Top 0.1% to pass bottom 90% of Americans in combined wealth

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morriswalters
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby morriswalters » Sat Nov 22, 2014 9:37 am UTC

Most people shouldn't day trade. Trading speculatively is about information and the ability to trade in a timely fashion. I don't call buying stocks and tuning your portfolio yearly, trading. And you don't buy to take a loss, but if you have enough stock you will take losses. Those I knew people accepted their losses and dumped them, and took advantage of them to, what is the term, maximize their ?gains?. Optimize? I am at the edge of my knowledge and should probably shut up.

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sardia
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby sardia » Sat Nov 22, 2014 3:00 pm UTC

ucim wrote:
morriswalters wrote:For the average person I consider day trading foolishness. Buy and hold. Or don't. But most people won't have sufficient information to keep up.

I'm not sure what you mean. Keep up with what? I agree most people couldn't keep up with day trading. It's a full time job. But it's not all that difficult to keep up with ten stocks that you re-evaluate every year, and whose company news you keep abreast of weekly.

morriswalters wrote:Because of the tax law as it was when I was around these people, they wanted losses to balance out their capital gains. However most of this was above me.
I don't think they were "looking to lose money" to offset a gain. That's daft. What they were likely doing was looking in their portfolio to see where they already lost money, and "declaring" (by actually selling) it in a timely manner to offset a gain they had already made. (Alternatively they could keep holding the losing stock hoping it would rebound, but then they'd not get the tax benefit of offsetting an actual loss against an actual gain; they'd have to pay tax on the entire gain.)

In theory they could then take the money they got from selling the (losing) stock, and just buy it back at the same price. They'd be in the same position they were in before, only now their basis in that stock would be the new, lower price, and therefore if it rose back to the same price as when they originally bought it, they'd pay tax on the (newly created) profit, which they wouldn't have had had they not sold it previously at a loss (and bought it back).

In practice, there are tax penalties for doing so unless you wait a month (I think) first.

Jose

There are several disadvantages that small traders have(assets under $100k in markets) that the big traders don't have to deal with.
Trading fees. Depending on how often you trade, they eat up an enormous percentage of your income, not profit, income from trading.
General benefits from scaling up. Would you trade a stock if the price went from $10 to $11? Most people wouldn't because it's not worth time, but if you owned 10 million stocks, then you just made $10 million.
High Frequency Trading. These bastards have computers that parse the news faster than it spreads at the speed of light. Say the Fed announces a rate change, and the market is going to fall. The people who get the news first, would have an obvious advantage. As it radiates outward, each light nanosecond, the news travels 12 inches. If everyone gets their news at the same time, but my super computer is parked right next to the exchange, how are you gonna beat me? You can't, so I eat all the profits from the resulting news, and you get shit. The only way people make money anymore is by betting long, or insider trading. Nobody ever brags that they make a killing off that unemployment report, all you here about is people winning the market lottery by betting on google or apple when they started.
Lastly, time spent vs money earned. Its pretty much a full time job to do long term trading, leave it to the professionals or as a very light hobby.

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ucim
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby ucim » Sat Nov 22, 2014 3:40 pm UTC

sardia wrote:As it radiates outward, each light nanosecond, the news travels 12 inches. If everyone gets their news at the same time, but my super computer is parked right next to the exchange, how are you gonna beat me?
There are tricks, but they are not for the little guy. But since your nanosecond advantage only lasts a nanosecond, to make money you have to move a lot of stock to make a little money, which means that there has to be somebody on the other end for all of that stock, at that price.

sardia wrote:...all you here about is people winning the market lottery by betting on google or apple when they started.
... and that is precisely why it's not a lottery. What google and apple did they did slowly, and people could see it happening. They could make intelligent choices based on market conditions, people's desire (or aversion) to technology, the way the companies fed into (or blundered) in that regard, and decide that these companies knew how to turn electrons into goods their neighbors would want. It takes some work to do this. It takes some talent to do this. It takes some dicipline to do this. And it takes the willingness to be wrong and absorb the loss in that case. It's not without risk. Plenty of companies looked good and blundered - I'm sure you could name a bunch off the top of your head.

To call it a lottery is to say that none of the above matters. That kind of thinking does you a disservice.

sardia wrote:Lastly, time spent vs money earned. Its pretty much a full time job to do long term trading, leave it to the professionals or as a very light hobby.
No, it's not. If you limit yourself to a handful of companies, do long term (say, with a five year outlook) investing, and resist the temptation to time the market (where you are likely to be out of sync for reasons stated above), it is nowhere near a full time job, and can yield good results. Add to that your own insight into your chosen field (a doctor likely has better insight into biotech than into ore processing), and you can do well.

It does take some capital. You should first build up enough money to play with, whose loss you could absorb. This is because nothing is guaranteed, and because it takes just as much time to research a $40 investment as a $40,000 investment.

Day trading OTOH is a full time job.

morriswalters wrote: Those I knew people accepted their losses and dumped them, and took advantage of them to, what is the term, maximize their ?gains?. Optimize?
"Offset" their gains. You're taxed on your net profits, and you normally don't have a profit (or loss) unless you actually sell the stock.

If you just sold Apple for a $40,000 gain, and you are also holding Palm, which is now trading for $15,000 (but you bought three years ago for $55,000), and you keep on holding it, you will pay tax on $40,000 (in real out-of-pocket money) and you'll still own that dog of a stock (Palm) you bought three years ago. Maybe it will turn around, maybe not.

OTOH, if you sell the Palm also, you'll take a loss of $40,000 on it. (In a sense, you lost the money three years ago, and didn't realize it until now!) So now you have a $40,000 profit and a $40,000 loss. Total net profit, zero. Total tax on this net profit: zero.
Spoiler:
New Jersey does not let you do that. If you spend $40,000 each on two stocks, one goes to zero and the other doubles, and you sell both, you come out even, having not made a penny. New Jersey will make you pay taxes on the $40,000 profit, and ignore the $40,000 loss.
The Motley Fool is a good site to start with when looking to learn about investment. Give it a look.

