Inflation is a tax on idle money. Inflation is generally around 3%, so it costs 3% of your money for it to be "liquid" (idle). This means most people aren't going to keep around liquid cash.
Additionally (I am a layman, but this is my understanding), to get around taxes, rich people take out loans using their assets as collateral.
This means the rich probably have very little liquid cash, but incredibly large lines of credit.
In regards to spending, what's the difference between cash in hand and credit?
So from my probably poorly informed position, this question doesn't make very much sense.
It will probably be spikey. Someone gets loads of
cash from selling X and before buying Y. Probably people getting out
of crypto at the top would be on such a list for a week or two.
The rich keep 10% of their portfolios liquid to react quickly during "fire sales" like right now when house prices fall.
The rich have very little cash as a percentage of net worth, they still have higher absolute levels than the not rich. I don't know why this internet meme is so popular. If all the rich people don't have money than who are the people with money if they aren't rich? Did we somehow manage to wealth equality with money?
By cash I also include cash equivalents like treasuries with very short durations.
Also, as counterproductive as it might sound, banks give more loans to those who already have money, so if you assume that the rich have enormous lines of credit it is precisely because they have liquid cash in case their debt based investments perform less than than they hoped.
What you are right about is that central banks want people to use cash as a medium of exchange so 3% inflation is basically a "circulation safeguard". The problem with this inflation is that it only exists because you cannot charge a 3% fee on cash directly. If you could do that then 0% inflation would be optimal.
While it's true most rich do keep a proportion of their portfolio in liquid assets, this doesn't imply cash:
> Cash equivalents are typically investments that have short-term maturities of less than 90 days and are considered liquid assets because they can be readily converted to cash.
> The problem with this inflation is that it only exists because you cannot charge a 3% fee on cash directly. If you could do that then 0% inflation would be optimal.
My understanding is that because the US Dollar is the reserve currency of the world we can devalue it via inflation to effectively take value from other countries by reducing the value of what they hold as well as reducing the "cost" of our debt. Since trades are conducted in dollars, dollars will still be purchased, even though they are a "poorly performing" asset?
So we can effectively fund the war in Ukraine directly with inflation. A tax was levied in the form of inflation, it was tolerated because it's not a "tax," and that tax is an extremely regressive tax on liquid cash. Inflation has effectively made labor cheaper too, making it even more regressive.
I guess what I'm asking is, why is 0 optimal? Isn't it more of a choice with consequences? Isn't optimal inflation probably not 0 if we are the reserve currency?
(I'm definitely throwing around some ideas I barely have a grasp of).
Trade is only about a quarter of the U.S. GDP. It would be kind of silly to manage domestic inflation solely to create financial international advantage. The U.S.’s strongest international advantage is our strong domestic economy (the business that Americans do with each other). Inflation is managed to support that.
Specifically, the goal of the Fed is to create stability, which major businesses need to do long term planning. It is more stable to “err” consistently on one side of the origin or the other; the Fed errs slightly on the side of inflation because it creates an incentive to invest.
You can look back at historical inflation rates and see the crazy volatility that existed before the Fed: swings of as much as 10% from inflation to deflation and back again. This made it very hard for people and businesses to make long-term financial decisions.
It makes sense to me because Elon or Bezos couldn’t cash out a fraction of their stock without crashing it. I’d be interested in who is truly wealthy and liquid and diversified.
I guess I’m looking for who is exceeding inflation and still making gains while not exposed to being decimated by a stock crash and definitely not almost all their net worth tied to one stock of a business they own.
I guess the most wealthy man is the one who can get the biggest loan?
The stock market however is an inflated balloon, if you just look at revenue the stock is mostly air/speculation.
It's a good thing to wonder about, but it's like asking the exact position of an electron at a given time. There will never be a single numerical answer.
Sure they could cash out without going through the public market. It's "easy enough" to arrange sales of large numbers of shares in private transactions. For Musk levels of money there's have to be more than a few such arrangements. Depending on the buyer's desire for that stock, it can even be profitable, as they similarly couldn't publicly buy such a large quantity without wild market swings.
In particular, even if you don't have stock in your own company, you'd still likely want to invest most of your assets. I would guess that a list of people holding large quantities of cash would, roughly speaking, contain two groups: people who don't manage their wealth very well, and currency traders/speculators who are holding cash itself as an asset.
The bank, the government, the tax authorities. In this country, Norway, the last of those does indeed divulge it because anyone can access anyone else's tax return.
1. Even if he'd be mad enough to put 60B in one bank(-account), it's strictly forbidden for anyone who could access such information to divulge it. In reality, people who need to hold very large sums of liquidity (which is a very rare requirement if you really think about it) use short term treasuries and/or the money market.
