2009 April 29 Wednesday
The Rich Are Worried About Economic Depression
Those poor rich people, woe is them.
The "Survey of Affluence and Wealth in America," set to be released Wednesday by American Express Publishing and Harrison Group, will show that 53% of the nation's wealthy are now worried that they could run out of money, in large measure because many of the respondents fear the country is headed for an economic depression.
Except they are as happy as puppies.
"The irony is that despite the worries and the cutbacks and having to be more resourceful or spend less to make their money go further, the percentage of families reporting themselves to be very happy is up," Taylor added. "Two-thirds of the families say they are very happy, which is up since 2007."
Taylor believes that represents a turn toward optimism. Tuesday's consumer confidence numbers generally showed a big step up in confidence, although the overall numbers remained in negative territory. See Economic Report.
What gives? Do they enjoy worry? Or are they happier when they feel more helpless? Or what?
From the first article:
If you benchmark yourself against the richest man in town -- and that is frequently what wealthy people do -- you are going to feel mighty poor in the best of conditions.
So its pretty obviously the case that they are happy as puppies because they are benchmarking themselves against the rest of the population.
Well, I expect the wealthy to be long gold.
I live silver though.
"Do they enjoy worry?"
Higher IQ , higher future time orientation people are more likely to focus on public policy and international affairs than lower IQ less wealthy individuals.
If the nation is having difficulties, then the High IQ/High income business class types will become more worried because they are paying close attention to what's going on rather than the folks watching American Idol.
With less money and people have fewer choices they have to make. It probably simplifies a lot of people's lives to scale back on consumerism.
Why wouldn't they be happy, the government has come in and compensated them for their poor investment decisions.
I actually read the links Randall posted now. I wonder if the wealthy have liquidated their equity positions, or they collectively still have a large long position on it. (Regarding metagame considerations; shorting equity indices would have an even better risk/reward profile if they still have large long positions; I suppose some would lose their nerve when the equity markets fall again). I also thought that they would be more concerned about protecting their wealth from the alleged invitability of hyperinflation, so they would use precious metals as a unit of account instead of fiat currency. They might have a slightly negative intratemporal discount rate as they might be concerned about passing their wealth on to their children. (I agree with the hypothesis posed here.) Because of this low discount rate, they are willing to take paper losses in precious metal volatility, but they will at least keep their unit of account (precious metals) even if they will pay a small premium to hold a long position (the equivalent of storage.) I found it surprising that precious metals wasn't mentioned in the article.
"I found it surprising that precious metals wasn't mentioned in the article."
Yeah, no mention of brass and lead at all....
I said precious metals... most investors consider them an alternative store of value. They do not consider base metals to be a store of value.
Aki must not be from around here if he doesn't understand why brass and lead are precious metals.