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Risk vs. arrogance

from David Ruccio

Most of us are pretty cautious when it comes to spending our money. The amount of money we have is pretty small—and the global economic, financial, and political landscape is pretty shaky right now.

And even if we’re not cautious, if we’re not prudent savers, then no harm done. Spending everything we have may be a personal risk but it doesn’t do any social harm.

It’s different, however, for the global rich. The individual decisions they make do, in fact, have social ramifications. That’s why, back in 2011, I suggested we switch our focus from the “culture of poverty” to the pathologies of the rich.

Consider, for example, the BBC [ht: ja] report on the findings of UBS Wealth Management’s survey of more than 2,800 millionaires in seven countries.

Some 82 percent of those surveyed said this is the most unpredictable period in history. More than a quarter are reviewing their investments and almost half said they intend to but haven’t yet done so.

But more than three quarters (77 pct) believe they can “accurately assess financial risk arising from uncertain events”, while 51 percent expect their finances to improve over the coming year compared with 13 percent who expect them to deteriorate.

More than half (57 pct) are optimistic about achieving their long-term goals, compared with 11 percent who are pessimistic. And an overwhelming 86 percent trust their own instincts when making important decisions.

“Most millionaires seem to be confident they can steer their way through the turbulence without so much as a dent in their finances,” UBS WM said.

Most of us can’t afford that kind of arrogance in the face of risk. But the world’s millionaires can. Just as they did during the lead-up to the crashes of 1929 and of 2008.

They trusted their instincts—and everyone else paid the consequences.

  1. patrick newman
    May 20, 2017 at 1:26 pm

    At the same time the Conservative media in the UK (not the BBC) are obsessed about the relatively small number of people living on and dependent on benefits with the clear suggestion they are the feckless undeserving poor. This has created something of a clamour by some in the working class to have benefits cut even when there are still 1.5M unemployed and less than 800,000 vacancies!

  2. R. Bauer
    May 20, 2017 at 2:50 pm

    Reportedly a large number of rich people committed suicide in 1929. Are there similar observations for 2008 crisis? And if not what hase changed?

  3. Jeff
    May 21, 2017 at 12:57 am

    Of course, no discussion of managing risk and investments is complete without a mention of the fact that interest rates have been steadily marching toward 0 since 1980 when we prioritized investment in dollars over need for investment.

  4. May 22, 2017 at 5:06 am

    I learned about “rich people” as Hemingway did. By observation and abuse. I was introduced to Lowry Mays by a news reader who worked on one of Clear Channel Communications’ original radio stations in the 1980s and 1990s. Mays told my friend and I getting rich is easy. Two steps. Always invest where the highest return is, regardless of what that is. Shift risk so if investments fail someone else must pay the cost. As I experienced more about investing and investments this simple two step strategy described all that I saw. Since the turn of the century (from 19th to 20th) the road to wealth has moved from property, producing, and skill to investing in paper and derivatives of paper. Hedge funds pool investors’ money and then invest looking for the highest return. In 2016, there were over 700 such funds and they had $3.5 trillion invested. Many believe they were a prime mover in the 2007-2008. recession/depression. On average the funds have positive results a little better than the flip of a coin. Managers of such firms are paid on average $200,000 while the superstars receive over $1 billion. But the methods the rich use to protect their wealth have not changed. 1) the rich seek other rich to form a united front; 2) the rich lobby (some say buy) laws and politicians to protect them; 3) the rich find others to take the blame and pay the costs when things go wrong – the poor. Rich people are rich because they have more money that other people, particularly the poor. Doesn’t matter how that money is gained. Today in the world, particularly the US there is a divide between rich and poor created to protect the rich and exploit the poor. That divide posits those who invest, create money, and support civic society, and opposing them those who exploit the wealth others create while making no positive contribution to society. This divide is the basis of government and politics in the US today. It’s as solid as a stone wall. The exultation of the rich and denigration of the poor are necessary requirements of this wall. It may be disgusting for some. But even those who hate it, as I do, must admire the skills and patience of the work that substituted exultation in place of loathing of the rich in the minds of many of America’s workers and poor.

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