Top 1% of Americans own 56% of US stock - Bottom 90% own just 12% of stock (1 Viewer)

[superchuck500]

It's quite a figure and the share held by the top 1% is growing. When you consider the free rein that corporations have to act politically and that those decisions are controlled almost exclusively by the extraordinarily wealthy in a board room where the corporation is legally bound to act in the interest of its shareholders (i.e. the 1%), what does that mean for the bottom 90%? Not in the top 1%? Sucks to be you.

The wealthiest US households are strengthening their grip over corporate America. The richest 1 per cent of Americans now account for more than half the value of equities owned by US households, according to Goldman Sachs. Since 1990, the wealthiest have bought a net $1.2tn in company stakes, while the rest of the population has sold more than $1tn.

Three decades ago, ownership was also lopsided, but the top percentage point of Americans by wealth only controlled 46 per cent of all US equities held by households. By the end of September 2019, that proportion had hit a record 56 per cent, amounting to $21.4tn, according to the investment bank’s calculations. That includes both public stock and ownership stakes in private companies.

“The wealthiest households have been by far the biggest driver of positive household equity demand,” Goldman Sachs analysts, led by Arjun Menon, said in the report.

“Accelerating US economic growth and rising stock prices should continue to support equity purchases by the top 1 per cent.” Recommended LexEquities World economy/stocks: Piketty is right Premium As of September 2019, the bottom 90 per cent owned $4.6tn of equities, or 12 per cent of the total, the analysts noted.

How America’s 1% came to dominate equity ownership

Wealthiest households have bought $1.2tn of company stakes since 1990

www.ft.com

 

[Beach Friends]

What is that path today?

I just laid out the most significant factors.

 

[EmBeeFiveOhFour]

I haven't read this, but how do Pensions and company 401k plans fit into this percentage?

Or are they talking about IRA's, and other private ownership?

Because my family is currently in that top 10%. It doesn't take much to get up there...

This is a calculation of wealth, not income. The cut-off for the 90th percentile by net worth is just under $1.2 million. It's increasingly hard to get there for a generation of people which starts adulthood fresh out of school with a five or six figure negative net worth. It's easier to get there for people who inherit it or who were born in a generation that purchased cheaper houses or stocks 30-40 years ago.

 

[wardorican]

This is a calculation of wealth, not income. The cut-off for the 90th percentile by net worth is just under $1.2 million. It's increasingly hard to get there for a generation of people which starts adulthood fresh out of school with a five or six figure negative net worth. It's easier to get there for people who inherit it or who were born in a generation that purchased cheaper houses or stocks 30-40 years ago.

Thanks for the clarification.

Either way, my main question was about if 401k and pensions were counted in that graphic.

Pensions eat up a big chunk of the market and aren't attributed to any individual, but it is retirement income/wealth some will get.

 

[RobF]

Structurally, the SS system isn't set up to work like that - it's effectively a Ponzi scheme.

Just an aside, but I strongly disagree with that characterisation. A Ponzi scheme is fraud, where high returns are promised on a spurious investment, but where there is no investment and returns are actually delivered from further investments, in a typically unsustainable manner.

Whereas SS is based on a sustainable 'pay-it-forward' principle*, where a share of productivity from the current working population is used to support some of the non-working population, with the current working population then being entitled to receive support from the future working population in turn. It's not fraud, it doesn't promise high rates of return, there are no non-existent assets. It's not a Ponzi scheme.

*The principle is sustainable, there will inevitably be excesses or shortfalls where the share for the non-working population is set largely statically and the relative size of the non-working population to productivity changes such that expenses can't be met by revenue, or revenue exceeds expenses; but adjusting expenses and/or revenue addresses that.

 

[CoolBrees]

W tried to privatize SS, and that was one of the first and largest pushbacks in his presidency from the right.

Boomers want a change to SS, just not yet. They kicked the can down the road this far, they will kick it just far enough to not have to deal with the bill.

