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Financial Wealth Evaporating

by John Rubino on June 3, 2012 · 26 comments

Live by the sword, die by the sword. The 1% have spent the past couple of decades accumulating an ever-bigger share of the world’s fiat-currency-inflated financial assets. Now, with the air going out of the FIRE (finance, insurance, real estate) economy, the super-rich are discovering that their stocks and bonds, like the paper money on which they’re based, are to a large extent illusory:

World’s Richest Lose $24 Billion as Adelson Fortune Drops
The world’s richest people lost a combined $24.4 billion this week as concerns over Spain’s rising borrowing costs and the sputtering American job market caused global markets to tumble.

Casino mogul Sheldon Adelson lost $2.2 billion. Shares of his Nevada-based Las Vegas Sands Corp. (LVS) fell 10.3 percent during the week. On Friday, Macau casinos reported gambling revenue rose 7.3 percent in May, its slowest pace since July 2009. Adelson, 78, is the 22nd richest person in the world, according to the Bloomberg Billionaires Index.

“We seem to be bogged down in a very sluggish pattern,” John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview on June 1. “The jobs report was discouraging, and it’s been discouraging the past several weeks. It reaffirms this fear that the economy is slowing.”

The Dow Jones Industrial Average erased its 2012 gain after U.S. employers created the fewest jobs in a year and Chinese manufacturing slowed. The Standard & Poor’s 500 Index sank 2.46 percent on June 1, to close at 1278.04 in New York, its biggest drop since November.

Yields on 10-year treasuries dropped below 1.50 percent for the first time ever Friday as U.S. payrolls climbed by 69,000, less than the most-pessimistic forecast in a Bloomberg News survey, and Chinese manufacturing grew at its weakest pace since December.

Mark Zuckerberg, 28, fell off the Bloomberg index. Shares of Menlo Park, California-based Facebook Inc. (FB), the world’s largest social-networking company, dropped 13.1 percent during the week. He is worth $14.1 billion.

Mexico’s Carlos Slim, 72, remains the world’s richest person with a net worth of $63 billion. The tycoon lost $3.1 billion during the week, as shares of his Mexico City-based telecommunications company America Movil SAB fell 3.04 percent. Bill Gates, 56, ranks second with a net worth of $58.2 billion.

What does this mean?
Even for the people profiled above, losing several billion dollars in a week has to sting. Further down the rich-guy list the losses are probably in the tens of millions, which no doubt hurts as well. So the brands and businesses that cater to people who make statements with their wealth will see fewer impulse buyers, more desperate sellers, and lower profits. They’re classic shorts, in other words.

In a few years, the marinas will be full of abandoned yachts and Lamborghini dealerships will be loaded with pre-owned bargains, just waiting for gold bugs (the new financial aristocracy) to use their coins and bars for a little conspicuous consumption.

{ 22 comments… read them below or add one }

Yay Man June 4, 2012 at 12:31 am

Yah, Man!

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paper is poverty June 4, 2012 at 2:13 am

These guys are the new money among the super elites. The old money owns land, gold, art, jewelry, artifacts, etc. Thus the term “old”: their wealth endures.

Anyway, if it’s possible to estimate someone’s wealth, they are new money (as far as super-elites go). Old money has learned to diversify by controlling wealth via third parties & by owning things all over the world, plus they hide wealth by making private acquisitions of hard assets. And even their known properties would often be hard to value. It’s the guys who are stupidly chock full of easy-to-count digital assets who make the Forbes list.

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bob D June 4, 2012 at 2:38 am

naw, the rich 1% holding more and more funny money will merely go back
to europe and do sticky finger stuff and get more and more money,
funny euros, they dont care, they just buy from those who take the
funny money the rich guy has in hand and offers as trade for a goodie
and will pay whatever asked,

the trick is to be one of the 1% otherwise
no sense crying about it,

all the loot is there on the table up for grabs,

so if you did not get your share too bad, but then the clue is to get
going and grab more of the funny money off the table before is all gone

