The rich and poor in 2 charts
The top 1% owns 50% of all equities while the bottom 50% own less than one precent.
The US Federal Reserve publishes a quarterly report called a “Distributional Financial Account” summary which at its core shows how assets (equities, real estate, consumer goods that appreciate and value, pensions) and liabilities (consumer debt, mortgages, etc) are distributed by demographic attributes like Wealth, age, race, etc. Check it out here when you have a moment.
The Top 1% of Americans own 53% of all corporate equities and mutual funds while the bottom 50% of Americans own less than 0.6% (that is 0.006)!
Putting aside the obvious implications of generational wealth disparity, think about the will of the people. US citizens have echoed very reasonable changes to our financial systems like making sure US companies actually pay federal income tax. How effective do you think our US regulators will be at implementing this change…any change echoed by the ‘people of the United States’ when the top 1% owns 53% of all equities? Jeff Bezos & co advocates for ‘social justice’ like ensuring all individuals have access to opportunity regardless of their socioeconomic upbringing and color of their skin..yet mandates policies in Amazon to avoid paying income tax, avoid providing health insurance to its part-time employees, and advocate against unionization.
There is very little chance that our US regulators will achieve any meaningful change given the disparities in equity ownership.
Meanwhile, what segment of the population do you think is most impacted by consumer debt? The answer: everyone else.
When we analyze consumer debt by wealth percentile, heads is tails and tails is heads. Now the bottom 50% of Americans account for over 56% of all consumer debt and the bottom 90% of Americans are responsible for ~91% of all consumer debt. The difference between the wealthy who own equity and the poor who own consumer debt is that the wealthy are well connected, are represented by lobbyist, and have have the worlds best attorneys and tax accounts shielding them from any legal implication.
Meanwhile the poors in main-street USA have had their ability to organize (via unions) decimated, and the party which is supposed to represent them (the democrats) has new masters who represent bicoastal elites that are disconnected from problems impacting real Americans. Absolutely shameful.
There are 2 takeaways from this report:
Take away# 1 — Own equities
There is very little chance that any US regulator will be able to effectuate any meaningful change with respect to wealth disparity. If you want to be wealthy, please make sure you are investing (for the long run) in the US equities market and abroad. For most people this means investing via their roth IRA and/or 401k. My wife and I personally max out our 401ks and Roth IRAs. If you’re into ratios, aim for 15% of your pre-tax income going into some type of retirement account.
Take away #2 — Avoid consumer debt
I will continue to say this until my face turns blue, but please folks avoid consumer debt. There has been a proliferation of earned wage platforms that give you access to your wages before your paycheck. This is a modern payday loan. Moreover, buy now pay later is back in the mainstream. Both of these are terrible solutions because they don’t address the underlying problem: which is you don’t have enough money to live your life. Practically speaking, aim to live off of 60% of your post-tax income and keep your housing costs are 30% of your post-tax income. This will create a financial moat around your life when there’s a rainy day; and there will always be a rainy day.
If you want to imagine the worst-case scenario — watch the movie squid games. You’ll see poor souls forced into dire straights based on poor financial decisions they made (the movie is awesome by the way).