Updated: "Who Rules America - An Investment Manager's 2014 Update on the Top 1%"

[haha]

Anyone remember the "Yacht Tax"? Yeah, we're gonna hit those rich folks in the pocket, alrighty!

Who got hurt? The hourly people who were building those boats all got laid off bc the rich stopped buying!

That was a really good idea....

Now the rich are building boats and mansions...construction, electricians, pavers, real estate agents, caterers, florists, etc etc all get jobs.

When business people have money, they create growth. When government gets that money, they dole it out for consumption, and of course the paramount job of government, to buy votes

 

[explanade]

Right, because keeping taxes low for the "job creators" have worked out so well.


Yacht tax doesn't affect that many people. Once yachts have been bought how often do they keep buying yachts, even if they can afford it?

The luxury goods companies are part of small industries compared to mass goods companies, both in dollars brought in and people employed.

If you want to increase overall employment you try to get more Fords and Chevies sold, not Maybachs.

 

[longranger]

The pathways of venture capital have become so much more distorted than back in my youth. Then it was easy to understand the logic of so called trickle down economics even if it was bullshit which I often thought it was.

Now with a world economy much more of that US generated capital is invested in countries with cheap labor rates and lax environmental protection laws. Sure it makes low cost, often low quality goods available to consumers at an attractive price point. It does not however help with our deteriorating infrastructure, improve education, create high paying jobs, protect patents or consider the next generation. The level of collateral damage caused by the combination of increasing income inequality and outsourcing of much of our industrial capacity fuels our national deficit while simultaneously benefitting that 0.1% throughout the world.

 

[ERD50]

...

Now with a world economy much more of that US generated capital is invested in countries with cheap labor rates

... while simultaneously benefiting that 0.1% throughout the world.

Did you include the people in the less developed countries that now have a higher paying (and probably safer) job in that 0.1%?

That's the problem that I've stated repeatedly with the 'inequality' numbers. They are withing a country, not world-wide.

I agree there should be some decent world-wide environmental and worker labor/safety standards. This is happening to a degree, but needs to be expanded.

-ERD50

 

[marko]

Right, because keeping taxes low for the "job creators" have worked out so well.


Yacht tax doesn't affect that many people. Once yachts have been bought how often do they keep buying yachts, even if they can afford it?

The luxury goods companies are part of small industries compared to mass goods companies, both in dollars brought in and people employed.

If you want to increase overall employment you try to get more Fords and Chevies sold, not Maybachs.

There was a reason they repealed the yacht tax: it affected a LOT of people.

It affected a whole swath of the economy's hourly workers: yacht yard employees, dock people, fuel people, restaurant people, transportation, catering, housekeeping, engine repair, spare parts, maintenance, captains, deck people, airlines, hotels... on and on.

Yes, yes, it is a small percentage but there is more to running a big boat than just filling it with fuel; a big one can pump almost $1M a year into a local econonmy.

And, yes: those hourly people go out and buy Chevy's and Fords, eat at restaurants, buy houses.

 

[NW-Bound]

So, the rich get richer. But do the poor get poorer?

I surfed the Web, and saw several statistics from OECD showing that the median income in the US is not bad at all, and in fact is higher than that of most Western European countries. Note that OECD adjusts for the costs of living in different countries using PPP (Purchasing Power Parity). With PPP, one will see that the highly-paid Swiss worker is better off than the US counterpart but not by a factor of almost 2. And the American has better purchasing power than his counterparts in other Western countries with high cost of living. That should be no surprise to people who travel abroad.

But the above is for income. For wealth, there's a different data set. And it shows that the average US family indeed holds less wealth than many European families. The fact that in this aspect the US even trails Italy, an economic basket case, was perplexing to economists. One Web site suggests that the cause is the propensity of the American to spend. No matter how much you make, if you do not save you are not going to accumulate wealth.

 

[haha]

Anyone who has ever seen poor knows that what we see in the US is only less rich, not poor. I've seen toddlers with kwashiorkor, but you will never se this in the US unless some crazy parents have locked the kid in a cage.

And hunger? If poor people in the US are going hungry, why aren't they skinny like poor people in poor countries?

Ha

 

[NW-Bound]

The medical profession has been telling us skinny or rather skinnier than we are right now is healthy. We want skinny!

So, perhaps some hunger is good. But isn't hunger what dieters always complain about? It's not easy to go hungry I'll tell you. Luckily, my appetite recently has not been as strong as it used to be. I hope that will help me keep my current BMI of 23.5.