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bob D June 4, 2012 at 2:53 am

above by rubino touts how much loot the rich guys lost last week, e.g.
lost 24 billion, or whatever, this means on paper because there is never
a loss of loot until something is sold or loot is spent

even the rich guys can account the loot spent

but they bite their fingernails for naught when they still hold the paper
that has merely gone down in price, because that is the onslaught of
the day, next month will reverse, or next year will, or whenever,

as Armstrong says price is a up and down curve, not a straight line ::
thus what goes up on mkt has to go down at some time and the reverse
is true same way, thus the rich too never lose any loot until they sell
and then their loss is only for the day on the stuff sold, too bad, but
if they smart they saved a buck or two, or a handful of shares,
to play another day and recoup their loss during the next century or so

gotta feel sorry for the rich 1%, they bet and won and held onto their
increased in value paper, and then needed shoes for baby and sold
and what they sold was at a loss, too bad

take facebutt e.g., olde uncle zukerberg said he made over $100,000
trading
commodities during summer vacations in high school,

thus he is a hardbutt trader,
thus he timed and priced his fb-ipo at his best profit price,
too bad if the big shot dummies like goldman sacks were outwitted, no biggie

they goldiesacks only win when they broker both ends of the deal i.e. they
represent and negotiate for both the buyer and seller, thus put their bet
in when the buyer seller is hot i.e. at peak price and thus goldielocks is
only winner, both buyer and seller lose on spot or when sell at loss, too bad

altho within a yr fb will be at $5 or less, remember that zucker made a big
CASH TAKE OUT PROFIT, summer vacation fun and games

even if he loses all remaining shares in fb etc, he has
made his profit and could care less if he makes more

- why? – because he is
a sociopath who gets his goodies off the fun of tampering with scoiety and
making the herd do his bidding rather than as a psychopath who gets his
goodies off making big bucks, or even small bucks, by taking the loot off
the table while buyer and seller are out to lunch, too bad

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Ian June 4, 2012 at 4:32 am

At this point in the game, they (the elite) don’t care if the value in paper dollars collapses; they now control all the major industries, and that’s what they wanted to accomplish.

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Thomas Avery Blair, EA June 4, 2012 at 5:44 am

I can only speak for myself, but it looks to me like the guy trying to make a living on Main Street USA is pretty much doomed to proverty, down to a level of existence not unlike those of the early 1930s.

Really there is very little a small business owner like myself can do but cut costs and try to hang on until there is nothing left to hang onto. Far too many of my customers are closing out their pensions and IRAs, giving the keys to their McMansions back to the lenders, and either moving in with relatives or have kept a single car (hopefully paid for) and lodge there at night.

Here in NE Florida the so-called “hobo jungles” along railroad tracks are growing in populations of men, women and children, most now scavenging and looting where they may to find a meal, something to barter with for a beer or ciggarettes. It is not uncommon to see some publicly breaking the law so the police will put them into the “3 hots and a cot” cycle at the local jails when they seriously need medical or dental attention, or simply a place where they might get a decent nights’ sleep in relative safety.

Soon the vast majority of American citizens will scream for “peace and safety” and will submit to whatever they must for a few scraps of food and a place to sleep at governmental expenses…until that system also finally collapses and the destitute in time die off.

One day at a time. Time and time again.

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bobo June 4, 2012 at 6:14 am

Lot of things seem to be happening at top level and lot of people lost their jobs and life savings.It seems most of the americans are doing part time jobs to survive.Government and wealthy don’t want to change the system and populace doesn’t seem to be aware of it.
So it seem like a very slow collapse instead of sudden collapse to me.These financial crises will be regular events after every 2 years and will continue till….i don’t know.
I think QE can be continued till infinity since treasury and fed no longer need to worry about real economy any longer…May be after some 200 years we might see the sudden collapse.

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Tony D June 4, 2012 at 11:32 am

Probably not too wise to gloat about this topic. It will happen to most people in some form over the next few years. I’m happy to be holding silver and hope to get out of this OK.

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Economicwarfare June 4, 2012 at 2:19 pm

America a land of opportunity, where the individual could take an idea, develops it. Economic Warfare, Abdelnour lays out a plan for restoring economic freedom in the United States and around the world.

Thanks,
Economic Warfare

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Alan June 4, 2012 at 5:30 pm

I never heard of “hobo Jungles”! I live in NW Florida and have seen people living in abandon gas stations. I have seen signs for protective cages to put over your A/C so it doesn’t get stolen. We are in a slow decline hopefully its slow enough to adjust and prepare in case the bottom falls out. I really feel bad for my kids.