2. What's the relevance of Norways idiosyncratic laws in this discussion? In almost every other country in the world (including the most of Europe) the government / tax authorities consider such information strictly private.
The relevance is making people aware that secrecy is a choice not a natural law. And while it is not common it is not only Norway that does this, it's a Nordic thing, with the exception of Denmark (which has had tax scandals that would have been found out sooner had the records been public!).
It's still more complicated than this though, isn't it. Our inflation numbers are essentially polled perceptions of how much average prices rise. Depending on your lifestyle and what you spend on, you may not necessarily spend as much more per month as inflation percentages suggest.
A family living cheque to cheque will feel the burn a lot more since the majority of their purchases go to groceries and things that do go up with inflation. But a billionaire whose cash expense is marginal compared to their worth probably wouldn't notice - or have cause to care.
For example, if your liquid cash is going to pay things that are not rising in price, but your other cash is in a savings account earning interest, wouldn't you be relatively less affected by inflation?
> Inflation is a tax on idle money. Inflation is generally around 3%, so it costs 3% of your money for it to be "liquid" (idle).
I hear this all the time. Inflation measured by CPI is not a tax on the cash held by the rich. The basket measured by CPI is a rounding error to that level of wealth. If you held even $1 million in cash, you need to look at the things you buy with that cash as investments and compare how those values have been changing.
For example, if you were a tech investor, you’ve seen far greater than CPI level inflation in the assets you buy over the last 5 years, so holding as cash wasn’t very smart. But if you blindly dumped cash into tech this year to avoid “inflation tax” then you missed out on massive deflation in the asset you buy.
Zooming out to the wealthy, consider commodities, real estate, bonds, stocks, etc. most asset classes have crashed, so holding cash isn’t necessarily a bad idea (at least, it certainly isn’t a bad idea because “inflation is running hot”).
Over time stocks tend to beat inflation. Looking at one small window of time is just wrong.
Plus if you just look at liquid assets you miss how these people actually made their money.
Plus if you look at the long term 3% compound inflation is seriously corrosive. That's over 30% of your wealth gone in 10 years. How long before things like food and bills become serious concerns?
> Over time stocks tend to beat inflation. Looking at one small window of time is just wrong.
It is wrong only if someone is sitting in cash for long periods of time. A poor person needing to buy groceries every week is seriously affected by CPI inflation. A rich person holding onto significant cash because they view asset prices to decline is actually experiencing deflation in the thing they want to buy and CPI for that person is utterly irrelevant. The long term return of stocks is irrelevant to this discussion.
> Plus if you just look at liquid assets you miss how these people actually made their money.
Not sure what you are getting at here, but it is beside the point I am making that CPI is not relevant to the wealthy holding cash.
> Plus if you look at the long term 3% compound inflation is seriously corrosive. That's over 30% of your wealth gone in 10 years. How long before things like food and bills become serious concerns?
Again, this isn’t something that affects the wealthy. If a wealthy person wanted to buy META a year ago, the price has declined 70% since then, so the asset you wanted to buy has experienced deflation giving you a better entry point, regardless of CPI inflation. Replace META with almost any other asset and the same statement is true over the last year or so.
>It is wrong only if someone is sitting in cash for long periods of time
It's wrong because you don't know ahead of time when assets are going to fall.
All we know in that the long term inflation will average out to X and stock price growth will average > X, and that inflation will erode the value of cash.
Someone with a million dollars in 1900 was very wealthy. Do you think their family that kept all their wealth in cash is still wealthy? No.
I am not suggesting anyone can judge ahead of time when assets are going to fall (though there are certainly indicators). I am stating that CPI inflation is not a “tax” on the cash held by the wealthy. It isn’t relevant. Their “basket of goods” purchased differs dramatically from what CPI measures and largely includes financial assets which have seen deflation. This is objectively a “cash is king” situation despite inflation running hot.
What wealth do you think you needed to hold to be in the 1% 100 years ago?
Can we agree that it is a lot less than today?
The 1% back then didn't have to worry about the price of milk back then either. They still have to worry about inflation though, because if they dont.if their wealth doesn't keep up with inflation they are getting less wealthy. If you have 100 million today you can't just sit back and not worry about your family ever working again, because eventually a house will cost 100 million. Then the car will, then eventually the milk will too. If you have 100 million in the bank and a pint of milk costs 100 million you are no longer wealthy, it doesn't matter what basket of goods they buy.
Never if you are wealthy. That's the point. The things needed to survive are what inflation is based on, for a wealthy person that amount of spending is so much less than 1% it's negligible. You only lose the 3% of your money if you need your billion dollars to buy food and gas and general consumer goods. The cost of luxury items fluctuates wildly and isn't part of inflation.
