'High-Beta Rich': a wealth of volatility

THE HIGH-BETA RICH: How the Manic Wealthy Will Take Us to the Next Boom, Bubble and Bust, by Robert Frank. Crown Business, 239 pages, $26.

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. Their toys included a yacht, a stretch SUV 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 they ran out of credit as the collapse of Lehman Brothers hammered David's company, Westgate Properties. Owing more than $1 billion, the Siegels couldn't finish what would have been America's largest private home.

In "Richistan" -- a bubbly book for a frothy age -- Wall Street Journal reporter Frank invited us to gate-crash and gawk even as he asked what the growing gap between the richest 1 percent and the rest meant for American society. The title of the new book, though clunky, captures Frank's premise. It is an anecdotal look at the new nouveau riche, whose behavior resembles "high-beta" technology stocks. They are, Frank says, "prone to violent swings and rapid cycles of value creation and destruction."

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, guesthouses and a private 19-hole golf course near Palm Springs, Calif. When Frank returned in 2010, the waterfalls had dried out and the links had turned "an anemic shade of yellow."

The narrative groans in places under heavy-handed explanations of how these individuals illustrate trends. But 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.

In California, for example, 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 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.