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The wealthy disproportionately have their money invested in equities. The ultra wealthy are also typically highly concentrated in specific companies, think Jeff

by jmh530 8y ago

The wealthy disproportionately have their money invested in equities. The ultra wealthy are also typically highly concentrated in specific companies, think Jeff Bezos and Amazon. They tend to lose more when the market crashes.

ceejayoz 8y ago
They tend to be able to wait out the crash, though, and be in better position to take advantage of the recovery.
richardknop 8y ago
The wealthy are able to wait out recessions without having to panic sell their equities and in the end they become even richer because inevitably the bull market that comes after the crash will make them come out on the top. All the while collecting dividends. Working class people who don't own equities don't gain anything from bull markets such as the one that's been going on for last 10 years.
- cm2187 8y ago
  I am not sure that's the case. I read that when you look at the top billionaire list through times (80s, 90s, 2000s, now), there is a lot of turnover. Over long economic cycles, the fate of the companies that made people rich can evolve in both directions.
  - ceejayoz 8y ago
    High turnover at the very top isn't shocking - there'll always be new ones like Zuckerberg and Bezos shooting up as new markets are found/created. There's a big difference between "no longer richest person in the world" and "lost everything".
  - orthecreedence 8y ago
    Let's say I'm a billionaire. There's a market crash. A lot of my money is tied up in the market, but luckily, a lot of it isn't. A lot of it will be safe investments or shares in profit-generating companies that issue dividends. So, while the commoner is destitute, while I may have lost 50% of my wealth, I have safe money (and passive income) I can use to pour into the market buying post-crash cheap investments. Also, because my cost of living is minuscule compared to my income, I don't have to panic-sell during the crash. When the market bounces back four years later, I'm now 1.5x wealthier than I was before the crash (thanks to all the cheap investments), and all I had to do was move some money around.
    - richardknop 8y ago
      Don't forget that wealthy people also own a lot of real estate and are rentiers so they have plenty of passive income sources to easily cruise through a recession while buying up cheap stuff which will go up in price heavily once economy gets back on track.
gryfft 8y ago
Yes, they lose more. They lose proportionally less. They're not winding up on the streets. It's disingenuous to pretend that it has anywhere near the impact on their lives as it does the other 99.9% of the participants in the economy.
- almost_usual 8y ago
  They definitely can end up in the streets. Some of the wealthiest people suffered the most during past crashes, most killed themselves before taking the streets. Read Devil Take the Hindmost. Edit: I’m not going to search through this book to find sources that fit some criteria you’re looking for. Get off HN comments, read a book, and learn some financial history lessons.
  - gryfft 8y ago
    I haven't read it, but I have a feeling we're not talking about the same people. I'm not talking about successful investors and millionaires. I'm talking specifically about net worth north of $200M in today's dollars. Not the people who jumped from their windows during the Depression. The ones who bought their stock and waited it out. Edit: I've now read a few reviews and summaries of Devil Take The Hindmost. Its subtitle is "A History Of Financial Speculation," and it appears that its subject matter is not focused on ultra-wealthy persons with diversified portfolios being ruined by market corrections, but specifically speculators and frauds. At a glance, it doesn't look particularly relevant to this conversation.
    - almost_usual 8y ago
      Some of the _wealthiest_ people in modern history have lost it all. A recent example is Eike Batista.
      - gryfft 8y ago
        Batista is currently under arrest and has been sentenced to 30 years in prison for bribing disgraced Rio de Janeiro governor Sérgio Cabral, in order to secure public contracts, according to Wikipedia[0]. I'd prefer an example that isn't somebody who wound up in prison. 0. https://en.wikipedia.org/wiki/Eike_Batista https://en.wikipedia.org/wiki/Eike_Batista
cimmanom 8y ago
Unless they get bailed out

by jmh530 8y ago

ceejayoz 8y ago

They tend to be able to wait out the crash, though, and be in better position to take advantage of the recovery.

richardknop 8y ago

The wealthy are able to wait out recessions without having to panic sell their equities and in the end they become even richer because inevitably the bull market that comes after the crash will make them come out on the top. All the while collecting dividends. Working class people who don't own equities don't gain anything from bull markets such as the one that's been going on for last 10 years.

cm2187 8y ago
I am not sure that's the case. I read that when you look at the top billionaire list through times (80s, 90s, 2000s, now), there is a lot of turnover. Over long economic cycles, the fate of the companies that made people rich can evolve in both directions.
- ceejayoz 8y ago
  High turnover at the very top isn't shocking - there'll always be new ones like Zuckerberg and Bezos shooting up as new markets are found/created. There's a big difference between "no longer richest person in the world" and "lost everything".
- orthecreedence 8y ago
  Let's say I'm a billionaire. There's a market crash. A lot of my money is tied up in the market, but luckily, a lot of it isn't. A lot of it will be safe investments or shares in profit-generating companies that issue dividends. So, while the commoner is destitute, while I may have lost 50% of my wealth, I have safe money (and passive income) I can use to pour into the market buying post-crash cheap investments. Also, because my cost of living is minuscule compared to my income, I don't have to panic-sell during the crash. When the market bounces back four years later, I'm now 1.5x wealthier than I was before the crash (thanks to all the cheap investments), and all I had to do was move some money around.
  - richardknop 8y ago
    Don't forget that wealthy people also own a lot of real estate and are rentiers so they have plenty of passive income sources to easily cruise through a recession while buying up cheap stuff which will go up in price heavily once economy gets back on track.

gryfft 8y ago

Yes, they lose more. They lose proportionally less. They're not winding up on the streets. It's disingenuous to pretend that it has anywhere near the impact on their lives as it does the other 99.9% of the participants in the economy.

almost_usual 8y ago
They definitely can end up in the streets. Some of the wealthiest people suffered the most during past crashes, most killed themselves before taking the streets. Read Devil Take the Hindmost. Edit: I’m not going to search through this book to find sources that fit some criteria you’re looking for. Get off HN comments, read a book, and learn some financial history lessons.
- gryfft 8y ago
  I haven't read it, but I have a feeling we're not talking about the same people. I'm not talking about successful investors and millionaires. I'm talking specifically about net worth north of $200M in today's dollars. Not the people who jumped from their windows during the Depression. The ones who bought their stock and waited it out. Edit: I've now read a few reviews and summaries of Devil Take The Hindmost. Its subtitle is "A History Of Financial Speculation," and it appears that its subject matter is not focused on ultra-wealthy persons with diversified portfolios being ruined by market corrections, but specifically speculators and frauds. At a glance, it doesn't look particularly relevant to this conversation.
  - almost_usual 8y ago
    Some of the _wealthiest_ people in modern history have lost it all. A recent example is Eike Batista.
    - gryfft 8y ago
      Batista is currently under arrest and has been sentenced to 30 years in prison for bribing disgraced Rio de Janeiro governor Sérgio Cabral, in order to secure public contracts, according to Wikipedia[0]. I'd prefer an example that isn't somebody who wound up in prison. 0. https://en.wikipedia.org/wiki/Eike_Batista https://en.wikipedia.org/wiki/Eike_Batista

cimmanom 8y ago

Unless they get bailed out