But you still need that money to keep up with inflation.
If you have a billion dollars under the mattress and inflation is 3% you've lost 30 million dollars in spending power. That dwarfs anything you would spend on food yes. And the next year another 30 million, and the next year.
So you need to invest to protect it from inflation, so inflation is relevant. The percentage they spend on food and stuff today is negligible. But you invest to keep it that way. Because once it becomes non negligible it's too late.
Their point is that inflation measures consumer goods such as milk. How much milk do you need to buy in your lifetime?
Wealthy people don’t use their money to buy milk, they use it to invest in businesses and to buy real estate, asset prices which don’t track the inflation rate at all (currently inflation is up and assets are down).
The parent opened with "I hear this all the time. Inflation measured by CPI is not a tax on the cash held by the rich. "
Which suggests that inflation will never hurt the rich. But it will yes they are spending much of that cash on milk today. But the price of milk is rising whereas money kept in cash isn't, or at least not at the same rate. If you have a job with good pay today, would you be happy if you were told it would never rise? Sure you may be happy today, but what about in 20 years when the price of everything has doubled.
The rich doesn’t care about the price of milk. They care about the price of stocks, bonds, real estate, etc. which make up the bulk of their purchases. These assets have experienced deflation over the period you are pointing to the price of milk inflating. CPI inflation isn’t a tax on the cash held by the wealthy.
What time period? My position is that you don't know ahead of time what assets will rise and fall, but in the long term stocks will beat inflation. And if you want to preserve your wealth so you don't have to worry about the cost of milk you will need to beat inflation.
They care about stocks, bonds, and real estate precisely because of inflation. Because if they don't beat inflation they get poorer every year.
If you don't invest you are guaranteed to lose to inflation, that's why people invest in riskier assets. They don't do it because it's fun.
What are you taking as “advice”? I am stating what should be the un controversial observation that CPI measures things that make up a large percentage of a poorer person’s costs, whereas for the rich, inflation per CPI is meaningless and that their “basket of goods” purchased in a year is primarily financial assets, which have objectively seen deflation over the last year.
I don't think so. I don't even think it's possible to estimate someone's liquid assets except the person gives you a hint...maybe ProPublica's leaked tax files trove [1] can do the job, but they removed any identifying information on anyone who wasn't a public figure, presumably to avoid lawsuits.
Stocks are amongst the most liquid assets, only topped by bonds. But many rich people are rich in private companies, apartments/houses, and boats, which are all much less liquid.
that's a tough metric if you meant liquid as in cash on hand that is not actively making them money, just why would they disclose that.
there are also forms of assets that are actively making them money yet easy to access and reallocate (say at x% loss depending on how urgent you need it).
In general, there are far more disclosure and public record laws around stock ownership than around cash-like assets. (And the folks assembling "X Richest People" lists still have to do quite a bit of digging & guessing.)
Also - "liquid cash" is a vague term. Depending on the situation, accountants put a wide variety of not-literally-cash assets into the "cash & liquid assets" category. Even if you could get all the data - who was where on a "X Liquid Cash Richest" list would be extremely sensitive to both (1) the exact date of your list and to (2) the exact definition used in the accounting.
ahhh ! I too want a list of viable "stick-up" targets :) Too many a times ive got "sure, i can get you the money in 3 to 5 days" excuse in my career as the 'HandsomeBandit' /s
If you're Jeff Bezos there's no bank that is going to lend you 100B$ against your stock, because:
1. they don't have this money available themselves
2. there's less than 100B$ liquidity to dump these stocks on the market if they go down in value and Jeff's assets have to be liquidated, so the bank will limit the amount of money it will lend
The liquidity of anyone's stock holding depends entirely on how much one holds compared to how much is routinely traded on the markets.
If I own 0.01 percent of any heavily-traded stock, it's 100% liquid. I can sell it whenever I want at a moment's notice. In any such accounting it will be added to my liquid wealth. But if I own 25% of the same stock, it's illiquid.
If I also run the company, then it's worse because any attempt to sell a large part of my holding will itself trigger a crash in the price.
Poor Bezos, one of the richest man in the world, yet has no cash at hand. I've heard stories of him having to ask money to the passerby to afford lunch. So sad to be the richest man but to actually own nothing.
Hey poors, take example from Jeff! He's not liquid at all, like all of you, but he's always so happy!
Who said anything about that you should feel sorry for Jeff Bezos? The parent commentator simply described the circumstances regarding what Jeff Bezos can get. Who are you arguing against?
Mostly against the trite argument that net worth != liquidity, it's just reiterated everywhere here so I figured I could comment on any thread. Everyone is just skimping on the fact net worth still grants billionaires more power than entire countries have. That is what people are angry for.
