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Who is benefiting from stock market's record run?

From Reuters.com

"While pensions and retirement funds were lifted by the rise in stock markets, the president has avoided talking about one key point about who really benefits when the market rallies: Most of the gains go to the small portion of Americans who are already rich.

That’s because 84% of stocks owned by U.S. households are held by the wealthiest 10% of Americans, according to an analysis of 2016 Federal Reserve data by Edward Wolff, an economics professor at New York University. So when the stock market has a blockbuster year - such as the nearly 30% rise in the S&P 500 benchmark index in 2019 - the payoff primarily goes to people who are already rich."

The Rich get Richer

Comments

  • Awaiting my tour guide and driver while I scribe this post.

    This is why part of your social security needs to be invested in the stock market and just not everything in US Treasuries. In this way those not already invested gain exposure to stocks which are the wealth generator for most investors.
  • Should there be a requirement that all citizens own securities?
  • Wouldn't forced sharing of wealth gains be socialism?
  • edited February 2020
    “84% of stocks owned by U.S. households are held by the wealthiest 10% of Americans ...”

    That’s got me wondering how many of that fortunate 10% post regularily on this board? And which threads are they likely most active on? Judging by the screen names, this isn’t a preeminently wealthy lot (ie: Puddenhead, Old Joe). However, those are likely convenient subterfuges cleverly designed to conceal their actual high-flying profiles.)
  • From the linked article: "That’s because 84% of stocks owned by U.S. households are held by the wealthiest 10% of Americans, according to an analysis of 2016 Federal Reserve data by Edward Wolff, an economics professor at New York University. "

    What constitutes the wealthiest 10%? By annual income? or by accumulated assets? Individuals or households?
    Hank asked "how many of them regularly post on this board?".
    We may be a member of that group and not know it -- what does it take to be in that 10%?
    David
  • Reading the article I am pretty sure it refers to net worth

    2017 you needed $1,180,000 to be in top 10% of households.

    https://dqydj.com/net-worth-brackets-wealth-brackets-one-percent/
  • edited February 2020
    Gary1952 said:

    Should there be a requirement that all citizens own securities?

    Alan Greenspan seems to think so:

    “We need to change the structure of all the various social programs that have a trust fund to them and go to a defined contribution rather than defined benefit.” Greenspan

    (The source is from 2018. Greenspan repeated the suggestion on Bloomberg TV recently.)

    While he doesn’t mention equities as the investment of choice, does anyone seriously believe Greenspan would have individuals stash these “defined contributions” away in 2% treasury bonds or 1% money market accounts?
  • edited February 2020
    hank said:

    Gary1952 said:

    Should there be a requirement that all citizens own securities?

    Alan Greenspan seems to think so:

    “We need to change the structure of all the various social programs that have a trust fund to them and go to a defined contribution rather than defined benefit.” Greenspan

    (The source is from 2018. Greenspan repeated the suggestion on Bloomberg TV recently.)

    While he doesn’t mention equities as the investment of choice, does anyone seriously believe Greenspan would have individuals stash these “defined contributions” away in 2% treasury bonds or 1% money market accounts?
    I guess I don't really care what a senile Greenspan says. I believe that this is still s free country and people can own what they want to own. A quote from my step daughter referring to her new 401k at age 43: "Been listening to Dave Ramsey and Chris Hogan......going to put 15% of my income into my 401k. I wish this was introduced to me at a younger age". I agree with her. But she was in no frame of mind at 20 or 30 to give a darn (putting it mildly) about investing.

    My point is that many don't care about the market and want to buy new iPhones and BMWs etc. Saving and investing is not a right. But it is a right to do what you want to do. GWB tried to siphon some SS into savings but was shot down. What does that say about the cronies that want to control who does what?

    What really needs to be done is education in high school.

  • edited February 2020
    Sir - I’m afraid I didn’t fully comprehend your question and what point you were trying to enunciate:

    “Should there be a requirement that all citizens own securities?”

    I didn’t consider the question unreasonable. It seemed to lack context, and so I tried to add some possible context which might befit the question. Certainly, there are many other ways an open-ended question like that might be addressed.

    Glad to hear your step-daughter is doing well. Wasn’t aware former Fed Chairman Alan Greenspan’s mental acuity had declined.

    Regards
  • hank said:

    Gary1952 said:

    Should there be a requirement that all citizens own securities?

    Alan Greenspan seems to think so:

    “We need to change the structure of all the various social programs that have a trust fund to them and go to a defined contribution rather than defined benefit.” Greenspan

    (The source is from 2018. Greenspan repeated the suggestion on Bloomberg TV recently.)

    While he doesn’t mention equities as the investment of choice, does anyone seriously believe Greenspan would have individuals stash these “defined contributions” away in 2% treasury bonds or 1% money market accounts?
    Income annuities would work fine if Fed chairs, like Greenspan, hadn't kept lowering rates to goose the economy.