Home ownership is about the only wealth building move normal family can make. Making less than $100k, for family of four just doesn’t leave enough over at the end of a month for any investing outside of standard retirement if they are luck to have that.

Easiest way to fix SS is to remove the cap. I am lucky enough to be in the 3% and make enough that the extra $ taken above the 2020 $137k line would make only a difference in my wealth portfolio. Well, to me that is the point. I would have to give up some of my wealth for others to build any wealth.

Seriously $137k is way too low for the cap, if there is even to be a cap- $1million. $137k isn’t even a high salary anymore. shirt I don’t know how a family of four could afford to live on that to be honest.

 

[superchuck500]

I haven't read this, but how do Pensions and company 401k plans fit into this percentage?

Or are they talking about IRA's, and other private ownership?

Because my family is currently in that top 10%. It doesn't take much to get up there...

It's talking about equity ownership in the form of stock shares. That would include any shares held in a special tax-treatment plan (e.g. 401K, IRA, or 529). I don't think it would include pensions unless they are based on holding of shares.

 

[superchuck500]

Just an aside, but I strongly disagree with that characterisation. A Ponzi scheme is fraud, where high returns are promised on a spurious investment, but where there is no investment and returns are actually delivered from further investments, in a typically unsustainable manner.

Whereas SS is based on a sustainable 'pay-it-forward' principle*, where a share of productivity from the current working population is used to support some of the non-working population, with the current working population then being entitled to receive support from the future working population in turn. It's not fraud, it doesn't promise high rates of return, there are no non-existent assets. It's not a Ponzi scheme.

*The principle is sustainable, there will inevitably be excesses or shortfalls where the share for the non-working population is set largely statically and the relative size of the non-working population to productivity changes such that expenses can't be met by revenue, or revenue exceeds expenses; but adjusting expenses and/or revenue addresses that.

That's fair, I withdraw my characterization. I certainly didn't mean to suggest fraud - only that new contributions into the system are required to pay near-term liabilities. If you prefer 'pay-it-forward' that's fine by me.

I'm fairly sure that objective expert analysis does not agree that the SS system is sustainable - largely due to smaller generations following a very large one. But I think you're just saying theoretically sustainable to distinguish from Ponzi. So again, fair enough.

 

[RobF]

I'm fairly sure that objective expert analysis does not agree that the SS system is sustainable - largely due to smaller generations following a very large one. But I think you're just saying theoretically sustainable to distinguish from Ponzi. So again, fair enough.

That's why I was saying the principle is sustainable, as distinct to a specific practice. The principle is always sustainable; as long as you have a working population producing anything, then a share of that can be allocated to support the non-working population.

A particular scheme implementation may not be sustainable, if expenses systematically increase relative to revenue and no adjustments are made accordingly. So if revenue doesn't increase as it should, for example due to income equality pushing increasing amounts of income out of revenue capture due to caps, and/or relative size of non-working population increasing beyond the means of the productivity of the working population, and no adjustments are made, then you have a system that will not be fully sustainable (it'll either have to offer reduced support, or make up shortfalls from elsewhere).

That said, it is possible for smaller generations to support larger ones while maintaining or even increasing their own wealth, even to the same standards as previous generations, if productivity increases and the appropriate share of it is transferred to the non-working population.

But the thing is, even with an investment return scheme, the support for the non-working population is still essentially taken from the productivity of the working population; that's ultimately where the returns on investments come from. It's just a different mechanism for doing so, it doesn't necessarily increase productivity and wealth such that there's actually more to go around, nor does it necessarily share that productivity and wealth more equally. If the non-working population's productivity is decreased relative to the demands of the non-working population, there's still going to be problems. That is, it's not a social security problem, it's a productivity of the working population relative to size and demands of the non-working population problem.

 

[SystemShock]

What is that path today?

First, you inherit Manhattan real estate...

 

[SystemShock]

I just laid out the most significant factors.

