When you drive into the Whole Foods parking lot, you’ll see the latest BMWs, Mercedes, Audis, Porsches, and Volvos. More important than what the 1% are paying is the growing gap between them and the rest of their fellow citizens who struggle to pay for food at Walmart.
So writes Elliott Schiff of Wilmette, Illinois, in the letters section of the Wall Street Journal (December 5, 2024; print edition December 6). As you can see, I’ve been following this month’s Wall Street Journal.
What is Schiff’s implicit assumption? People who drive the latest BMWs, Mercedes, Audis, Porsches, and Volvos are wealthy. Probably many of them are wealthy. Many of them may not. You typically don’t build wealth by buying assets that quickly depreciate in value. New luxury cars tend to depreciate quickly. Schiff might want to read The Billionaire Next Door. I posted about it here. In response to a question from commenter TMC on that post, I got the book from the library and enjoyed re-reading some of the stories and facts.
This is directly related to Schiff’s point. This is from Table 4.1 of this book. 46.3% of millionaires owned a car that was modeled this year or last year. However, 37.6% owned a car that was more than three years old. Additionally, 18.9% owned a car that was more than five years old. Of course, you’d want to know what percentage of luxury cars that bear Schiff’s name are owned by billionaires, but the book’s data won’t tell you that. Remember, too, that $1 million in 1996, when the authors were writing, is just over $2 million today. Using the Personal Consumption Expenditure Index, a more accurate measure of inflation, $1 million in 1996 is equivalent to $1.77 million today.
A reasonable question, then, is: What percentage of the luxury cars on the lot Schiff observed are owned by people with a net worth of at least $1.77 million? I think the probability that it is less than 60% is even, and the probability that it is less than 50% is 40%.