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Rapscallion June 4, 2012 at 11:09 pm

No matter how this ends up, because the cycle will start all over again when times start getting better. (5,10 or 20 years). Who knows how many times Mother Earth has seen the demise of humankind? And we keep coming back for more….time and time again! Close to Bug-out time for me!

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whatever June 4, 2012 at 11:38 pm

If you want to “chat” with one of these downtrodden rich folks, do take note that Blythe Masters’ blog is once again accepting unscreened comments. Take time to drop Blythe a note and tell her how sorry you are that JPM is in the tank after the London CIO exploded. Commiserate about her reduced 2012 bonus and offer to buy a Silver Eagle at a local coin shop in her honor. Tell her you ‘ll call it the Blythe Eagle.

http://blythemasters.blogspot.com/

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Jason Emery June 5, 2012 at 3:25 pm

Not to be a nitpicker, but isn’t the title, ‘Financial Wealth Evaporating’ somewhat of an oxymoron?

What is wealth? In my mine, wealth is a fruit producing apple tree, a factory that produces goods in demand, an operating mine that dispenses metal at a cost less than sale price of said metal. The actual metal produced, or paper (financial) claims against it, are ‘money’. I see a big difference between wealth and finance (money).

If I buy a house, and plan to live here until the mortgage is paid off, and beyond, the concept of an underwater mortgage doesn’t really apply to me, except if I want to refinance or borrow against the equity. A house is wealth, a mortgage is a paper claim against that wealth.

The terms ‘wealth’ and money/finance/paper/store-of-value should not be used interchangeably.

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John June 5, 2012 at 10:19 pm

To be sure, some people may have “wealth” that may be evaporating, but that’s just the way things work sometimes. Somehow, though, I don’t see the 1% moving off the grid anytime soon. Even if 95% of their wealth were to disappear, they’d still have a lot. Around my neighborhood, I haven’t noticed a thing. The people next door still have their houses around the world. The family next door to them must spend $20K a month on landscaping. No one seems to be hurting.

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W G Thompson June 6, 2012 at 7:22 am

Watch for the moment when something big
goes wrong with something 90% of us
need. There are lots of candidates,
not all of them financial. Each will
require its own strategy, no two
exactly the same. Banks, water supplies
and oil get my vote. Rare earth miner-
als get no attention now, but just you
wait until Apple & Numbtel run out of them. I’d bet money, though, that it’ll end up being some stupid little thing
that nobody thought of as critical.
vty, WGT
being some

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MrSteve June 6, 2012 at 11:01 am

If I had 4 billion and lost 2. I wouldn’t be that upset. On the other hand, If all I had was 100k and lost 50k, I’d be fuming!

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Jason Carter June 7, 2012 at 2:04 am

I am seeing quite a few million dollar plus second homes listed for sale here in Naples, FL. Likely, those homes will continue to fall in value for at least the next 2 years vs the FRN and continue falling vs gold through 2020.

I would imagine the uber-wealthy have some hard-money wealth stored outside the U.S. if they have any sense. Can’t be too careful as a reworking of the entire Western financial system is on the horizon. Debt based fiat has its limits and its limits will soon be breached.

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silverbug2155 June 10, 2012 at 12:48 pm

I would not throw around the “1%” label to all who are just plain rich. For since when is it a crime to be rich and at the same also be the American Dream? It is the NY Invesment Houses now turned Banks who I prefer to call the 1%. Those who get preferential treament by the SEC,CFTC and the NY Judicial system. It is these who seem to get the perfect trade no matter what. MSM MOPE seems to have lulled everyone into sleep thinking the 1% are just the rich. Don’t believe one word of it as this is just an old trick called CLASS WARFARE……………….

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silverbug2155 June 10, 2012 at 12:58 pm

Just another note, Has anyone ever heard of live in one country, have your citizenship in another, and your money in another country? Probably getting harder to do in this day and age.

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Joanne September 3, 2012 at 9:06 am

This is a really good time to think outside the box. This guy has figured it out. I think his IQ is around 200. http://www.youtube.com/watch?v=YCSQszklNBY

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Joanne September 3, 2012 at 9:09 am

Everyone seems to wish QE could last forever. If it was not for those margin calls….that, per contract, may not be paid with currency, maybe it could. Stay tuned.

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Joanne September 3, 2012 at 9:16 am

Class warfare is a great way to get people to kill one another while the 1% EAT their CAKE in their underground bunkers. ???

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