Jose
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby addams » Sat Nov 22, 2014 3:50 pm UTC

The Department brought a Ph.D. from Yale Business School in to teach us that sort of stuff.
She made us learn how to read the Stock and Business Page of the News Paper.

She was pretty good.
After several months of listening to her, we knew just a tiny bit about investing.

Buy a good Mutual Fund and fucking forget you have it.
Unless you want to Change Major, Change Career, Change Life Focus.

She taught us a lot more than Stock Market.
She was good. We respected her.

I followed her advice.
Until a Real Winner, like Diccky Boy Cheney took issue with me. I was doing pretty well, for a girl.
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sardia
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby sardia » Sat Nov 22, 2014 4:31 pm UTC

Any moron can buy stocks using your so called insights. You aren't going to beat the market returns. The s and p 500 is gaining 10% a year. Did your market insights beat that? How diversified is your portfolio? Why do you insist on giving awful I investment advice?

Here's good investment advice.
Max out any matching funds in your 401k.
Max out a IRA or IRA Roth. You don't make enough money to care which one.
Pick funds that have low fees. Its given as a percentage, I aim for less than .5% or .005 cents per dollar per year.
Diversify into s&p 500 (large companies USA)
Russell 2000 (small us companies)
Real estate funds
International funds

Research the cheapest funds for a day and then buy it. Check back once a year to fund your IRA and to rebalance. Sell a bit of your biggest gainers and buy more of your losing funds. The end result should be each mutual fund be of equal dollar value. If the transaction fees are too high, just buy in large chunks and don't bother selling. Once your funds grow to make the transaction fees worthwhile( I prefer chunks of 10-20k dollar purchases at a time. ) you can start rebalancing.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby ucim » Sat Nov 22, 2014 4:58 pm UTC

I am merely saying that the stock market is not a game of pure chance, and supporting my statements. I am not giving investment advice - that would be daft. So is taking investment advice from a random post on the internet.

The market is not for everyone, but if it's not for you, that doesn't make it a lottery. And while anybody can get lucky (or unlucky), looking at somebody's success as "mere luck" ignores the facts. There is reason behind it. It can be learned.

Jose
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby sardia » Sat Nov 22, 2014 5:13 pm UTC

ucim wrote:I am merely saying that the stock market is not a game of pure chance, and supporting my statements. I am not giving investment advice - that would be daft. So is taking investment advice from a random post on the internet.

The market is not for everyone, but if it's not for you, that doesn't make it a lottery. And while anybody can get lucky (or unlucky), looking at somebody's success as "mere luck" ignores the facts. There is reason behind it. It can be learned.

Jose

Show me an investment manager who has beaten the market year on year for decades, and I'll show you a criminal. There are very few market insights that don't fall into insider trading or are already priced into the market. I'm not saying don't invest in the stock market, I'm saying you should be aware of where they rigged it, and how to minimize your losses. Aka, follow the essentials. What I said is a repost of what every good financial adviser has ever said.
What you're giving is the false impression that any hot shot, Full on dunning kruger effect, can make a quick buck. It's not like that, and it's dangerous to make it seem like that. You are being deceptive(unintentionally or not).

PS If the idea you're trying to convey was only meant for those already knowledgeable about the finance markets, then why phrase it to novices?

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby ucim » Sat Nov 22, 2014 5:50 pm UTC

sardia wrote:Show me an investment manager who has beaten the market year on year for decades, and I'll show you a criminal.
That's a very strong statement, equivalent to "all investment managers who consistently beat the market are criminals". I don't buy it. It sounds too much like sour grapes.

I don't deny that some criminal activity occurs. I don't deny that some legal activity that you thing should be criminialized occurs. But to say that there is no room for legitimate knowledge to play a part in honest investment activity is... well... beef by-products of the highest purity.

sardia wrote:What I said is a repost of what every good financial adviser has ever said.
Remember also that financial advisers want you to depend on them.

sardia wrote:What you're giving is the false impression that any hot shot, Full on dunning kruger effect, can make a quick buck.
I don't think I'm giving that impression. I have never mentioned "making a quick buck". I am not talking about "any hot shot".

What I am saying is that it is not black magic.
Spoiler:
EMTP wrote:Right. And everything we know about stock market investing implies that [Warren Buffet] has done well through pure chance.
It is not a lottery. It can be learned, just like auto mechanics, nuclear physics, and playing the violin. Not every hot shot is going to have a career at Carnegie Hall, but Yo Yo Ma did not get where he is just by being lucky.

To decide that you don't want to do this because you have better things to do with your time is a perfectly legitimate decision. Most cello fanciers should not rent Carnegie Hall and have a recital. But to decide you don't want to do this because it's impossible unless you're a criminal is wrongthinking.

sardia wrote:PS If the idea you're trying to convey was only meant for those already knowledgeable about the finance markets, then why phrase it to novices?
For the same reason we teach physics in high school. Most high school students shouldn't build an H-bomb. But building an H-bomb is not magic, and learning how they work... indeed simply knowing that they are based on sound science, is worthwhile.

At the very least, you'll be able to talk more intelligently to your financial adviser.

Jose
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby morriswalters » Sat Nov 22, 2014 10:39 pm UTC

My original point was that Buffet is a child of both chance and skill. If it hadn't been Buffet, someone else would have been at that spot. Bill Gates ended up rich, but if a confluence of events hadn't occurred, which included being in a position to take advantage of the outcome of events that led to the personal computer, he might have been nothing more than a successful engineer. He ended up where he is, and we see it with hindsight, and attribute qualities to him with the assumption that if you have those qualities you can end up where he is at. There are only so many of those slots or whatever it pleases you to call them. And random chance speaks louder than talent. That is the way I process it. I have come to believe that the poor have to exist. Just as the wealthy do. However if you transfer wealth from the top .1 percent and used some on that vaulted intelligence to enlarge the middle class with it, then wouldn't the natural outcome be that the number of poor would decrease? Isn't that exactly what Sardia proposes?

