Wealthiest Families & the stock market

The top 5% of US households own 71% of US equities, while the top 20% of US households own 93% of US equities (source: Survey of Consumer Finances, Federal Reserve Board). 

CEO median compensation reaches $13.7 million

 For heads of the 300 largest companies, CEO compensation surged to $13.7 million (up from $12.8 last year) in 2020 when the rest of the nation was suffering dramatic financial losses, according to The Wall Street Journal (4/12/21). Just one more example of the growing gulf between the top earners and the rest of us. 

for example, Norwegian Cruise Line's CEO Frank Del Rio doubled his pay to $36.4 million during the same year (2020) that the company lost $4 billion after cruises were cancelled and revenue's plummeted 80%. How does that make any sense?

Income inequality is bad enough, but wealth inequality is way worse

"The richest 1 percent now owns more of the country’s wealth than at any time in the past 50 years." Writing for The Washington Post, Christopher Ingraham explains:  "Today, the top 1 percent of households own more wealth than the bottom 90 percent combined. That gap, between the ultrawealthy and everyone else, has only become wider in the past several decades." Using the analogy of equally distributing slices of pie, Ingraham explains the results of research by economist Edward N. Wolff, published in his new book: "A Century of Wealth in America." 

Extreme wealth and income inequality is bad for the economy. What can we as a nation due to reduce wealth inequality and its perverse negative effects?

"If you were designing a tax plan to reduce the extreme inequality in the United States, you'd probably try to find ways to redistribute some of the wealth from the richest households to the poorest ones. But the Senate GOP tax plan does precisely the opposite of that, according to the CBO: In the short term the richest households get the biggest tax cuts, while longer term the taxes of the poorest households actually increase."

Check it out: https://www.washingtonpost.com/news/wonk/wp/2017/12/06/the-richest-1-percent-now-owns-more-of-the-countrys-wealth-than-at-any-time-in-the-past-50-years/

Wealth inequality is bad and getting worse

Writing May 5, 2019 in The Washington Post, economist Robert J. Samuelson explains how the gap between rich and poor is getting worse in America. It's not about income... it's about the incredible growing wealth disparity.

The $100 trillion question: What to do about wealth? and... what is the current administration doing about the problem?

Summarizing data from a recent Federal Reserve board study, Samuelson concludes: "The study’s most striking feature is how gigantic the numbers are."  source: https://www.washingtonpost.com/people/robert-j-samuelson/?utm_term=.551849e3978d

The distribution of  wealth is highly skewed and getting worse:

"In 2018, the net worth of the wealthiest 10 percent of Americans represented 70 percent of household wealth, up from 61 percent in 1989, the study’s first year. Even among this upper crust, wealth became more concentrated. Over the same years, the share of the top 1 percent went from 24 percent to 31 percent."

"The bottom 50 percent of U.S. households had virtually no net worth, the difference between assets and liabilities, mainly loans. Their wealth share tumbled from 4 percent of total wealth in 1989 to 1 percent in 2018."

"The big losers over the past 30 years could be termed the broad middle class: those with wealth starting at the median (the midpoint of all wealth) and going to the 90th percentile. Their share of household wealth, though still sizable, has dropped from 35 percent in 1989 to 29 percent in 2018."

"The truth is that we still don’t fully understand the surge in economic inequality of the past three decades. The populist temptation is to blame greed, but this is not a satisfactory explanation because greed is hardly new. It seems virtually certain that, sooner or later, taxes on the well-to-do and wealthy will go up. That’s where the money is, and that’s where the biggest private gains have been."

Maybe it is time to revisit the recent tax reform legislation. 

How did you fare under the new income tax law?

Big Firms Pay CEOs $1 Million a Month

Writing in The Wall Street Journal (3/18/19) Theo Francis explains that job growth has helped more Americans find employment while also helping corporate CEOs earn $1 million/month. Yes, per month. According to WSJ analysis, "median compensation for 132 chief executives of S&P 500 companies reached $12.4 million in 2018, up from $11.7 million in 2017." The median raise for CEOs was 6.4% even though most of these companies reported disappointing returns for shareholders.
Compensation for the head of Walt Disney corporation was $66 million last year, an increase of 80% over 2017. Yes, an 80% increase in pay!
And you can bet who has the ear of our politicians; it's not you or me.

Income Inequality Explained in a Cartoon and Why the Disparity Matters (and is getting worse)

Alvin Change explains: "Something massive and important has happened in the United States over the past 50 years: Economic wealth has become increasingly concentrated among a small group of ultra-wealthy Americans."
"You can read lengthy books on this subject, like economist Thomas Piketty's recent best-seller, Capital in the Twenty-First Century (the book runs 696 pages and weighs in at 2.5 pounds). You can see references to this in the campaigns of major political candidates this cycle, who talk repeatedly about how something has gone very wrong in America."
"Donald Trump's motto is to make America great again, while Bernie Sanders's campaign focused on reducing income inequality. And there's a reason this message is resonating with voters:
It's grounded in 50 years of reality."
"You can see lots of discussion and debate and political fighting over who has wealth in America, and whether that should change. Or, you can look at the the cartoon below to understand how the distribution of wealth has changed in America, and why."

