by Doctor Science
William Holbrook Beard, The Bulls and Bears in the Market. I can't figure out if the bears in this close-up:
are looking for more money inside the bull they've eviscerated, or are angry because it turned out to be a hollow, bubble-y sort of bull.
In July Bill Domhoff, sociologist at UC Santa Cruz, posted An Investment Manager's View on the Top 1%, written by a long-time acquaintance who works in the business (and who wants to stay anonymous, not surprisingly). He emphasizes that there are two distinct sets in the "top 1%":
The Lower Half of the Top 1%The top half of one percent, and especially the top tenth of one percent, are a different story:
The 99th to 99.5th percentiles largely include physicians, attorneys, upper middle management, and small business people who have done well.
...Since the majority of those in this group actually earned their money from professions and smaller businesses, they generally don't participate in the benefits big money enjoys. ... Most of those in the bottom half of the top 1% lack power and global flexibility and are essentially well-compensated workhorses for the top 0.5%, just like the bottom 99%.
The Upper Half of the Top 1%The important point here is that even the people who look like they've made their money from a business outside the financial industry -- the Bill Gates or Steve Jobs types -- really haven't. They've made their money from *stocks*, not from selling things or services.
Membership in this elite group is likely to come from being involved in some aspect of the financial services or banking industry, real estate development involved with those industries, or government contracting. Some hard working and clever physicians and attorneys can acquire as much as $15M-$20M before retirement but they are rare. Those in the top 0.5% have incomes over $500k if working and a net worth over $1.8M if retired. The higher we go up into the top 0.5% the more likely it is that their wealth is in some way tied to the investment industry and borrowed money than from personally selling goods or services or labor as do most in the bottom 99.5%. They are much more likely to have built their net worth from stock options and capital gains in stocks and real estate and private business sales, not from income which is taxed at a much higher rate. These opportunities are largely unavailable to the bottom 99.5%.
... Folks in the top 0.1% come from many backgrounds but it's infrequent to meet one whose wealth wasn't acquired through direct or indirect participation in the financial and banking industries. One of our clients, net worth in the $60M range, built a small company and was acquired with stock from a multi-national. Stock is often called a "paper" asset. Another client, CEO of a medium-cap tech company, retired with a net worth in the $70M range. ... One client runs a division of a major international investment bank, net worth in the $30M range and most of the profits from his division flow directly or indirectly from the public sector, the taxpayer. Another client with a net worth in the $10M range is the ex-wife of a managing director of a major investment bank, while another was able to amass $12M after taxes by her early thirties from stock options as a high level programmer in a successful IT company.
It's not just the wealth from the stocks of their companies, either. This chart of income sources for the top hundredth of a percent
shows that dividends -- direct shares in profits -- have become much less important since the 1970s, while "wages" have become much more important. It looks as though these extremely wealthy people are working for their money, doesn't it?
Except that "wages" includes stock options and bonuses, which are often based on stock price performance. So wealthy people who aren't getting money from S-corporations, sole proprietorships, and partnerships are getting almost all their income from capital stock/ real estate gains, and from stock-indexed wages.
And the stock market isn't really for investment, it's for *speculation*. "Give them money and get a percent of the profits" is be investment, because you (the wealthy person) are tying your income to how much money the company actually takes in for doing things. "Buy low, sell high" is speculation, because how much money you get doesn't have to depend on anything the company actually sells or does -- all that matters is what potential buyers think, and their confidence that the stock will continue to be worth more in a market of people who think like them.
No wonder so many of our Very Serious Leaders keep saying "confidence" is of overwhelming importance, more important to businesspeople than things like "are there enough customers?" -- even though actual businesspeople are most concerned about lack of demand.
Speculation is driven by confidence, and the more large corporations are run by and for the interests of speculators, the more confidence -- instead of customers -- will seem to be truly necessary for business success. For gamblers, the Confidence Fairy seems real:
Fortune and her Wheel, from an illuminated manuscript of Boccaccio.
and marketing -- in the form of "if you believe in fairies, clap your hands" -- is the most crucial element for success.
In any case, it looks as though the wealthiest and most powerful people in our society, regardless of what line of work they claim to be in, are all really in finance and Wall Street. The rest of us are the 99.9%.