Even billionaires are feeling the pinch

With two-fifths (40%) of the world's wealth destroyed in the past 18 months, even billionaires are suffering. We're all in the same boat, so how do we pull through?

Every year, US business magazine Forbes publishes a list of the world's richest people. This year's list of billionaires shows that the number of US-dollar billionaires has plunged from 1,125 a year ago to 793 today, a fall of 332. In other words, the number of people with ten-figure fortunes has fallen by almost three-tenths (30%).

The famous five

As you can see, the top five is dominated by US billionaires, including software tycoons Bill Gates and Larry Ellison. The $25 billion decline in super-investor Warren Buffett's wealth from $62 billion to $37 billion moves him from first to second place in this table of titans. However, this demotion won't trouble the Sage of Omaha, as he takes little interest in his personal wealth (as readers of best-selling biography The Snowball: Warren Buffett and the Business of Life will know).

From riches to rags

Alas, the world's richest folk have lost almost a quarter (23%) of their wealth in the past twelve months. Today, the combined wealth of the world's billionaires is $2.4 trillion, down $2 trillion on a year ago. For those on both this year's list and last year's, their wealth is down by $1.4 trillion.

This is hardly surprising, given one estimate that two-fifths (40%) of the world's wealth has been destroyed in under eighteen months. It doesn't matter what assets you own -- shares, property, commodities or currencies -- your wealth will have been battered since 2007. Indeed, the only real safe havens have been savings accounts and government bonds. These may produce low returns over the long term, but at least they have generated a small positive gain during the market meltdown.

Of course, it's tempting for us mere mortals to display schadenfreude by taking delight in the misfortunes of the super-rich. However, whether you're a billionaire or on benefits, your personal wealth has likely taken a severe knock since 2007. Thus, in some ways, we're all in the same boat -- if not the same 400-foot yacht. Hence, perhaps we should avoid taking envious pot-shots at any one group. From rich to poor, we're all suffering. Then again, the elite few are doing so in positively sumptuous surroundings!

Rockin' all over the world

What's more, all parts of the globe have been thumped by the global slump in asset prices. There are 29 fewer Indian billionaires than a year ago. The worst-hit Indian tycoon, Anil Ambani, lost $32 billion -- or over three-quarters (76%) of his massive fortune -- as the Indian stock market tanked. There are roughly thirty million seconds in a year, so Ambani lost an incredible $1,067 in every second of 2008!

Russian oligarchs suffered, too, with 55 losing their billionaire status in 2008, largely thanks to the collapsing price of oil, base metals and real estate. Aluminium baron Oleg Deripaska saw his fortune nosedive from $28 billion to a mere $3.5 billion -- a fall of seven-eighths (88%).

Bizarrely, the Forbes list includes one enterprising narcotics baron: Joaquin Guzman. Mexico's most-wanted criminal is estimated to be worth $1 billion, thanks to his control of the Sinaloa drug cartel. Given the addictive nature of the cocaine which Mr Guzman controls, his future is assured -- if he can continue to stay one step of the law, that is.

Back to basics for billionaires (and bankers)

Bringing things back down to earth, it's clear that the big problem -- faced by rich and poor alike -- is 'easy credit' turning into 'tough debt'. This is a theme that I've banged on about for years, but my pleas largely fell on deaf ears. During the boom years, it became far too easy to make wealth using a ton of borrowed money. Today, our boom-time excesses are all too obvious, as companies and individuals struggle to cut back in the face of tightened restrictions on lending.

As well as taking on excessive levels of debt in order to grow their fortune, something else sticks out when studying the decline and fall of the mega-rich. In many cases, their fortune was highly concentrated in one high-growth area, such as mining, oil or real estate. Hence, my advice to budding billionaires would be to diversify -- spread your wealth around -- so that you don't end up with one big egg in a fraying basket.

Finally, I would caution billionaires and bankers alike never to assume that the good times will always roll. Instead, recognise that winning streaks always come to an end, so plan ahead, and spend wisely now in order to preserve and grow your wealth in future. Otherwise, when boom turns to bust, so too will your fortune!

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