On the stock market. I use a 401K and leave it alone. I never play games where I don't have knowledge of all the players. I use the 401K since there is no other choice. We conveniently keep interest rates so low that saving the old fashioned way is useless.YMMV.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby ucim » Sat Nov 22, 2014 11:29 pm UTC

morriswalters wrote:My original point was that Buffet is a child of both chance and skill....
I agree 100%. It's (ego) gratifying to think that our successes are due to our own smarts (and our failures are due to bad luck) but it ain't so.

morriswalters wrote: And random chance speaks louder than talent. That is the way I process it.
I don't know which is "louder". I don't know that there's even a monotonic measure of "loudness" in this context. However, it's important to be prepared when random chance operates in your favor, and you won't do that if you believe that success is due entirely to chance and criminal behavior.

morriswalters wrote: I have come to believe that the poor have to exist. Just as the wealthy do. However if you transfer wealth from the top .1 percent and used some on that vaulted intelligence to enlarge the middle class with it, then wouldn't the natural outcome be that the number of poor would decrease?
It would seem. That is the basis of tax-supported public education. That, and "it's better for me that you are educated".

morriswalters wrote:On the stock market. I use a 401K and leave it alone.
A 401K is not an investment strategy, it is a (tax sheltered) vehicle in which one can implement an investment strategy. You can pretty much do the same things in a 401K that you can do in a regular (taxed) investment account. It's probably a good idea to be more conservative in your retirement account, but that depends on your personal situation.

Jose
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby LaserGuy » Sun Nov 23, 2014 1:23 am UTC

ucim wrote:
sardia wrote:Show me an investment manager who has beaten the market year on year for decades, and I'll show you a criminal.
That's a very strong statement, equivalent to "all investment managers who consistently beat the market are criminals". I don't buy it. It sounds too much like sour grapes.

I don't deny that some criminal activity occurs. I don't deny that some legal activity that you thing should be criminialized occurs. But to say that there is no room for legitimate knowledge to play a part in honest investment activity is... well... beef by-products of the highest purity.


The evidence strongly suggests that nobody beats the market long-term. Fewer than 1% of professional fund managers can beat the market over a 10 year period. And the more you trade, generally, the worse you do.

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sardia
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby sardia » Sun Nov 23, 2014 2:28 am UTC

To add on to what laserguy said, if I brought in 1,000,000 people and told them to bet in whatever strategy they have on roulette on black or red, and then I picked out the top 1% of those gamblers, did any of them have any skill? How is that different from spraying a wall with bullets, and then circling a bullseye on the largest clump so I can declare myself a sharpshooter.

A great many people can and should invest in stocks, but not in the way you implied. Unless they have knowledge equivalent to insider trading, then there's no tricks or deep insight into the financial markets. I've told you the only things that matter are being well diversified, and minimizing fees. I can bank on that. You can't say the same for any other form or strategy regarding stocks. For the vast majority, day trading, individual stocks, etc etc can't beat buying the market.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby CorruptUser » Sun Nov 23, 2014 4:18 am UTC

Tell me. Why are you so convinced that the only way to beat the market (outside of luck) is through insider information?

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby LaserGuy » Sun Nov 23, 2014 5:34 am UTC

CorruptUser wrote:Tell me. Why are you so convinced that the only way to beat the market (outside of luck) is through insider information?


It seems to me that if someone were able to consistently beat a free market, that would actually violate some fairly central tenants of free market economics--it would mean that one individual is able to allocate goods and services more efficiently than the entire market. If for example, Warren Buffett were able to always beat the market, then it would be economically optimal to abandon the free market all together and just have Warren Buffett do all of the work.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby morriswalters » Sun Nov 23, 2014 5:52 am UTC

ucim wrote:A 401K is not an investment strategy, it is a (tax sheltered) vehicle in which one can implement an investment strategy. You can pretty much do the same things in a 401K that you can do in a regular (taxed) investment account. It's probably a good idea to be more conservative in your retirement account, but that depends on your personal situation.
I don't get to pick stocks in my 401k, just packages put together by the managers. The only strategy involved is hoping that the fund managers have some sense.

And there seem to be two different things being talked about, trading where one try's to outguess the market swings and straight up investing, where you buy stocks as an investment in a particular company. I'm I missing anything?

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby ucim » Sun Nov 23, 2014 6:19 am UTC

the link wrote:Fewer than 1% of mutual fund managers persistently beat the market based on superior market-timing or stock-picking skills.
Fund managers are at a big disadvantage here. They have to manage too much money. This forces them to spread it around, and the more you have to spread it around, the closer to the average you will get. If you had all the money in the world, it would be impossible to beat the market. You would be the market. This is why...
LaserGuy wrote:If for example, Warren Buffett were able to always beat the market, then it would be economically optimal to abandon the free market all together and just have Warren Buffett do all of the work.
...doesn't work.

But if you stick with a small number of stocks, and a small amount of money (relative to a mutual fund), you will not be at that disadvantage. You will actually be able to buy what you want, and only what you want, without moving the market yourself.

Also, note that the link talks about funds not beating the market. It does not say that an individual's small basket of stocks can't consistently beat the market.

sardia wrote:if I brought in 1,000,000 people and told them to bet in whatever strategy they have on roulette on black or red,
But roulette is a game of chance. That fact is not evidence that the market is also.

morriswalters wrote:I don't get to pick stocks in my 401k, just packages put together by the managers.
This is a function of the specific 401k account you have, not a function of 401k itself. There are 401k accounts that let you pick stocks. I have a retirement account that even lets me buy options, should I wish to. Whether that's a smart strategy depends on lots of things, but it is certainly possible to do even inside of a retirement fund.

And yes, long term ("investing") vs short term ("trading"), being opposite ends of a continuum of the same thing, are often confused in discussions like this one, which is itself a bit of a side track from the OP.