The sole existence of billionaires bothers me a lot, yet I don’t see the issue in rectifying the truth about their fortune being 1 or 2 orders of magnitude smaller than what people believe. But don’t get me wrong, I think they are still way too rich even after accounting for this discount.
I agree but I feel this has been rectified over and over, as I'm hearing the argument for years both online and on conventional media.
By now it only feels to me as a cheap way to hijack the discussion and derail it further from the fact that we have to debate why billionaires exist and not how liquid they are.
In the end the anti-billionaire/anti-system sentiment exists for valid reasons and it doesn't need to be educated to show us that there is an ever growing discontent with the way things work.
>Liquid assets refer to cash on hand, cash on bank deposit, and assets that can be quickly and easily converted to cash. The common liquid assets are stock, bonds, certificates of deposit, or shares.
>Liquid assets are different from non-liquid assets, such as property, vehicles, or jewelry, which can take longer to sell and may lose value in the sale. Liquid assets are perceived as being the most basic type of asset available.
Selling billions of dollars worth of stock is very different than logging on robinhood and trading hundreds of shares.
Making a list of richest people based on stocks is disingenuous because they will never be able to get that valuation if they sold it on the market due to the selling pressure such an event would exhibit from selling that much stock. Also gains in stocks are called unrealized wealth. It's not considered wealth until you decide to sell.
Recently Elon sold stock to shore up funds to buy Twitter. Doing so he tanked the price of TSLA.
If this is true, how would a founder or large shareholder ever retire (or even unexpectedly die and have their estate liquidated) without immediately killing the company they are a majority shareholder in? It seems like this must have happened at some point.
That makes sense. But even if you’re one of the world’s richest people and decide for some reason to retire just on the savings of a FAANG engineer, you still eventually die and your assets must be sold or passed on to others. Someone is going to cash out.
I just don’t understand how once you reach a certain level of wealth you are functionally locked out of ever accessing it except on paper. Someone must have kept their wealth or cashed out (one way or the other) at some point. It feels like, if true, no business would ever exist more than 30 years but clearly there are many businesses that have.
The shares get dispersed to the broader family, children, grandchildren etc.
Typically at those levels of wealth there is a “family office” which is just a word for “hedge fund” that’s only clients are the family. Like any hedge fund they can use those shares as parts of lots deals to diversify, manage risk and pull out cash.
Sometimes it’s even simpler, dividends can provide a significant cash flow for large shareholders.
In any case, it would be extremely strange for someone to get very wealthy and then hold most of their portfolio in cash.
Agreed it would be strange, more wondering about how “making a list of richest people based on stocks is disingenuous because they will never be able to get that valuation if they sold it on the market”
> If this is true, how would a founder or large shareholder ever retire
Bezos doesn't need to sell 100% of his AMZN to retire. Just a few points would be enough to live a lavish lifestyle.
This is a real issue though, and the same problem you're describing exists in the inverse. How was Elon able to buy 100% of the shares of Twitter without prices going to infinity? You go to private buyers and sell large blocks at a discount (or buy large blocks at a premium) to the current market value. Drag-along clauses help ensure there aren't meaningful stragglers once start approaching 100%.
Mackenzie Scott got $36B of Amazon stock and has sold $8B.
Large shareholders aren't very large. They dilute their shares over time. The Google guys have a tiny amount of financial shares of Google, while retaining voting shares.
The Twitter owners recently sold Twitter at >100% of its nominal value as measured both at the time of the offer and the week before closing. Twitter's value didn't crash when the sale was announced.
Somewhat unrelated but where does this bizarre tendency on this site to call famous tech people by just their first names even if one doesn't know them personally come from? "Elon", "Jeff", "Mark" and etc... Normally, unless you personally know some famous person, it sounds downright odd to refer to them as if they were a beer buddy, neighbor or colleague. (assuming here that you and many others who comment here don't actually know Elon Musk personally).
Stockholdings of highly capitalized, highly traded stocks on major stock exchanges (NYSE, Nasdaq, FTSE, a few others) are one of the more liquid assets there are.
If you are a multi-billionare it's reasonable to think you can convert maybe $500M - $1B of stock holdings to cash and have it in your bank accounts in 24 hours.
> Cash equivalents are typically investments that have short-term maturities of less than 90 days and are considered liquid assets because they can be readily converted to cash.
Exactly, holding $1B of TSLA vs S&P500 have very different degrees of liquidity I imagine. So an interesting metric would have all the assets categorized and multiplied by some sort of liquidity factor. Of course in practice that is pretty much impossible to actually accomplish.
Part of the selection criteria for inclusion in the S&P500 is "Minimum monthly trading volume of 250,000 shares in each of the six months leading up to the evaluation date"
If you tried to move $1B in shares in the smallest company in the S&P500 then yes you will move the market for sure. But if you have $1B invested across the S&P500 then it will barely be noticed.
