on the 2008 list with a net worth of $42 billion. Real estate losses for his Reliance Capital Holdings, coupled with even larger losses from Reliance Communications Ltd. and Reliance Power Ltd., cost him $31.9 billion (76% of his fortune), leaving him with a net worth of just $10.1 billion and a ranking of 34th in 2009.
All told, India lost 29 billionaires from 2008 to 2009, and 23 of the 24 still on the list lost money. Still, that total was minor compared to what happened to Russia's billionaires. With heavy concentration in metals, minerals and other natural resources, including gas, the declines in those markets (gold's gain notwithstanding) knocked 55 of Russia's 74 2008 billionaires off the 2009 list – and the remaining 19 all saw their fortunes decline.
The richest Russian still on the list is 43-year-old investment specialist Mikhail Prokhorov, who ranked 40th with a fortune of $9.5 billion, down $10 billion (51%) from 2008 – with most of the losses linked to a 25% stake he held in the MMC Norilsk Nickel mining company. The other six Russians who last year ranked in the top 25 dropped completely out of the top 50 this time around.
Of course, the country with the most billionaires lost was the United States, which saw a total of 110 people drop from the list. Although the exact figure wasn't available, the bulk of the dollar losses also came from the United States. Even the top Americans posted major losses: While Bill Gates leapfrogged Warren Buffett and Mexico's Carlos Slim Helú to retake the No. 1 ranking he'd held for 13 years prior to 2008, he did it by losing just $18 billion compared to the $25 billion surrendered by both Buffett and Helú. Gates net worth was listed as $40 billion at the time of the 2009 survey, with Buffett holding $37 billion and Helú $35 billion.
Though Buffett undoubtedly suffered some major losses during the period, thanks to a large drop in his Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) stock, there is some question about whether he did as bad as the numbers suggest. The reason is that in 2006 he pledged to give away 85% of his fortune and has been making significant philanthropic donations ever since. He also may have made a fairly quick recovery, though he's still short of the $62 billion he had in 2008. Buffett's worth had rebounded to $56.5 billion by Oct. 1, according to gurufocus.com, – and that was before his $100-per-share buyout bid for Burlington Northern Santa Fe Corp. (NYSE: BNI).
Surprisingly, given the ill fortunes on Wall Street and the woes of some major financial firms, New York City lost just 16 billionaires – and Big Apple Mayor Michael Bloomberg was one of the few big winners. His media-driven fortune climbed from just $11.5 billion to $16 billion and he jumped from No. 65 to No. 17. Sadly, some of his neighbors in Manhattan weren't so fortunate – the number of billionaire hedge fund managers, most of whom have a presence in New York, fell from 39 to 28 – a 28.2% drop.
The impact of investments on wealth was also a bit surprising. Though ups and downs in the number of billionaires closely track the fortunes of the stock market (see the chart below), Forbes reported that only 80 of the 355 billionaires who fell off the 2009 list owed their wealth solely to financial market investments.
Celebrities didn't set the wealth world on fire either. Designer Ralph Lauren ($2.8 billion) and jetsetter Richard Branson ($2.6 billion) led a downward move by the wealthiest. However, television giant Oprah Winfrey managed to buck the trend as her fortune climbed to $2.7 billion.
Sports moguls also got penalized. Dallas Mavericks owner Mark Cuban saw his net worth drop to $2.3 billion, while Dallas Cowboys owner Jerry Jones lost $100 million, winding up at $1.3 billion and No. 559 on the list.
The question that probably holds the greatest interest for most of us is: "What did the 38 new billionaires do to make the 2009 list?" Alas, there's no easy answer to that query as the paths to riches varied substantially – and would be hard to emulate. One newcomer – Mansour bin Zayed Al Nahan ($4.9 billion) – was born into Abu Dhabi's royal family; little chance for us commoners there. Another, Joaquin Guzman Loera ($1 billion), went outside the law, heading one of Mexico's biggest drug cartels; probably not a good choice either.
However, two common business themes – green energy and China – were apparent in the list.
Wang Chuanfu, the 43-year-old head of BYD Co. Ltd., began selling electric cars in China in 2008, with plans to introduce them to Europe and the U.S. by 2011. He attracted the attention of Buffett, who bought a 10% stake in the company. That sent the shares skyrocketing, lifting Wang onto the list with $1.3 billion. (He joins 42 other Chinese billionaires who made the list from 2003 to 2008, though 19 of those dropped off the list this year.)
Germany's Aloys Wobben also blew onto the elite group via green energy. He founded windmill manufacturer Enercon GMBH in 1984, and the worldwide growth in wind turbine-generated electricity finally powered him onto the list this year with a net worth of $3.5 billion.
Thus, while the fortunes of the world's billionaires certainly dwindled thanks to the global crisis, the addition of 38 new names on the list provides hope for the future of this "impoverished" group.
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