Jose
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby sardia » Sun Nov 23, 2014 7:10 am UTC

morriswalters wrote:
ucim wrote:A 401K is not an investment strategy, it is a (tax sheltered) vehicle in which one can implement an investment strategy. You can pretty much do the same things in a 401K that you can do in a regular (taxed) investment account. It's probably a good idea to be more conservative in your retirement account, but that depends on your personal situation.
I don't get to pick stocks in my 401k, just packages put together by the managers. The only strategy involved is hoping that the fund managers have some sense.

And there seem to be two different things being talked about, trading where one try's to outguess the market swings and straight up investing, where you buy stocks as an investment in a particular company. I'm I missing anything?

You really should take a look at your 401k, and bring it up with your HR rep. All too often, the HR guys have a conflict of interest that is directly tied into you losing (gaining less) money. HR guys hate dealing with paperwork, and then a sweet talking mutual fund saleman comes by with a great sounding offer. If you give permission to manage your 401k money of all your employees, I'll take care of all of it, at no cost to your company/HR. Sounds too good to be true? It's because it is. They instead take it out of the employee's earnings by having high expense ratios. Parasitic mutual fund companies like TRowe Price and others have expense ratios above 2% a year. Remember, the stock market in a good year only gains 8-10%. You're losing 20-25% of your capital gains every year just because your HR people are lazy bums who got tricked into giving away your retirement money.

And how conservative you want to be depends on how dependent you are on your stocks/bonds. An extreme example would be if you won the lottery, then you wouldn't need your 401k at all, and you would be perfectly happy with 90% stocks that maximize growth or interest of roughly 6-10% a year. Ucim is probably referring to not dumping your 401k into say...the latest biotech company with a single drug and a prayer.

Corrupt, how rosy do you think the financial markets are?
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby Zamfir » Sun Nov 23, 2014 7:12 am UTC

LaserGuy wrote:
CorruptUser wrote:Tell me. Why are you so convinced that the only way to beat the market (outside of luck) is through insider information?


It seems to me that if someone were able to consistently beat a free market, that would actually violate some fairly central tenants of free market economics--it would mean that one individual is able to allocate goods and services more efficiently than the entire market. If for example, Warren Buffett were able to always beat the market, then it would be economically optimal to abandon the free market all together and just have Warren Buffett do all of the work.

How is that different than reality? Buffet and his company do manage a part of the economy. Not just by buying stocks, they even buy influential or controlling shares and make decisions on the management and strategy of firms. A firm is a centrally-planned subpiece of the economy, and Buffet is the top of the command pyramid of a substantial number of firms.

They can't just do all the firms. It takes effort to build enough knowledge of each firm. And the relevant experience doesn't necessarily scale to every type of firm, so they stick to firms that somehow fit their experience. But within that area, decisions are indeed taken away from the market as a whole.

I don't think it contradicts much about 'free' markets. That's a nebulous concept, but it usually includes the existence of sizable firms and small groups of people controlling them. Of course, it contradicts the economist's model of a 'perfect' market, but pretty much everything about reality contradicts that model.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby addams » Sun Nov 23, 2014 12:21 pm UTC

Sure.
Prudent behavior guided by an expert you have hired might seem like the right thing to do.
Don't do That or anything else, if one of The Big Boyz wants to shut you up.

http://en.wikipedia.org/wiki/Martha_Ste ... conviction
According to the U.S. Securities and Exchange Commission (SEC), Stewart avoided a loss of $45,673 by selling all 3,928 shares of her ImClone Systems stock on December 27, 2001, after receiving material, nonpublic information from Peter Bacanovic, who was Stewart's broker at Merrill Lynch. The day following her sale, the stock value fell 16%.[41]


After a highly publicized six-week jury trial, Stewart was found guilty in March 2004 of felony charges of conspiracy, obstruction of an agency proceeding, and making false statements to federal investigators, and was sentenced in July 2004 to serve a five-month term in a federal correctional facility and a two-year period of supervised release (to include five months of electronic monitoring).[45]


Let's see?
Cheney and his pet company Enron, start a World War.
His secret meetings stay secret.

He gets regular spots on all the major free TV Networks.
Ms. Stewart follows the advice of a paid professional, she goes to jail.

Yeah.
ok.

Free Market?
My Ass!
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby morriswalters » Sun Nov 23, 2014 2:04 pm UTC

Within the limits of what is doable, I manage it. But you can only mange what is there to manage. Were I younger I would buy stocks and shove them into a box (figuratively) and forget them. Reinvesting dividends in the relevant stock.

One of the problems of being born poor and having to teach yourself the basics is that you get to the line late. It would be nice if you could teach kids these basic financial behaviors, like saving, with reinforcement, in schools. Although I have no idea how to do so.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby leady » Mon Nov 24, 2014 10:53 am UTC

Its almost pointless teaching the kids - you need to change parental behvaviour

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby mat.tia » Mon Nov 24, 2014 11:25 am UTC

I am sorry if I insist on this point, but I have this opinion, which could be very naive, but needs some external criticism to recognize itself that way.
One often hears "markets do", "markets push", "markets ask"...
"Markets" often have the first and last word in many topics; "markets" sometimes have the power to accept and confirm an elected politician, as well as to reject it and have it substituted by another. Together with the power of making a whole country default.
Assuming that the wealth distribution is not exactly equal but very similar in all countries that participate in the same market, does it make sense to still consider markets as the expression of global dynamics and not as the behaviour of those few owning so much? I'd say that way more than 90% of market shares are owned by that 0.1% since the 90% of "bottom" people has less money to invest and spends most of its money to buy necessities.
The products that "regular people" decide to buy do influence the markets but 1) the amount of money they can spend to move markets is incomparable to that owned by "rich people" 2) in any case, the consumer being at the end of the line sees its choices extremely reduced and prepared by the choices made higher up in the stream of decisions (market choices indeed).
Am I the only one seeing this as a corruption of the democracy + free market system?
If so, why do you think there is no problem with that?