> So an interesting metric would have all the assets categorized and multiplied by some sort of liquidity factor. Of course in practice that is pretty much impossible to actually accomplish.
Not at all. Average trading volume times price is almost exactly that.
> Not at all. Average trading volume times price is almost exactly that.
For stocks, yes. But there are plenty of other modes of wealth too which can be much harder to estimate. Like for example what is the liquidity of Bezos' half billion dollar yacht or Putins billion dollar palace?
No such list that I'm aware of and the US govt would be at the top of the list ;)
Because of inflation and FDIC protection limits, most people don't carry around excess cash. It costs money to hold cash.
Fidelity will let you hold up to 1.25M before getting past FDIC protections. Many don't like their cash to go beyond FDIC protections, so 1M or so cash is around the upper limit people would regularly want to hold.
I think easily liquifiable assets in general would be a better measure. Bill Gates would be somewhere near the top, he could sell most of his diversified ~100b stock portfolio without causing much of a stir.
If there is such a list - there will be a bunch of people you've never heard of on it and certainly would not want to emulate. People don't hold their wealth in cash because it is constantly depreciating by design.
After a certain level of wealth, most assets are financial and liquid cash becomes a vanishingly small part of total wealth.
I've absolutely 0 info on cash distribution across the richest people, but this figure shows average asset across all people (in France). It still can be helpful as a way to "visualize" asset type property distribution across the spectrum.
If you are rich with most of your assets in liquid form, you're not richin' right. The whole point is to keep as little liquid assets as possible and invest in a diverse portfolio of longer-term, return-yielding investments.
You'll want short-term liquidity for upcoming payables, and long-term solvency to justify leveraging as much as possible of your investments through borrowing.
Anyone wealthy enough will know not to have any actual currency. It's an extremely rare thing for someone to have realized gains and be holding liquid.
Once you know this reality, when folks like AOC want to ban 'billionaires' what they are actually saying is they want to go after unrealized stocks. Which isn't just stock market, it can be fine art, cars, whatever. Their goal is to seize private property to fund their spending. Many countries have tried this, all of them collapsed.
More accurately, that should be 'Cash-poor, asset-rich'. Assets are not just stocks, but also real-estate, precious metals*, commodities such as copper, wheat, etc.
*Gold as normally looked on as a 'store of wealth', not an 'investment'. It has been traditionally looked at in the same way as a permanent form of cash, rather than as a commodity like copper, or iron, or other metals.
Spare cash lying around is 'lazy money'. While it's good to have some cash on hand, it's poor investing to keep a lot of cash lying around. How much cash you have on hand is a function of your wealth-level. Some of us can get a bit twitchy if the cash(plus gold) levels should go down under a couple of hundred thousand or so. Your assets should be out there working, and bringing in more money.
Stocks are only one form of asset. And most people use them wrongly. Many people people chase the share-price without bothering about the company's fundamentals which is where real investing is involved. 'Trading' is merely another form of gambling. You do 'trading' for fun, not for investment, and you should be willing to lose all of that money if it be.
A good rule-of-thumb for an asset is that you have to be able to hold it in your hot little hand or at least touch it. Anything else is just numbers in somebody's computer and that can be taken away from you in the blink of an eye. (Or even when the power goes off.) Oh, and there's nothing 'safe' about a Bank's Safety Deposit Box. If they hold it in their Bank, it's theirs, not yours.
One last thing. Get rid of the debt. Pay off your mortgages as soon as possible, within months rather than years. Keep your Credit Cards in a positive balance rather than in debt, so pay them off entirely at the end of the month or even more often. I consider it a failure on my part if they get into debt at all. Online banking is your friend.
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[ 2.9 ms ] story [ 156 ms ] threadAdditionally (I am a layman, but this is my understanding), to get around taxes, rich people take out loans using their assets as collateral.
This means the rich probably have very little liquid cash, but incredibly large lines of credit.
In regards to spending, what's the difference between cash in hand and credit?
So from my probably poorly informed position, this question doesn't make very much sense.
The rich have very little cash as a percentage of net worth, they still have higher absolute levels than the not rich. I don't know why this internet meme is so popular. If all the rich people don't have money than who are the people with money if they aren't rich? Did we somehow manage to wealth equality with money? By cash I also include cash equivalents like treasuries with very short durations.
Also, as counterproductive as it might sound, banks give more loans to those who already have money, so if you assume that the rich have enormous lines of credit it is precisely because they have liquid cash in case their debt based investments perform less than than they hoped.