No, you didn't.
Plenty of people who finished school, got a job, then got married and then had children are broke and live paycheck to paycheck.

And if there is a factor that works against wealth accumulation, it is having children.

 

[B4YOU]

I am just curious why you say wealth inequality is due to tax policy.

The bottom 45% of income earners pay no federal income tax. I guess I don't understand how tax policy could help increase the wealth of these earners.

Not all taxes are income taxes. LA state funding is down 40% or $4500 per student per year for higher education. A student leaving with 20k debt accruing interest limits stock purchase options. This fuels generational wealth inequality by creating a debtor class. This is a national trend based on state policies. Something like 47/50 have lowered higher education funding.

Yes, there are multiple factors that affect wealth inequality (union participation, globalization, automation, etc.), but suggesting SSI needs a major rework when it has been one of the more effective tax policies seems miss guided.

(Edit: If you really want to change SSI, then remove the cap and means test benefits starting with current recipients.)

I agree that basic financial education should be provided at multiple grade levels.

 

[EmBeeFiveOhFour]

And if there is a factor that works against wealth accumulation, it is having children.

Very much this. Given that most families with young children require both parents to work in order to cover the basic necessities, the costs of day care, school aftercare, summer camps, healthcare, etc. etc. are absolutely crushing. Which leads to what we have now -- couples delaying marriage and buying houses and having children because of high debt loads load and the inability to take on even more debt for diapers. The people with the most financial education know that they can't possibly afford kids. Boomers like James Carville who brag about paying their $300 annual tuition working part time and wondering why these lazy kids today can't just pay their tuition and rent with a part time job know a hell of a lot less about how basic finances work now than a family with two young kids.

 

[superchuck500]

Very much this. Given that most families with young children require both parents to work in order to cover the basic necessities, the costs of day care, school aftercare, summer camps, healthcare, etc. etc. are absolutely crushing. Which leads to what we have now -- couples delaying marriage and buying houses and having children because of high debt loads load and the inability to take on even more debt for diapers. The people with the most financial education know that they can't possibly afford kids. Boomers like James Carville who brag about paying their $300 annual tuition working part time and wondering why these lazy kids today can't just pay their tuition and rent with a part time job know a hell of a lot less about how basic finances work now than a family with two young kids.

It’s certainly true that the relative cost to earnings for childcare, healthcare, and education have gone up dramatically over the past 30 years. Wages haven’t even come close to keeping up.

 

[samiam5211]

Social security was once unsustainable because the boomers did not have as many kids as their parents.

Through a combination of immigration (legal and not) and the boomer generation shrinking, social security is once again sustainable if we can keep it going another 10 years and keep our young people productive.

Importing people accustomed to a lower standard of living and that will have more children is the best long term approach.

Even the poor in the west enjoy an elevated standard of living from the labor of other people’s poor.

This is not a sustainable model. Eventually capitalism runs out of other people’s poor people.

 

[dtc]

So if you allowed people to use their SS money to invest in equities you could see more than a doubling of that $1.2T that the richest have taken on since 1990. Talk about immediately raising the wealth of tens of millions of people in the bottom half of wealth.

Depends on how you want to do it. Nothing wrong with people 60+ taking their contributions and investing. And so on.
Or you could set it up at some age where people at that age or below can take their existing contribution or just future contributions and invest.
Regardless of how you structure it there would be an increase in wealth correlated to the number of people participating - and if everyone participated it would produce enormous growth of wealth in the bottom half.

How much would a 60 year old who's never made more than 35k / yr have in his retirement account and how would that provide for him when he lives until he's 90?

Do I need to do the math for you or do you get what I'm putting down?

What about the 65 year old woman who's never worked outside of the home? How much does she get? When she lives to be 100 what's she eating?

Oh yeah, one more thing to add.

When you take the single largest pool of wealth in the world which is what the cumulative total of SS would be and you release it into a market like the ones we have now, what happens to earnings? When the party in power who's agreeing with you seeks to deregulate and absolve any financial advisers from responsibility to their clients, what happens?