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby leady » Mon Nov 24, 2014 11:43 am UTC

Ownership strongly depends on the company. Certainly with recent tech stocks then yes ownership is highly condensed, but the older a listing the more its pension fund owned - particularly for yielding stock.

In terms of the stock market generally there is a very good argument that its madness that the general public goes anywhere near it and that its the tax exemption status in many countries that superfueled prices. The stock market after is supposed to be there to guide large scale capital investment not provide a tax haven. The idea that the little people should care about stock is a very modern thing & quite probably a bad thing

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby Zamfir » Mon Nov 24, 2014 12:33 pm UTC

Mattia,in a sense I would agree with you. Sometimes people talk about how "the markets" demand something, and that's often a roundabout way to say "we have to look after the interests of rich people because we need their money".

On the other hand, your numbers are not quite right.
mat.tia wrote:Assuming that the wealth distribution is not exactly equal but very similar in all countries that participate in the same market, does it make sense to still consider markets as the expression of global dynamics and not as the behaviour of those few owning so much? I'd say that way more than 90% of market shares are owned by that 0.1% since the 90% of "bottom" people has less money to invest and spends most of its money to buy necessities.

The OP has a study on this, for the US. According to that study, the 0.1% richest households in the US own 22% of all wealth owned by all their households. They probably own a larger share of financial instruments like stocks, but it won't add up to 90%.

As a table, according to that study:

99.99%-100% 11%
99.9%-99.99% 11%
99%-99.9% 20%
90%-99% 35%
0%-90% 22%

They also split out the wealth of some groups. For the 0% to 90% group, pensions are the majority of their wealth. Houses used to be another big chunk, but mortgages are nowadays cancelling most of that value. Of course, there are stocks and bonds inside of those pensions.

Based on those numbers, the 0.1% richest people do not own 90%+ of the stock market, and probably not even a majority of it. On the other hand, their influence is probably larger than the numbers suggest. They can act on their own, or in small coordinated groups, and voice a single message with a lot of money behind it. A 1000 poorer people togther might own the same amount of assets, but it's far harder to turn that into a coordinated influence. Pension funds are not as influential as rich people's funds of the same size, and our control over our pensions is not as strong as rich people's control over their funds.

Another thing you mention:
Am I the only one seeing this as a corruption of the democracy + free market system?

I think we should be honest about this: for all the history of democracy, a small set of rich people owned a large share of financial assets. And they had outsize influence on the government. It's not a new thing, although the US seems to be moving towards a strong concentration of wealth even by historic standards. A bit of an experiment, I guess.

I don't think we can call it corruption, it's how the system is supposed to work. When rich people are not given enough influence over the government, they throw their social power against democracy. Sometimes the rich people win and they get their power back. Sometimes the rich people lose, but that's not pretty either. Experience suggests that you need a nasty streak to really win against rich people.

So the peaceful situations are compromises. Democracy, but with enough levers for rich people to keep them satisfied.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby mat.tia » Mon Nov 24, 2014 2:04 pm UTC

Zamfir wrote:
I think we should be honest about this: for all the history of democracy, a small set of rich people owned a large share of financial assets. And they had outsize influence on the government. It's not a new thing, although the US seems to be moving towards a strong concentration of wealth even by historic standards. A bit of an experiment, I guess.

What strikes me is not that things never were perfect, but that we take for granted that a small group of people has, in a Democracy, the right to experiment new distributions of wealth concentration - in their favour, by chance. And with us being democratically ok with it.

I don't think we can call it corruption, it's how the system is supposed to work. When rich people are not given enough influence over the government, they throw their social power against democracy. Sometimes the rich people win and they get their power back. Sometimes the rich people lose, but that's not pretty either. Experience suggests that you need a nasty streak to really win against rich people.

So the peaceful situations are compromises. Democracy, but with enough levers for rich people to keep them satisfied.

I thought the system was supposed to work differently: I've always seen Democracy as a way to try defending everyone's interests, but mostly the Weak's against the Strong's (the opposite happened easily even without Democracy).
Therefore I'd understand a Democracy trying to reduce rich people's power (not necessarily their rights or possessions) instead of allowing them to gain more.

A Country that adopts a Democracy is not automatically a perfect country; it is a Country that has strongly decided to grow in a precise direction. The direction being taken here seems to be the opposite of the declared one.
But it might be that this is normal and I am only very unsophhisticated thinking it makes any sense opposing instead of accepting it.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby addams » Mon Nov 24, 2014 2:18 pm UTC

I talk to much.

In a World War, opposing the Rich and Powerful is not a smart move.
In a World War....

Isn't that a bit of Hyperbole.
I was off reading other links and other threads.

They got tangled up together inside my head.
mat.tia; Democracy is not a terrible idea.

Democracy is a Target human beings have been aiming at for a very long time.
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby ucim » Mon Nov 24, 2014 2:36 pm UTC

mat.tia wrote:I thought the system was supposed to work differently: I've always seen Democracy as a way to try defending everyone's interests, but mostly the Weak's against the Strong's (the opposite happened easily even without Democracy).
Democracy is not defined by this tenet. It is the legitimate role of any government (specifically the police-type powers). As democracies are generally controlled by the weak to a greater extent than many other forms of government, this tenet has a greater prominence there. But it's not what defines democracy.

Further, it's not to blindly defend the weak against the strong. That's daft. It's to defend the weak against abuses by the strong. And "abuse" isn't defined as "something I don't like".

There is legitimate disagreement as to what constitutes "abuse". In a democracy, we all get a voice in this. And the power of that voice depends on whether or not we listen, and how easily we are swayed by marketing (political and otherwise).