What you are right about is that central banks want people to use cash as a medium of exchange so 3% inflation is basically a "circulation safeguard". The problem with this inflation is that it only exists because you cannot charge a 3% fee on cash directly. If you could do that then 0% inflation would be optimal.
Please specify which market you're talking about.
While it's true most rich do keep a proportion of their portfolio in liquid assets, this doesn't imply cash:
> Cash equivalents are typically investments that have short-term maturities of less than 90 days and are considered liquid assets because they can be readily converted to cash.
> Stocks and marketable securities
> U.S. Treasuries and bonds
> Mutual funds
> Money-market funds
https://www.investopedia.com/ask/answers/032715/what-items-a...
Certainly the gini coefficient of actual cash is lower than what it is if you take into account other assets.
My understanding is that because the US Dollar is the reserve currency of the world we can devalue it via inflation to effectively take value from other countries by reducing the value of what they hold as well as reducing the "cost" of our debt. Since trades are conducted in dollars, dollars will still be purchased, even though they are a "poorly performing" asset?
So we can effectively fund the war in Ukraine directly with inflation. A tax was levied in the form of inflation, it was tolerated because it's not a "tax," and that tax is an extremely regressive tax on liquid cash. Inflation has effectively made labor cheaper too, making it even more regressive.
I guess what I'm asking is, why is 0 optimal? Isn't it more of a choice with consequences? Isn't optimal inflation probably not 0 if we are the reserve currency?
(I'm definitely throwing around some ideas I barely have a grasp of).
Specifically, the goal of the Fed is to create stability, which major businesses need to do long term planning. It is more stable to “err” consistently on one side of the origin or the other; the Fed errs slightly on the side of inflation because it creates an incentive to invest.
You can look back at historical inflation rates and see the crazy volatility that existed before the Fed: swings of as much as 10% from inflation to deflation and back again. This made it very hard for people and businesses to make long-term financial decisions.
https://fred.stlouisfed.org/series/M2SL
I guess I’m looking for who is exceeding inflation and still making gains while not exposed to being decimated by a stock crash and definitely not almost all their net worth tied to one stock of a business they own.
2. What's the relevance of Norways idiosyncratic laws in this discussion? In almost every other country in the world (including the most of Europe) the government / tax authorities consider such information strictly private.
A family living cheque to cheque will feel the burn a lot more since the majority of their purchases go to groceries and things that do go up with inflation. But a billionaire whose cash expense is marginal compared to their worth probably wouldn't notice - or have cause to care.
For example, if your liquid cash is going to pay things that are not rising in price, but your other cash is in a savings account earning interest, wouldn't you be relatively less affected by inflation?
I hear this all the time. Inflation measured by CPI is not a tax on the cash held by the rich. The basket measured by CPI is a rounding error to that level of wealth. If you held even $1 million in cash, you need to look at the things you buy with that cash as investments and compare how those values have been changing.
For example, if you were a tech investor, you’ve seen far greater than CPI level inflation in the assets you buy over the last 5 years, so holding as cash wasn’t very smart. But if you blindly dumped cash into tech this year to avoid “inflation tax” then you missed out on massive deflation in the asset you buy.
Zooming out to the wealthy, consider commodities, real estate, bonds, stocks, etc. most asset classes have crashed, so holding cash isn’t necessarily a bad idea (at least, it certainly isn’t a bad idea because “inflation is running hot”).
Plus if you just look at liquid assets you miss how these people actually made their money.
Plus if you look at the long term 3% compound inflation is seriously corrosive. That's over 30% of your wealth gone in 10 years. How long before things like food and bills become serious concerns?
It is wrong only if someone is sitting in cash for long periods of time. A poor person needing to buy groceries every week is seriously affected by CPI inflation. A rich person holding onto significant cash because they view asset prices to decline is actually experiencing deflation in the thing they want to buy and CPI for that person is utterly irrelevant. The long term return of stocks is irrelevant to this discussion.
> Plus if you just look at liquid assets you miss how these people actually made their money.
Not sure what you are getting at here, but it is beside the point I am making that CPI is not relevant to the wealthy holding cash.
> Plus if you look at the long term 3% compound inflation is seriously corrosive. That's over 30% of your wealth gone in 10 years. How long before things like food and bills become serious concerns?
Again, this isn’t something that affects the wealthy. If a wealthy person wanted to buy META a year ago, the price has declined 70% since then, so the asset you wanted to buy has experienced deflation giving you a better entry point, regardless of CPI inflation. Replace META with almost any other asset and the same statement is true over the last year or so.
It's wrong because you don't know ahead of time when assets are going to fall.
All we know in that the long term inflation will average out to X and stock price growth will average > X, and that inflation will erode the value of cash.
Someone with a million dollars in 1900 was very wealthy. Do you think their family that kept all their wealth in cash is still wealthy? No.