 

[Letj]

Anyone who has ever seen poor knows that what we see in the US is less rich, not poor. I've seen toddlers with kwashiorkor, but you will never se this in the US unless some crazy parents have locked the kid in a cage.

And hunger? If poor people in the US are going hungry, why aren't they skinny like poor people in poor countries?

Ha

There is no poverty in America. The poor has the everyday material comforts that everyone else has - tv, cable, refrigerator, in door cooking and plumbing, warm homes, adequate healthcare, etc. In addition all their basic needs are met. To appreciate how lucky the so called poor in America is, one has to only spend one minute in a developing country. It's why immigrants from those places are breaking the door down to come here.

 

[imoldernu]

At what point does personal wealth become dynastic wealth?
10 Million
50 Million
100 Million
500 Million
1 Billion
10 Billion
More?
Further... Is dynastic wealth right or wrong?

 

[explanade]

Cheapest foods are high-calorie, high-fat, processed and sugar-rich.

BMI by socioeconomic brackets would probably decline towards the top.

 

[Totoro]

Further... Is dynastic wealth right or wrong?

To paraphrase Buffet: I don't believe it is good for society if you choose your next olympic team from the offspring of last edition's winners.

 

[marko]

At what point does personal wealth become dynastic wealth?
10 Million
50 Million
100 Million
500 Million
1 Billion
10 Billion
More?
Further... Is dynastic wealth right or wrong?

By dynastic wealth, do you mean generational (Waltons, Kennedys, Rockefellers, Roosevelts)? Or do you mean a specific amount?

I met a guy who felt that "nobody should have more than a million dollars...once you get above that amount the government can use it more than you"
If its wrong, what happens to the money after it goes above a certain amount?

Then there are the "you didn't earn it, you inherited it" people, as if you're somehow less of a person.
Again, if it's wrong to inherit above a certain amount, who gets the money...and why?

In either case, I think both camps are 1) out of line 2) off base 3) a little crazy 4) jealous/envious 5) dangerous.

 

[Totoro]

I don't know how much VC is responsible for innovation though. Their game is to invest in a startup most likely to get a big IPO.

While I fully agree many VC funds produce rather crappy outcomes in terms of adding value to society the last few years, there are some good examples:

• Tesla is one. Actually the IPO is what kept it afloat.
• Google. It was the best search engine out there by far, and they created some things which help us all greatly: Google maps, Gmail are just two examples. Agree with the crappy business model in search, but you sometimes have to work with what you have
• Linkedin is actually a midly positive one in my opinion. Much easier to find contacts, good people, network etc .. not to mention keep my contact list up to date

It's not like the Intel's and such of yesteryear, but very likely in those days you had much crappy IPOs coming out of the VC pipeline too.

And many are not IPO'd yet or are aimed at B2B. Check out Khosla Ventures, there are some serious things happening there.

I think the truth is that many great VC backed business get bought by others before they IPO or remain in VC hands. Why get rid of a great thing?

 

[marko]

To paraphrase Buffet: I don't believe it is good for society if you choose your next olympic team from the offspring of last edition's winners.

You don't arrive at generational wealth by letting the "offspring" run the show (they usually can't run a one car funeral). You get other people to do that and send the checks out to beaches in Greece and ski resorts in the Alps.

 

[CaliforniaMan]

There is no poverty in America. The poor has the everyday material comforts that everyone else has - tv, cable, refrigerator, in door cooking and plumbing, warm homes, adequate healthcare, etc. In addition all their basic needs are met. To appreciate how lucky the so called poor in America is, one has to only spend one minute in a developing country. It's why immigrants from those places are breaking the door down to come here.

We have quite a few friends and acquaintances in this situation. They come from SE Asia, and are considered poor by U.S. standards. But once they get here they start petitioning to get other family members to join them here. They work much harder here than in their home country and contribute a lot to the economy. None seem to want to go back.

 

[daylatedollarshort]

There is no poverty in America. The poor has the everyday material comforts that everyone else has - tv, cable, refrigerator, in door cooking and plumbing, warm homes, adequate healthcare, etc. In addition all their basic needs are met. To appreciate how lucky the so called poor in America is, one has to only spend one minute in a developing country. It's why immigrants from those places are breaking the door down to come here.

You don't think there are poor in Detroit, Appalachia or Oakland or homeless in most majors cities?

47 million were uninsured in the U.S. in 2012, and without insurance health care for anything but minor illness is unaffordable for the very poor. We have had more uninsured in the U.S. than the entire population of Canada.

What about all of the families that live in high crime areas? Are they there because they want to be and not because they can't afford to live anywhere else?