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby Tyndmyr » Mon Nov 24, 2014 2:39 pm UTC

morriswalters wrote:Most people shouldn't day trade. Trading speculatively is about information and the ability to trade in a timely fashion. I don't call buying stocks and tuning your portfolio yearly, trading. And you don't buy to take a loss, but if you have enough stock you will take losses. Those I knew people accepted their losses and dumped them, and took advantage of them to, what is the term, maximize their ?gains?. Optimize? I am at the edge of my knowledge and should probably shut up.


Nanosecond trading, day trading, and moderate-long term investments are all really different, overlapping activities.

But yes. One would expect half of all people to be below average, generally speaking. Trading fees exist. Therefore, yes, more than half of people will perform below average. And everybody is falliable, even specialized managers.

But no, it isn't chance. Yes, it is a complex system, but it's still generated causally.

ucim wrote:
morriswalters wrote:On the stock market. I use a 401K and leave it alone.
A 401K is not an investment strategy, it is a (tax sheltered) vehicle in which one can implement an investment strategy. You can pretty much do the same things in a 401K that you can do in a regular (taxed) investment account. It's probably a good idea to be more conservative in your retirement account, but that depends on your personal situation.

Jose


*shrug* My 401k is aggressive as hell, but whatever. I'm young. Aggressive mixes are fine over very long periods of time. Diversification can mitigate risk, and risk smoothing can be done by buying on schedules, but other than that...tradeoffs exist.

But in any case, your statement is correct. Merely having a 401k does not mean you should ignore those other factors.

sardia wrote:To add on to what laserguy said, if I brought in 1,000,000 people and told them to bet in whatever strategy they have on roulette on black or red, and then I picked out the top 1% of those gamblers, did any of them have any skill? How is that different from spraying a wall with bullets, and then circling a bullseye on the largest clump so I can declare myself a sharpshooter.


That only matters of the roulette wheel is indeed random. If it turns out the roulette wheel is not actually entirely random, then that is in fact a valid way to develop strategies to exploit it.

In other words, you are relying on your conclusion that the stock market is valid to argue in this fashion. It does not produce that conclusion unless you use it as a premise.

LaserGuy wrote:
CorruptUser wrote:Tell me. Why are you so convinced that the only way to beat the market (outside of luck) is through insider information?


It seems to me that if someone were able to consistently beat a free market, that would actually violate some fairly central tenants of free market economics--it would mean that one individual is able to allocate goods and services more efficiently than the entire market. If for example, Warren Buffett were able to always beat the market, then it would be economically optimal to abandon the free market all together and just have Warren Buffett do all of the work.


In practice, even the most prolific investors work on a significantly smaller scale than the market as a whole. Just because you, as an individual, literally have more knowledge about a given subsector than anyone else does not mean this is true for everything at all times.

Plus, it'd be very difficult to find such a person in the first place without a market. Dunning Kruger rears it's ugly head again when you ask people how good they are at stuff.

morriswalters wrote:Within the limits of what is doable, I manage it. But you can only mange what is there to manage. Were I younger I would buy stocks and shove them into a box (figuratively) and forget them. Reinvesting dividends in the relevant stock.

One of the problems of being born poor and having to teach yourself the basics is that you get to the line late. It would be nice if you could teach kids these basic financial behaviors, like saving, with reinforcement, in schools. Although I have no idea how to do so.


It's hard. A lot of that is currently learned from parents, and that exposure will likely be a major element regardless of educational system. Better personal finance education is probably practical in elementary school, though. I don't think it's unreasonable to expect a high school grad to balance a checkbook, make a budget, retirement plan, etc. It's still a big jump from there to actually doing it, of course, but it's a start.

Zamfir wrote:Another thing you mention:
Am I the only one seeing this as a corruption of the democracy + free market system?

I think we should be honest about this: for all the history of democracy, a small set of rich people owned a large share of financial assets. And they had outsize influence on the government. It's not a new thing, although the US seems to be moving towards a strong concentration of wealth even by historic standards. A bit of an experiment, I guess.


This is true...and is also generally true of even most non-democratic systems. Money and power are relatively concentrated under all systems, the major difference being how it is allocated.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby Zamfir » Mon Nov 24, 2014 2:53 pm UTC

But it might be that this is normal and I am only very unsophhisticated thinking it makes any sense opposing instead of accepting it.

I oppose it as well, so at least we're in it together. When I called it an experiment, I was a tad sarcastic.

I am worried that the US is developing a wealth distribution that harms democracy. I am worried that the same trend might show up nearer to me. I am worried that the global rich have influence across borders. Wealth distribution numbers in my country do not show the same trend or strength as those for the US. Yet. But to some extent, the super-rich of the USA are also our super-rich. They just live in another country.

At the same time, democracies have always functioned with very powerful rich people. We don't even know how a democracy would look like without a strong wealth concentration in a small group, or if such a combination is possible at all. Powerful people collect money, money buys power and influence, and they influence the rules to accomodate themselves. Can that loop be entirely broken in a democratic, rights-respecting way?

Then again, most country show a decline in inequality after the introduction of full democracy. There is now a reversal of that trend over the last few decades, especially in the US. If that continues, we might be entering uncharted territory. An experiment, but not necessarily a good one.

Tyndmyr wrote:This is true...and is also generally true of even most non-democratic systems. Money and power are relatively concentrated under all systems, the major difference being how it is allocated.

I wouldn't say that allocation is the most importance difference, no. It matters a lot how concentrated power is, and what kind of powers the powerful have. Millionaires who can order you shot are worse than billionaires who cannot. Assuming that typical billionaires can't risk that in functioning democracies. Which I think is mostly true, but I am not entirely sure about it. Still better than knowing for sure that they can.