Can we agree that it is a lot less than today?
The 1% back then didn't have to worry about the price of milk back then either. They still have to worry about inflation though, because if they dont.if their wealth doesn't keep up with inflation they are getting less wealthy. If you have 100 million today you can't just sit back and not worry about your family ever working again, because eventually a house will cost 100 million. Then the car will, then eventually the milk will too. If you have 100 million in the bank and a pint of milk costs 100 million you are no longer wealthy, it doesn't matter what basket of goods they buy.
If you have a billion dollars under the mattress and inflation is 3% you've lost 30 million dollars in spending power. That dwarfs anything you would spend on food yes. And the next year another 30 million, and the next year.
So you need to invest to protect it from inflation, so inflation is relevant. The percentage they spend on food and stuff today is negligible. But you invest to keep it that way. Because once it becomes non negligible it's too late.
Wealthy people don’t use their money to buy milk, they use it to invest in businesses and to buy real estate, asset prices which don’t track the inflation rate at all (currently inflation is up and assets are down).
Which suggests that inflation will never hurt the rich. But it will yes they are spending much of that cash on milk today. But the price of milk is rising whereas money kept in cash isn't, or at least not at the same rate. If you have a job with good pay today, would you be happy if you were told it would never rise? Sure you may be happy today, but what about in 20 years when the price of everything has doubled.
They care about stocks, bonds, and real estate precisely because of inflation. Because if they don't beat inflation they get poorer every year.
If you don't invest you are guaranteed to lose to inflation, that's why people invest in riskier assets. They don't do it because it's fun.
Cash never returns to a previous value. There is constant inflation.
All the other assets are temporarily reduced in value and the value is not realized until the asset is sold.
Which part of that statement is unclear to you?
Are they though?
OP asked a very specific thing, not for this (very) amateurish lesson on "rich people and taxes".
1- https://www.propublica.org/article/the-secret-irs-files-trov...
there are also forms of assets that are actively making them money yet easy to access and reallocate (say at x% loss depending on how urgent you need it).
Also - "liquid cash" is a vague term. Depending on the situation, accountants put a wide variety of not-literally-cash assets into the "cash & liquid assets" category. Even if you could get all the data - who was where on a "X Liquid Cash Richest" list would be extremely sensitive to both (1) the exact date of your list and to (2) the exact definition used in the accounting.
If you want "Cash" only. I believe that point of owning cash is privacy and not having to disclose them.
If you're Jeff Bezos there's no bank that is going to lend you 100B$ against your stock, because:
1. they don't have this money available themselves
2. there's less than 100B$ liquidity to dump these stocks on the market if they go down in value and Jeff's assets have to be liquidated, so the bank will limit the amount of money it will lend
If I own 0.01 percent of any heavily-traded stock, it's 100% liquid. I can sell it whenever I want at a moment's notice. In any such accounting it will be added to my liquid wealth. But if I own 25% of the same stock, it's illiquid.
If I also run the company, then it's worse because any attempt to sell a large part of my holding will itself trigger a crash in the price.
Hey poors, take example from Jeff! He's not liquid at all, like all of you, but he's always so happy!
By now it only feels to me as a cheap way to hijack the discussion and derail it further from the fact that we have to debate why billionaires exist and not how liquid they are.
In the end the anti-billionaire/anti-system sentiment exists for valid reasons and it doesn't need to be educated to show us that there is an ever growing discontent with the way things work.
Liquidity implies that you can buy anything with stocks.
People sell stocks for money because money can buy more things than just money.
To quote Cornell (https://www.law.cornell.edu/wex/liquid_asset):
>Liquid assets refer to cash on hand, cash on bank deposit, and assets that can be quickly and easily converted to cash. The common liquid assets are stock, bonds, certificates of deposit, or shares.
>Liquid assets are different from non-liquid assets, such as property, vehicles, or jewelry, which can take longer to sell and may lose value in the sale. Liquid assets are perceived as being the most basic type of asset available.
Making a list of richest people based on stocks is disingenuous because they will never be able to get that valuation if they sold it on the market due to the selling pressure such an event would exhibit from selling that much stock. Also gains in stocks are called unrealized wealth. It's not considered wealth until you decide to sell.
Recently Elon sold stock to shore up funds to buy Twitter. Doing so he tanked the price of TSLA.
I just don’t understand how once you reach a certain level of wealth you are functionally locked out of ever accessing it except on paper. Someone must have kept their wealth or cashed out (one way or the other) at some point. It feels like, if true, no business would ever exist more than 30 years but clearly there are many businesses that have.