    While there has been some chit-chat around here about inflation. I think deflation keeps the central bankers up at night.
  • It's all about how you present the info...Gallup found 55% of Americans reporting they own stock in April 2019.
    Of course, the top 10% own a lot more but the top 10% pays over 40% of the Fed taxes too.
    SS problem can be solved if the money will be invested like they do with the railroad retirement(link)
  • FD1000 said:


    SS problem can be solved if the money will be invested like they do with the railroad retirement(link)

    Or make cuts.

    https://www.forbes.com/sites/teresaghilarducci/2019/08/23/trumps-second-term-plan-for-social-security-starve-the-beast/#167f8bd73794

  • I was showing you how the railroad social security is paying much more because it's managed much better. Our politicians could do better if they seat together to solve problems. Just think about how an insurance company does it.
  • edited February 2020
    As far as “benefitting from” - The term itself might warrant closer examination. When contributing through my workplace plan (25-50 years ago) I was often advised by the “experts” (plan advisor, experienced co-workers, financial journals, etc.) that I should view the intermittent losses that came along as “paper losses” and not worry too much since retirement was some decades away. OK. I get it.

    Is not the same true of market gains when you’re a decade or more out from being able to tap those investments? Are not those gains also of the “paper” variety until harvested at some distant future date? I see younger folks in their 30s and 40s today gawking over how much their retirement nest-egg has appreciated the past 10 years - and even throwing more money at this thing than they would otherwise. Yet, any kind of prudent analysis I understood when younger was that you wanted to invest when the markets were lower and than withdraw that investment decades out when they were a great deal higher.

    I’m wondering than if the current euphoria among those who are contributing - and decades away from withdrawing their money - is perhaps misplaced? The difference between than and now might well be the public clamor we’re subjected to daily from the likes of CNBC and the internet - neither of which existed during most of the years I contributed. Back than one was more or less required to read books, pick up the WSJ, or tune in to Rukeyser on Fridays to learn the ropes. The current misplaced euphoria is heightened by the politicization of most everything in sight, including equity valuations. We might well be reminded here that while “winning has a thousand fathers ... failure is an orphan.”
  • Hi @hank

    You noted: "you wanted to invest when the market was lower and plan to withdraw the money decades out when it was higher."

    For the young ones so inclined and with the financial ability to contribute to a 401k/403b; I will presume most of this money is dollar cost averaged via payroll deductions. This being the case removes the buy low or high factor, yes?

    'Course, there remains too many of the other young ones who don't invest. I spoke with a 33 year old lady a few months ago and asked her, "How is your 401k investment(s) doing?" She replied that she still had not started in the offered plan. She can afford a small amount on a monthly basis, but continues to avoid the opportunity.

    And there are the dumb moves, too; IMHO.
    In 2004 a married couple I'd known for many years decided to build a 3,000 sq. ft. real log house in Michigan. Tis a house right out of the pages of a "fine homes" magazine.
    However, they decided to cash out the wife's 401k (she is a computer systems analyst) to pay for a large a portion of the total cost of construction. The $150k withdrawn also incurred tax penalties, due to her age. Had she maintained her 401K, and been invested in a decent balanced fund; her account would be worth about $500K today. Is this house valued today; versus what it cost to build in 2004? I'm sure it is not worth $500K in today's Michigan market based upon the location.....just my guess.

    And for the young ones, well the $ numbers can look small. A $1,700 Roth IRA at the beginning of 2019 invested in large cap U.S. growth likely found a return of at least 30% in 2019. This is excellent, but on paper looks like a small dollar amount of about $510. But, the young ones have to be reminded that they are doing the right thing and that time is on their side. Many here should be able to recall the small dollar amounts first invested and the small dollar amounts shown as a return for the year. But, if done properly; overtime, the annual compounding becomes real numbers, yes?

    I'm sure there are more than enough folks here who did not start with a "silver spoon" for money; but by being prudent with spending and of the mind set to invest; find their household in, at least, the upper 20% of the so called rich in this country.

    So, who benefits from a market run? Those who are invested, period; be it a $1,700 Roth or $1 million +.

    Take care,
    Catch
  • edited February 2020
    Hi Catch,

    First, it would take a statistician to delve into the intricacies of dollar cost averaging as bull / bear markets impact that. (That I am not.)

    My gut instinct says one should hope for a 20-year bear market during the later stages of employment (when contribution amounts typically increase) and than pray for a 30-year bull market after retirement and when drawing down assets. Of course, that’s not very likely. I cite it simply to demonstrate that relative valuations (contribution years vs withdrawal years) do matter.

    What I think I can state with some confidence is that from the early ‘70s (my initial contribution years) thru the ‘90s (the latter years) I cannot remember an 11-year stretch during which the DJI climbed 350 % or more. Not even from a bear market low. The question here is: “Who is the stock market’s record run benefitting?” - If you’re in your last 10 years of employment and socking away more than you typically did in earlier years (playing catch-up), it’s definitely not helping you.
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