EDIT: on closer thought, I would also question that wealth is always concentrated. Take Viktor Chernomyrdin as example. Before the revolution, Gazprom was the Ministry of Gas Industries, and Chernomyrdin was its minister. Afterwards, he was CEO of the state-owned company, and later prime minister while Gazprom was privatized. He always denied it, but by most accounts he died as a dollar billionaire, as shareholder in the now-private Russian oil and gas industry. He had similar levels of concentrated power before and after the revolution, but only concentrated wealth afterwards.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby mat.tia » Mon Nov 24, 2014 3:31 pm UTC

ucim wrote:As democracies are generally controlled by the weak to a greater extent than many other forms of government, this tenet has a greater prominence there. But it's not what defines democracy.

yes: not a definition; major part of its goal. At least a requirement. If this is taken away, it is no more Democracy. Maybe not even a government, as you define it.
ucim wrote:Further, it's not to blindly defend the weak against the strong. That's daft. It's to defend the weak against abuses by the strong. And "abuse" isn't defined as "something I don't like".
There is legitimate disagreement as to what constitutes "abuse". In a Democracy, we all get a voice in this. And the power of that voice depends on whether or not we listen, and how easily we are swayed by marketing (political and otherwise).

exactly. I was struck by the fact that this power concentration was not considered as an "abuse". This is the reason why I asked for opinions on the matter.

Zamfir wrote:At the same time, democracies have always functioned with very powerful rich people. We don't even know how a democracy would look like without a strong wealth concentration in a small group, or if such a combination is possible at all. Powerful people collect money, money buys power and influence, and they influence the rules to accomodate themselves. Can that loop be entirely broken in a democratic, rights-respecting way?

That's the question that follows once and if we all agree the direction we'd like for a Democracy to take is the opposite of the one it is going. Surely, if the question is never addressed and the direction taken is accepted as a consequence of things in which we have no say, than the direction won't change and the same fact we have no say in it tells us a bit about how this gets along with Democracy.
If we have a say and we don't use it, it tells a lot about how suitable Democracy is for us.

I totally agree with you Zamfir about the fact that since territorialism has become a mean of capitalism, with the whole globalization deal, it makes little if any difference where the Rich man is born or lives.

Addams; I think yours is a Hyperbole. But please tell me what you think would be smarter. (Being the Rich Man does not count).
For what concerns discussing the idea of Democracy itself, I am afraid of going into that.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby Tyndmyr » Mon Nov 24, 2014 5:24 pm UTC

Zamfir wrote:
Tyndmyr wrote:This is true...and is also generally true of even most non-democratic systems. Money and power are relatively concentrated under all systems, the major difference being how it is allocated.

I wouldn't say that allocation is the most importance difference, no. It matters a lot how concentrated power is, and what kind of powers the powerful have. Millionaires who can order you shot are worse than billionaires who cannot. Assuming that typical billionaires can't risk that in functioning democracies. Which I think is mostly true, but I am not entirely sure about it. Still better than knowing for sure that they can.

EDIT: on closer thought, I would also question that wealth is always concentrated. Take Viktor Chernomyrdin as example. Before the revolution, Gazprom was the Ministry of Gas Industries, and Chernomyrdin was its minister. Afterwards, he was CEO of the state-owned company, and later prime minister while Gazprom was privatized. He always denied it, but by most accounts he died as a dollar billionaire, as shareholder in the now-private Russian oil and gas industry. He had similar levels of concentrated power before and after the revolution, but only concentrated wealth afterwards.


In the sense that it was listed as his wealth, personally, yes. But he lived a good life before and after, yes? Plenty of personal spending cash. And he ran the thing with all the wealth bound up in it. There seems to be little difference in terms of control and possession, only in how it is described.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby Zamfir » Mon Nov 24, 2014 6:24 pm UTC

That's where it gets interesting, I think. It's the difference between a CEO of a publicly traded company with a market cap of a billion dollar, and the sole owner of such a company. In their day to day lives, these two people might well have a similar spending pattern of private consumption. And their decision-making power also looks similar on a day to day basis. But we do not say that the CEO has a billion dollar worth of wealth.

The owner has a far greater leeway in their decisions. They can choose to run the company in a similar way as the CEO would, but they don't have to. In the most extreme case, they can liquidate the company and spend the proceedings on whatever money can buy. That's why we say they 'own' the company, and use the same vocabulary of property that we also use for owning a car or a piece of land.

In that sense, the USSR did not have a concentration of wealth. Their most powerful people had a lot of powers, some of which were (luckily) vanishingly rare in democracies. But they lacked the specific powers that we call wealth. However powerful he was, Chernomyrdin could never sell any part of the ministry of gas industries until after the revolution. And the perks of his ministerial office were nothing like a billion dollar worth of goodies.

The intruiging part, for me, is that we do NOT expect that most of our very rich people liquidate their assets and spend the proceedings on consumption. They get a legal right to do so, that's a core value of our society that lots of people died for to protect. And some of them exercise that right, and spend fortunes on consumption. But strangely enough, we expect that most of them keep their wealth in the form of financial assets and act as if they were fund managers of their own fund, or act as if they were a director of the company they own. If they didn't, our society would look very different in hard to predict ways.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby addams » Mon Nov 24, 2014 6:28 pm UTC

mat.tia wrote:
Addams; I think yours is a Hyperbole. But please tell me what you think would be smarter. (Being the Rich Man does not count).
For what concerns discussing the idea of Democracy itself, I am afraid of going into that.

I'm afraid I don't understand the question.

What would be smarter than what?
What things do you want compared?
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby ucim » Mon Nov 24, 2014 8:04 pm UTC

mat.tia wrote:exactly. I was struck by the fact that this power concentration was not considered as an "abuse". This is the reason why I asked for opinions on the matter.
No, mere concentration of power is not abuse. It makes abuse easier, but is not in and of itself abusive. In fact, concentration of power is necessary to a (large) functioning society and economy. Democracy is about to whom that power ultimately answers.

What is it that you would consider abuse? What would you consider legitimate use? (of wealth and of power)

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby mat.tia » Mon Nov 24, 2014 8:25 pm UTC

addams wrote:I'm afraid I don't understand the question.
What would be smarter than what?
What things do you want compared?

