To: Stephen O who wrote (2739 ) 6/12/2003 8:44:15 AM From: DeplorableIrredeemableRedneck Respond to of 37804 Who says buying lotto tickets doesn't pay off?: Canada mints more millionaires than U.S. Benefits reaped from strong economy, stock market, savings Jacqueline Thorpe National Post Thursday, June 12, 2003 ADVERTISEMENT Canada created more millionaires last year than the United States for the first time since an annual report on rich people began seven years ago. The number of high net worth individuals in Canada or people with financial assets of US$1-million or more (excluding their homes) rose 15,000 to 180,000 in 2002, according to the report released yesterday. The ranks of U.S. millionaires, meanwhile, actually shrank by 100,000 to two million, said the report from consultancy group Cap Gemini Ernst & Young and brokerage Merrill Lynch & Co. "We've talked a lot about the brain drain going north to south," Paul Battista, vice-president of Cap Gemini in Toronto, said in an interview. "This is an interesting story of the wealth drain going the other way. We actually are starting to reap some of the benefits of the fiscal prudence our government has focused on in the last couple of years and economic growth." Mr. Battista said Canada fared better last year than the United States for three reasons. First, the Canadian stock market did not fall as far, so individual equity portfolios did not take such a big hit. Canada's main stock exchange, the Standard & Poor's/TSX composite index, dropped 13.5% last year compared with a 22% plunge in the S&P 500 in New York. Our economy was also much stronger. Canada posted growth of 3.3% last year and created a record 560,000 jobs, while the U.S. economy grew only 2.4% and lost one million jobs. Finally, Americans appear to have spent much of their winnings from the stock market boom, while Canadians have been steady savers. Canadians saved 4.2% of their personal disposable income last year, little changed from the go-go year of 1997. The U.S. savings rate slumped to 2.3% last year from 4.5% in 1997. Mr. Battista said the rise in the number of millionaires in Canada bodes well for those who are not quite so affluent. "They're a bit of a harbinger," he said. "We can infer from this that the average Canadian did better than the average American." While Canada managed to mint more millionaires, that could not offset an overall decline in wealth among the rich in North America as the bear market dragged into its third year last year and the U.S. economy struggled. Wealth creation dropped by 2.1% to US$7.4-trillion in North America, the first drop since the report began. Overall, the Asia-Pacific region saw the biggest rise in the number of millionaires. They increased by 4.9% to 1.8 million and their financial wealth swelled 10.7% from the prior year to US$5.7-trillion. "Asia-Pacific high net worth individuals responded quickly to shield their financial wealth against new market realities," the report said. European millionaires grew 100,000 to 2.6 million and wealth creation grew US$400-billion to US$8.8-trillion, helped by currency gains against the U.S. dollar and less exposure to the stock market. Africa saw a 4.9% rise in the number of millionaires and a 4.3% increase in wealth, driven primarily by a 20% rise in the South African stock market and a 25% appreciation of the rand. While the drop in the number of millionaires in the United States may be a reflection of how poorly that economy has fared since the recession of 2001, a leading economist said yesterday the United States is still a remarkable engine of wealth creation. Russell Sheldon, senior economist at BMO Nesbitt Burns in Toronto, notes overall U.S. household net worth -- including those who have not quite achieved millionaire status -- is currently growing at an annual pace of about 3.5%, after accounting for inflation. That's down from a peak of about 5.5% during the stock market boom but still above levels in the early 1990s. At 3.5% growth, a society doubles its real wealth every 20 years or so, Mr. Sheldon said. "Even though the financial markets have been extremely volatile, judged on any long-term basis U.S. economic performance and wealth generation over the last decade or two has been extraordinary for a big economy," he said. "You're supposed to slow down when you get very big, and it's the new guys that can catch up to the more advanced countries." Mr. Sheldon said the United States has managed to lead the world in wealth creation because of a nimble business sector. While the U.S. economy has shed jobs at a ferocious pace over the past couple of years, those same productivity gains have boosted wages and the overall standard of living. "The big driving force in the U.S. was the aggressive reorganization of corporations in the late '80s and '90s to focus much more intently on profit maximization instead of size," Mr. Sheldon said. Indeed while Canada may have blasted past the United States in growth, job creation and the creation of millionaires last year, many economists say a lean, mean United States is quietly steeling itself to turn the tables on Canada this year or next. jthorpe@nationalpost.com © Copyright 2003 National Post