Typically at those levels of wealth there is a “family office” which is just a word for “hedge fund” that’s only clients are the family. Like any hedge fund they can use those shares as parts of lots deals to diversify, manage risk and pull out cash.
Sometimes it’s even simpler, dividends can provide a significant cash flow for large shareholders.
In any case, it would be extremely strange for someone to get very wealthy and then hold most of their portfolio in cash.
Bezos doesn't need to sell 100% of his AMZN to retire. Just a few points would be enough to live a lavish lifestyle.
This is a real issue though, and the same problem you're describing exists in the inverse. How was Elon able to buy 100% of the shares of Twitter without prices going to infinity? You go to private buyers and sell large blocks at a discount (or buy large blocks at a premium) to the current market value. Drag-along clauses help ensure there aren't meaningful stragglers once start approaching 100%.
Mackenzie Scott got $36B of Amazon stock and has sold $8B.
Large shareholders aren't very large. They dilute their shares over time. The Google guys have a tiny amount of financial shares of Google, while retaining voting shares.
Stockholdings of highly capitalized, highly traded stocks on major stock exchanges (NYSE, Nasdaq, FTSE, a few others) are one of the more liquid assets there are.
If you are a multi-billionare it's reasonable to think you can convert maybe $500M - $1B of stock holdings to cash and have it in your bank accounts in 24 hours.
See https://www.investopedia.com/ask/answers/032715/what-items-a...
> Cash equivalents are typically investments that have short-term maturities of less than 90 days and are considered liquid assets because they can be readily converted to cash.
If you tried to move $1B in shares in the smallest company in the S&P500 then yes you will move the market for sure. But if you have $1B invested across the S&P500 then it will barely be noticed.
> So an interesting metric would have all the assets categorized and multiplied by some sort of liquidity factor. Of course in practice that is pretty much impossible to actually accomplish.
Not at all. Average trading volume times price is almost exactly that.
For stocks, yes. But there are plenty of other modes of wealth too which can be much harder to estimate. Like for example what is the liquidity of Bezos' half billion dollar yacht or Putins billion dollar palace?
Because of inflation and FDIC protection limits, most people don't carry around excess cash. It costs money to hold cash.
Fidelity will let you hold up to 1.25M before getting past FDIC protections. Many don't like their cash to go beyond FDIC protections, so 1M or so cash is around the upper limit people would regularly want to hold.
I've absolutely 0 info on cash distribution across the richest people, but this figure shows average asset across all people (in France). It still can be helpful as a way to "visualize" asset type property distribution across the spectrum.
http://piketty.pse.ens.fr/files/ideology/pdf/F11.17.pdf
...can I get in on it?
$10M in paper cash is far less liquid and harder to spend than $10M in public stocks.
Once you know this reality, when folks like AOC want to ban 'billionaires' what they are actually saying is they want to go after unrealized stocks. Which isn't just stock market, it can be fine art, cars, whatever. Their goal is to seize private property to fund their spending. Many countries have tried this, all of them collapsed.
More accurately, that should be 'Cash-poor, asset-rich'. Assets are not just stocks, but also real-estate, precious metals*, commodities such as copper, wheat, etc.
*Gold as normally looked on as a 'store of wealth', not an 'investment'. It has been traditionally looked at in the same way as a permanent form of cash, rather than as a commodity like copper, or iron, or other metals.
Spare cash lying around is 'lazy money'. While it's good to have some cash on hand, it's poor investing to keep a lot of cash lying around. How much cash you have on hand is a function of your wealth-level. Some of us can get a bit twitchy if the cash(plus gold) levels should go down under a couple of hundred thousand or so. Your assets should be out there working, and bringing in more money.
Stocks are only one form of asset. And most people use them wrongly. Many people people chase the share-price without bothering about the company's fundamentals which is where real investing is involved. 'Trading' is merely another form of gambling. You do 'trading' for fun, not for investment, and you should be willing to lose all of that money if it be.
A good rule-of-thumb for an asset is that you have to be able to hold it in your hot little hand or at least touch it. Anything else is just numbers in somebody's computer and that can be taken away from you in the blink of an eye. (Or even when the power goes off.) Oh, and there's nothing 'safe' about a Bank's Safety Deposit Box. If they hold it in their Bank, it's theirs, not yours.
One last thing. Get rid of the debt. Pay off your mortgages as soon as possible, within months rather than years. Keep your Credit Cards in a positive balance rather than in debt, so pay them off entirely at the end of the month or even more often. I consider it a failure on my part if they get into debt at all. Online banking is your friend.
They check all participants, for what amount of cache they have.
AAA+ rating only possible for subject, who have 100% coverage of all credits bodies by cache.
Unfortunately, from NASDAQ, only Microsoft have AAA+ rating. Other companies have coverage only for year or more of percents, none cover body.