Super-Rich get Hammered!
03/23/2010

Billionaires around the globe have been hit with devastating losses.

Online PR News – 23-March-2010 – – The world’s super-rich have been hammered by falling equities, commodities, real estate and the credit crunch.
The latest “World Wealth Report” by Merrill Lynch and CapGemini stated that investors with at least €25 million to invest shrank by almost 25 per cent in 2008 and an additional 19 per cent in 2009. But the hardest hit have been the Billionaires with about €1.1 trillion of wealth evaporated, according to Forbes.com.

This evaporation of wealth has not been without tragedy, Germany’s 5th richest man Adolf Merckle, overwhelmed by the €4.5 billion in debt against his VEM Group Holdings, decided to make some quick cash by gambling on a short position on Volkswagen AG. The shares went against him badly when Porsche revealed that it had amassed a controlling stake, the shares quadrupled into a €350 million loss. Two months later Mr. Merckle committed suicide, leaving a note that read “I’m Sorry.” If Mr. Merckle didn’t cash out his short position at such a bad time, he would have profited close to €2.0 billion, eliminating 1/3 of his debt.

Peter Tasca of Laureate’s BVI fund, which was up 42 per cent during the financial crisis of 2008 says, “when we utilise shorting in the portfolio we always maintain tight stop-losses, low margin ratios, proper diversification and never short a stock that has a strong uptrend. Our fund allocation is 100 per cent long, 30 per cent short with a net long of 70 percent”. According to Mr. Tasca this is the ideal asset mix because historically the capital markets world-wide go up 70 per cent of the time.

Oleg Deripaska leveraged himself into a €32 billion global empire with over 290,000 employees, all by his 40th birthday. Once Russia’s richest man with a net worth of €21.5 billion, he’s been forced to sell some valuable holdings due to the credit crunch and collapse in commodities. BNP Paribas led syndicate, loaned Mr. Deripaska €1.0 billion against shares in Canadian auto parts company Magna International. The bank claimed the shares at fire sale prices after they dropped 40 per cent below his purchase price. He then had to sell his 10 per cent stake in German construction company Hochtief to Commerzbank. This collapse in commodities has cut Mr. Deripaska’s net worth 88 per cent to about €2.7 billion.

High roller Sheldon Adelson which owns the Venetian in Nevada, USA and the Sands Macau and Venetian Macau casinos in China, lost €19.2 billion in 18 months. He has even injected over €750 million of his own money just to help the companies cover their debt payments.

This recession has been devastating across all economic classes, whether the super-rich can rebuild to previous levels, only time will tell. Mr. Tasca says, “ I don’t think this market is healthy, we could very easily re-test the lows because there are still many billionaires that are illiquid and in this market, that is simply troubling.”