There are still many countries where it is okay to beat women with a stick. If a woman left to go to a country where she couldn't vote but wouldn't get beaten by a stick, would you say she had it good? Just because people want to immigrate here does not mean we can't do more to help the poor. It just means we may not have as horrible poverty as other countries. Just that some countries are worse is not a particular high hurdle for baseline social services in the U.S.

 

[Chuckanut]

Country to country cultural comparisons are often difficult.

When I was studying for my teaching credential we had a required class on how to deal with 'minorities' - people of color, women, and the disabled. (Yes, women are not a minority, but the theory was they were treated like a minority.)

The main teacher was a Mexican-American man, a very bright, former serviceman. At one point he emphasized that many MA females were shy around men and that male teachers had to take that into account and not assume that they were stupid or apathetic. They just didn't see themselves as active, vocal participant in the class. Especially with a male teacher.

The lady who taught the 'woman' part of the class was adamant that we challenge ALL female students including the shy MA students. Our job was to break the stereotype and get them involved even if it made the girl uncomfortable. In my review of the class I suggested they get together and figure out what we were supposed to do.

Adjusting for cultural differences is difficult with the exception of extremes. Nobody should be beaten or killed for disobeying her husband. But, if one culture wants its females to cover their hair because they are afraid their daughters will end up like certain female pop stars , who can say they are wrong?

One lesson from the class always stuck with me. No matter whatever your race, gender or nationality, there was one minority group any of us could always become part of , sometimes suddently - the disabled.

Good discussion.

 

[longranger]

This thread could now merge nicely into the current thread asking if members of the forum feel guilty about their fortunate circumstances in FIRE. It could equally well be titled is life even remotely fair and does it matter as long as I am in a favorable position? Intuitively most of us must know in our gut that #1 life is definitely not fair, #2 people who are successful over time feel that they totally deserve their affluence.

Yes it is true that many first world economies define poverty by criteria that are ludicrous to residents of a third world country. Residents of western democracies with safety nets are indeed fortunate on average. SO WHAT!!!!! What we are really discussing here are how those realities make us feel. Then we try to better understand the causes and our own individual positions in this economic hierarchy. Many of us feel empathy for those that are in a bad way. Very few feel guilt or responsibility for the less fortunate.

Any attempt to have the discussion proceed onto ways to solve "problems", which we each perceive as differently as the concept of fair, are difficult to find common ground on. So back to square one IMHO.

One last note regarding the upper 0.1%. I am not even close to that level of wealth but have several friends that are. Their perceptions of what is fair and attitudes towards others are as heterogeneous as any of ours. Just the human condition I suppose.

 

[marko]

Cheapest foods are high-calorie, high-fat, processed and sugar-rich.

BMI by socioeconomic brackets would probably decline towards the top.

"Times have changed, and now the poor get fat"
(Elton John, "The Bitch is Back")

 

[Totoro]

Numerous studies show that a majority of people would rather have less themselves, if they nevertheless had more than their neighbors, than have more with neighbors who had even more.

Best way to feel rich is to have poor friends and live in a poor area I fall prey to that thinking every so often, no stranger to character flaws. Trying to stamp it out though.

Human nature indeed.

 

[haha]

Best way to feel rich is to have poor friends and live in a poor area I fall prey to that thinking every so often, no stranger to character flaws. Trying to stamp it out though.

Human nature indeed.

I don't think it is a character flaw, it just is typical human nature. On the other hand, I love living in a rich area. I see nice landscaping, some beautiful old mansions, nice well kept cars, often pretty women and none of it costs me anything to view at least. I did go down a bit in neighborhood in order to get a larger condo than where I was renting. Still, overall I get lots of no-cost amenities. (Costs me no extra beyond probably higher RE tax and of course higher capital outlay to buy.)

I also live near a university. Beautiful landscaping, fountains, sculpture and all paid for by students and US government underwritten loans and alumni contributions.

Ha

 

[explanade]

Generational wealth worked with monarchies for hundreds of years.

Now were those societies better economically? They were if you lived in the castle and collected from the serfs.

 

[target2019]

Hard to comment on so many interesting thoughts in this thread. I'll go back and re-read "The Birth of Plenty: How the Prosperity of the Modern World was Created Paperback" by William J. Bernstein.
Certain to raise more questions than it answers, but might help gain better perspective on wealth and prosperity. The issue won't go away, for sure.

 

[GTFan]

While you're at it pick up this one to see how we got where we're at, but I don't think you'll like the outcome.Who Stole the American Dream? - Wikipedia, the free encyclopedia