You remember all the stories of NFL players broke after 5 years?

When you give a 60 year old person who's never made more than 35k in their lives say $200k in retirement assets in lieu of SS and that person invests it who manages it? What happens when they get ripped off? What happens when the increased pool of cash chasing returns diminishes returns and drives prices of already ridiculously over-valued stocks up.

Yeah. Thought so.

 

[dtc]

I wouldn't be able to provide details - but there seems to be some general consensus that at some point the SS system will be bankrupt. Which I am guessing means SS payments will effectively be coming out of the general fund.
With that in mind along with some sorts of "penalties" for, say, people under the age of 45 (maybe a declining scale of penalties) if they take out their contributions it seems like you could get past the funding concerns.

That's not true. SS is not broke and it's not going to be. The baby boomers came in during a smaller demographic, but that's almost wrapped up and the Xers are smaller. It's an ebb and flow and easily dealt with.

Demographics are changing in favor of SS and the fix is of little consequence. Kicking out retirement age or increasing the amount of income that's counted towards contribution cap is easy, logical, reasonable and something that back before the right went mad would have been an easy fix.

Back 20 years ago I recall doing the math and the cap on income was about 106k. I believe it's about the same now. Having those of us who make more pay into SS up to 150 or 200 would be easy. hell, reduce the burden on employers and have high earners contribute up to 250 or 500k. Lower the rate in toto and kick the top income out to a million.

Our politicians on both sides have let this easily fixable issue become a giant werewolf that I swear if you gave me a month and a million to hire a few folks to do some math I could fix and I'm not really kidding.

Means testing so that people who are rich are not receiving benefits would likely fix the whole thing. And, since we all acknowledge SS is essentially a ponzi scheme that subsidizes the retirement of old poor people, I think we could agree that someone with 500k in annual retirement income doesn't need the 1440$ or whatever they get.

 

[Mr. Blue Sky]

I'm always astounded that anybody who isn't part of that 1% on the right, doesn't demand that the Republican leadership of their party address this disproportionate and ridiculous wealth/income disparity. It's like it's not even an issue on the right, but why?

I guess they're more concerned with conservative judges, abortions and guns.

You answered your own question.

They are way too concerned with cultural BS to think straight in regards to voting for what’s actually in their best interests.

 

[dtc]

Obviously, I think, I am just throwing this out there. Its not like I have been working at the CATO Institute for a few years developing this.
But I agree - it would be a fundamental change to the SS system. I think it needs it. Not necessarily what I am advocating but something that does a better job of increasing wealth.
It would be hard to do, because I think SS has been a great system. It has worked wonderfully for what it was designed to do, but people would be much more wealthy and have much more income after retirement if we made it a mandatory private retirement account - where you are allowed to invest in qualified funds or treasuries (current system?).
I could see regulating it where as you go closer to the retirement age so much money had to be out of equities as a hedge to a market downturn as a person begins to draw on the account. But I imagine at some point that wouldn't even be necessary given the history of how the market performs.

Now we're talking, but let me again point out that someone who makes $8 per hour will NEVER save enough money to retire.

It's simply never going to happen. And, no matter what we say or do, there will always be people who don;'t have the skills required to make much more than whatever the statutory minimum wage is at the time.


Let's put it this way.

If you make MW for your whole earning age and you're ready to retire today, you may - MAY have been able to put away $1 per hour for the average of a 40 year period. Of course, back in 1980, that $1 was really 25c so with just a cursory guess as to the possible amount a person could have saved, you're looking at maybe 80k. Factoring in market gyrations and earnings since 1980 you may see a theoretical net worth of $400k.

If the 400k makes 5%, your hero makes 20k per year. If you anticipate their lifespan to be 20 years post retirement, then they could conceivably have $36k per year in actual income.

Again, what happens if they have a car wreck and live to be 88?