Check out:

This Cartoon Explains How the Rich Got Rich and the Poor Got Poor

https://getpocket.com/explore/item/this-cartoon-explains-how-the-rich-got-rich-and-the-poor-got-poor

As a family economist I actually read Thomas Piketty's massive book but don't recommend it for the faint of heart. Instead, a much more readable and digestible book is Joseph E. Stiglitz's The Price of Inequality: How today's divided society endangers our future. Published in 2012 (2013 in paperback) before the last presidential election. And it's even more relevant today.Stiglitz won the Nobel prize in economics.

How does my networth compare to other Americans?

Check out your status using the

Net Worth by Age Calculator for the United States

The Squared Away Blog explains: "An online tool tells you where you stand financially by stacking up your net worth against other Americans.
The calculator compares a family’s net worth – financial and other assets minus debts – with all other U.S. families. Homeowners can choose to include the value of their home equity in their total net worth – or not." Read more at:  https://squaredawayblog.bc.edu/squared-away/how-does-your-wealth-compare/

Check out how your wealth compares:
https://dqydj.com/net-worth-by-age-calculator-united-states/
Also find out:

What is the Average Net Worth By Age Group in America? (And Median Net Worth by Age)

Note the incredible differences between average wealth and median (mid-point) wealth (much higher than average due to the huge inequality gap in our country.

Moody's says gap between rich and poor threatens U.S. Triple-A bond rating thanks to republican tax cuts

For all virtually all of the last 100 years, the U.S. government has had the lowest cost to borrow money (which is a continual process) of any country in the world. Now the wealth gap threatens to destroy that track record and make borrowing more expensive and thus increase the deficit. On Oct. 8 Bradley Keoun, writing for TheStreet.com, reported that President Trump's $1.5 trillion of tax cuts are forcing the U.S. Treasury to cover the gap by borrowing money in unprecedented amounts. This huge increase in borrowing threa=tens our country's creditworthiness.

The tax cuts have blown a huge hole in the federal budget, increasing the deficit to the highest amount in 6 years and skyrocketing the national debt past $21 trillion.
Credit analysis firm Moody's Investor service concluded that the growing gap between rich and poor is threatening our nation's credit rating.

Remember when the Republicans used to be the deficit hawks? No longer.
U.S debt has been considered the safest investment. While the interest rate is low, the likelihood of getting repaid was always 100%. Now that certainty is at risk.

According to Moody's "the $1.5 trillion in tax cuts have made the rich richer, while forcing the less-wealthy to cover a bigger share of the cost of government."
Both income inequality and wealth inequality are growing. 
And guess who owns the lion's share of our debt... yup, China.

"You might be among the world’s richest people and not realize it"

"Compared with the rest of the world, a middle class American" is... wealthy. "To be among the wealthiest half of the world last year, an adult needed to own only $3,210 in net assets." To compare yourself to other Americans, "the median American family had $81,000 in net worth in 2013."
The majority (71%) of the global population -- collectively own only 3% of global wealth, according to Ana Swanson, writing in The Washington Post: https://www.washingtonpost.com/news/wonk/wp/2016/01/21/you-might-be-among-the-richest-people-in-the-world-and-not-realize-it/

10 Charts to explain the economy

Frustrated with your inability to save? It may not be a factor related to your character but more an effect of stagnant wages. Echeck out the Top 10 Charts of 2104 to help understand why we need an increase in the minimum wage as well as the cost of the growing wage & wealth inequality, courtesy of the Economic Policy Institute:  http://www.epi.org/publication/the-top-10-charts-of-2014/?utm_source=Economic+Policy+Institute&utm_campaign=49769a8560-Top_Charts_201412_18_2014&utm_medium=email&utm_term=0_e7c5826c50-49769a8560-55890353

Wealth Gap Widens: 2000-2011

The widening wealth gap is a political as well as economic issue with broad ramifications for American society. 
"According to  Distribution of Household Wealth in the U.S.: 2000 to 2011 and associated detailed tables, median household net worth decreased by $5,124 for households in the first (bottom) net worth quintile and increased by $61,379 (or 10.8 percent) for those in the highest (top) quintile (Figure 1). Median net worth of households in the highest quintile was 39.8 times higher than the second lowest quintile in 2000, and it rose to 86.8 times higher in 2011." Although the political factions in our country hold widely differing views as to whether or not this is a problem, and if so, how to address it, improving the quality of K-12 education, which certainly requires a larger financial commitment, is certainly one part of a complex picture. However, all the anti-tax rhetoric stands in the way of solving a critical issue facing the U.S.

The Dark Side of the Personal Finance Industry

New York journalist Helaine Olen’s new book (published January 2013), Pound Foolish: Exposing the Dark Side of the Personal Finance Industry has garnered praise – from The Economist, The New York Times, and others – and criticism from the industry.

According to Olen, "I don’t have anything against all financial advisers, but a lot of people are selling themselves as experts in things they are not expert in. I believe that their commissions are almost inherently conflicted. I also believe that the minute you start selling things as, “I can protect you.  I can do better than…,” you’re getting into dangerous territory, because it’s simply not true.” read the interview at http://fsp.bc.edu/olen-explains-%E2%80%98pound-foolish%E2%80%99/
Olen continues "the idea that we will all be okay if only we learn proper money management – is an excuse to blame people for their troubles.  Since the late 1970s, a massive inequality issue has opened up. We have very little class mobility in our country. We know that our net worth plunged by 40 percent in 2007-2010.  To turn around and tell people that their issues are all their fault is naïve at best and it’s an outright lie at worst." Read Olen's book for more perspective on our economy and the personal finance industry.