I am sorry, it is probably me that did not understand you. It would not be the first time and I guess I could blame at least a little the "language barrier". In any case I was referring to your sentence
In a World War, opposing the Rich and Powerful is not a smart move.


ucim wrote:No, mere concentration of power is not abuse. It makes abuse easier, but is not in and of itself abusive. In fact, concentration of power is necessary to a (large) functioning society and economy. Democracy is about to whom that power ultimately answers.

Exactly. I personally feel that power doesn't answer to me (nor to you). At least I was never asked anything by the main actors shaping this fast and global change - nor do I think they wonder what would be better for me.
In case this same feeling were shared by the majority of the People (what I was trying to understand asking is in fact if it is shared by you guys also), than it would become an abuse. Before the "minimum wage" is introduced, it is not an abuse to pay a person 1$ per hour. When People decide something is not acceptable, it becomes an abuse. If the form of government of this People is a Democracy, then the abuse is addressed.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby Tyndmyr » Mon Nov 24, 2014 8:35 pm UTC

Zamfir wrote:The intruiging part, for me, is that we do NOT expect that most of our very rich people liquidate their assets and spend the proceedings on consumption. They get a legal right to do so, that's a core value of our society that lots of people died for to protect. And some of them exercise that right, and spend fortunes on consumption. But strangely enough, we expect that most of them keep their wealth in the form of financial assets and act as if they were fund managers of their own fund, or act as if they were a director of the company they own. If they didn't, our society would look very different in hard to predict ways.


Precisely. They *could* sell the whole lot and spend the money on hats. But basically nobody does. And anyone who started liquidating his money-generating assets in such a fashion would rapidly stop being wealthy. The very pursuit of further wealth keeps that money locked into productive enterprises. And if they DO sell bits off, they tend to sell them off to other wealthy folks in functional lots, so the end result is merely a trading of places.

I suspect it's partially a self-selection issue. The sort of people who build giant piles of wealth are the sort of folks that, for whatever reason, want to do that. Hoarding instinct or competitive behavior, whichever. They just...keep doing that. Which is useful, sure, but it is interesting indeed.

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby ucim » Mon Nov 24, 2014 9:21 pm UTC

mat.tia wrote:Exactly. I personally feel that power doesn't answer to me (nor to you). At least I was never asked anything by the main actors shaping this fast and global change - nor do I think they wonder what would be better for me.
So... when you vote, your vote is not counted? When you buy something, your purchase does not show up on the tally?

The problem isn't that your opinion isn't counted, it's that other people's opinions (or lack of them) count against that. It's how [rant]javascripts are becoming acceptable web navigation methods[/rant]. (Other) people are easily swayed by superficialities, while you and I who know better are told to wear tin hats.

I don't think that anybody is abusively shaping "this vast and global change", but I do think that the wealthy and powerful are in a better position to take advantage of it. Is that abusive? Yes, for those in a position of trust, but I think no for those merely in a position of good fortune (which includes wealth).

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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby sardia » Mon Nov 24, 2014 9:27 pm UTC

Tyndmyr wrote:
Zamfir wrote:The intruiging part, for me, is that we do NOT expect that most of our very rich people liquidate their assets and spend the proceedings on consumption. They get a legal right to do so, that's a core value of our society that lots of people died for to protect. And some of them exercise that right, and spend fortunes on consumption. But strangely enough, we expect that most of them keep their wealth in the form of financial assets and act as if they were fund managers of their own fund, or act as if they were a director of the company they own. If they didn't, our society would look very different in hard to predict ways.


Precisely. They *could* sell the whole lot and spend the money on hats. But basically nobody does. And anyone who started liquidating his money-generating assets in such a fashion would rapidly stop being wealthy. The very pursuit of further wealth keeps that money locked into productive enterprises. And if they DO sell bits off, they tend to sell them off to other wealthy folks in functional lots, so the end result is merely a trading of places.

I suspect it's partially a self-selection issue. The sort of people who build giant piles of wealth are the sort of folks that, for whatever reason, want to do that. Hoarding instinct or competitive behavior, whichever. They just...keep doing that. Which is useful, sure, but it is interesting indeed.
use this model that rich people self select for generating wealth to account for the 2008 financial crisis or the poppy bubble.

mat.tia
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby mat.tia » Mon Nov 24, 2014 10:26 pm UTC

ucim wrote:So... when you vote, your vote is not counted? When you buy something, your purchase does not show up on the tally?

Yes, my actions do have an impact. But it's small and mine are not open choices: a person can decide what she prefers among a fixed number of options that come from the market. If the market choice is small (as it is getting smaller in many slices of the free market) a person's impact is very limited. If the legislator introduces a[n emergency] bill that says OGM products should not be labeled because otherwise you "discriminate" the largest part of food industry (I don't know if it is actually the case anywhere, but I think it's at least realistic) I do not have the option to express my opinion on that.
I guess I am simply reading this piece of news as just another symptom of a general tendency that seems to be followed by most western (et others) governments, and one that I dislike.

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ucim
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Re: Top 0.1% to pass bottom 90% of Americans in combined wea

Postby ucim » Mon Nov 24, 2014 11:20 pm UTC

mat.tia wrote:If the legislator introduces a[n emergency] bill that says OGM products should not be labeled because otherwise you "discriminate" the largest part of food industry (I don't know if it is actually the case anywhere, but I think it's at least realistic) I do not have the option to express my opinion on that.
Yes you do. You do so in the newspapers, twitter, blogs, and youtube, among other places. You also do so at the ballot box in the next election.

Remember, you hired your politicians to govern so that you don't have to. You hired Apple to make computers for you so you don't have to make them yourself. You can't do everything. This is the price.

Now if a legislator declares an emergency which increases his wealth or power, when there isn't an emergency, that is abuse of his or her power, and they need to be taken to task for that. Likewise, using your monopoly to bully suppliers into not supporting your competitor's products on their systems is an abuse of monopoly power (encoded into US law). But simply possessing the ability to do so is not itself abusive.

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