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Billionaires Go Broke, Repo Men Grab Gulfstreams, Yachts: Books

David and Jackie Siegel had it made, judging from Robert Frank’s “The High-Beta Rich.”

The Siegels owned a white-and-gold mansion in a gated community in Florida, he writes in this unsettling sequel to his 2007 best-seller, “Richistan.” They employed 15 housekeepers, three landscapers, six nannies and a chef, he says. Their toys included a yacht, a stretch SUV seating 15 and a Gulfstream III.

And yet they wanted more. So they began building a palace they called “Versailles” (and pronounced “Versize”). Their plans called for a bowling alley, an indoor skating rink, six swimming pools, two movie theaters, 10 kitchens and 23 bathrooms.

Then, like many billionaires of the Second Gilded Age, they ran out of credit as the collapse of Lehman Brothers Holdings Inc. (LEHMQ) hammered David’s company, Westgate Properties.

The very rich, as the old gag goes, are different from you and me: They have more money -- and more debt. Siegel, who owed more than $1 billion, couldn’t finish what would have been America’s largest private home, leaving a frame resembling a dinosaur skeleton, as Frank says.

Frank has covered the mega-moneyed set for the Wall Street Journal for eight years. He compares his excursions into the land of Maybachs to reporting from a foreign country -- a prosperous place with its own economy, health-care system, schools and travel network.

Source: Random House via Bloomberg

The cover jacket of "The High-Beta Rich: How the Manic Wealthy Will Take Us to the Next Boom, Bubble and Bust" by Robert Frank. Close

The cover jacket of "The High-Beta Rich: How the Manic Wealthy Will Take Us to the Next... Read More

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Source: Random House via Bloomberg

The cover jacket of "The High-Beta Rich: How the Manic Wealthy Will Take Us to the Next Boom, Bubble and Bust" by Robert Frank.

Sea Rays Get Repo’d

In “Richistan” -- a bubbly book for a frothy age -- he invited us to gatecrash and gawk even as he asked what the growing gap between the richest 1 percent and the rest meant for American society. In “The High-Beta Rich,” his warnings turn more pointed as he shows how yesterday’s booming consumption ended in a bust, complete with repo men seizing Sea Ray yachts and Cessnas from deadbeat millionaires.

The title, though clunky, captures Frank’s premise. This book isn’t about the “millionaires next door,” those sensible souls who drive battered Chevys, save pennies and treat debt like the plague. It is, instead, an anecdotal look at the new nouveau riche, whose behavior resembles “high-beta” technology stocks -- shares that swing higher and lower than the broader market. They are, Frank says, “prone to violent swings and rapid cycles of value creation and destruction.”

If Occupy Wall Street protesters are looking for an ally in Frank, they will be disappointed. He doesn’t “carry a flag in the class wars,” as he puts it. What he does offer is memorable evidence from a neutral, if irrepressibly voyeuristic, observer.

Ditch Digger

Tacking along like a chatty storyteller, Frank introduces us to an Indiana ditch digger who grew up in a shack with no plumbing, became a millionaire, and then was forced to auction off his Florida Keys estate at the bottom of the market. Saddled with more than $1 million in debt, he now lives in his 2002 GMC pickup truck.

Frank also catches up with billionaire Tim Blixseth, a timber magnate-turned-resort owner who, when last seen in “Richistan,” had built himself a Mediterranean mansion surrounded by pools, lush gardens, guest houses and a private 19-hole golf course near Palm Springs, California. When Frank returned in 2010, the waterfalls had dried out and the links had turned “an anemic shade of yellow.” Blixseth’s wife, Edra, had filed for Chapter 7 personal bankruptcy amid the couple’s bitter divorce. Even her fish-tank coral had been repossessed.

The narrative groans in places under heavy-handed explanations of how these individuals illustrate trends, and each chapter ends with a formulaic foreshadowing of the next. That said, Frank writes in a pleasingly breezy style and makes a convincing argument that the volatile earnings and spending of the high-beta rich have wound up distorting communities, the economy and government.

Aspen Traffic Jams

In Aspen, Colorado, for example, an influx of wealthy seasonal residents has driven down the number of permanent residents in the West End, triggered traffic jams (of commuting caretakers), and left the downtown pockmarked with empty stores, Frank writes. In California, the growing share of tax paid by high earners -- think capital gains on Silicon Valley stock sales -- has subjected the state to wild revenue swings.

Frank sees no easy fix for this lopsided dependence on the rich at a time when, as he says, the top 1 percent of Americans earn about 20 percent of the country’s income and stump up more than 38 percent of U.S. federal income taxes. He does offer some “survival tips,” including the wise counsel that most people should stop mimicking the manic spending of the rich.

Don’t be fooled by the glitter, he says. Behind the Richistanis’ mansions, you’ll often find a pile of debt: “They form a Potemkin plutocracy ever fearful of being exposed.”

Well put.

“The High-Beta Rich: How the Manic Wealthy Will Take Us to the Next Boom, Bubble and Bust” is from Crown Business (239 pages, $26). To buy this book in North America, click here.

(James Pressley writes for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are his own.)

To contact the writer on the story: James Pressley in Brussels at jpressley@bloomberg.net.

To contact the editor responsible for this story: Manuela Hoelterhoff at mhoelterhoff@bloomberg.net.

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