{"id":115866,"date":"2017-11-03T09:54:19","date_gmt":"2017-11-03T13:54:19","guid":{"rendered":"http:\/\/countingpips.com\/?p=115866"},"modified":"2018-06-01T15:53:30","modified_gmt":"2018-06-01T15:53:30","slug":"new-gilded-age-haunts-american-middle-class","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2017\/11\/new-gilded-age-haunts-american-middle-class\/","title":{"rendered":"New Gilded Age Haunts American Middle Class"},"content":{"rendered":"
November 3, 2017<\/div>
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By WallStreetDaily.com<\/u><\/a> \"compounding<\/p>\n

\"LouisDear Reader,<\/p>\n

Compounding interest is a force of nature.<\/p>\n

It\u2019s such a daunting force, in fact, that it\u2019s chiefly responsible for 99% of the wealth residing in the hands of 1% of the population.<\/p>\n

There are now 1,542 billionaires living among us.<\/p>\n

Last year, another 145 multimillionaires cracked the billion-dollar mark.<\/p>

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How\u2019d they do it?<\/p>\n

Sure, some shrewd investments were made \u2014 but the power of interest on interest makes such fortunes bigger and bigger.<\/p>\n

We last saw wealth so ferociously concentrated at the top in 1905. The Guardian<\/i> sums it up:<\/p>\n

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The world\u2019s super-rich hold the greatest concentration of wealth since the U.S. Gilded Age at the turn of the 20th century, when families like the Carnegies, Rockefellers and Vanderbilts controlled vast fortunes.<\/i><\/p>\n<\/blockquote>\n

The problem isn\u2019t going away.<\/p>\n

Here\u2019s what you need to know now.<\/p>\n

The Power of Compounding Dividends<\/h3>\n

\"JonathanFew people outside of the super-rich can actually conceptualize a billion dollars.<\/p>\n

I\u2019m talking about not just having that kind of money but knowing what it means to taste true wealth.<\/p>\n

And many Americans are missing out on their best chance to get there\u2026<\/p>\n

Allow me to explain.<\/p>\n

The stock market is the fastest way for the middle class to get rich.<\/p>\n

The S&P 500 has risen by about 275% since the start of current U.S. bull market in March 2009.<\/p>\n

And that\u2019s not even including dividends.<\/p>\n

With dividends, stocks have more than tripled over the same period.<\/p>\n

Yet fewer than half of Americans have even a penny invested in stocks, according to a recent Bankrate Money Pulse study.<\/p>\n

That\u2019s a travesty!<\/p>\n

To be sure, many investors got burned in the financial crisis.<\/p>\n

But the wealth-building powers of stocks and dividend reinvestment are far too great to ignore.<\/p>\n

Consider that a mere $1,000 investment into the S&P 500 just 10 years ago \u2014 after growing about 5% annually \u2014 would be worth $1,677.52, excluding dividends.<\/p>\n

Here\u2019s where things really get nuts\u2026<\/p>\n

Take that same $1,000 investment into the S&P in 2007 and reinvest the dividends\u2026 and the total return comes out to $2,050.63.<\/p>\n

That\u2019s more than double your money in just 10 years \u2014 and that\u2019s including losses incurred during a major recession.<\/p>\n

Over the same period of time, you\u2019d have been lucky to make even 1% in a savings account or 2% in a U.S. Treasury.<\/p>\n

Bottom line: Investors may never make a billion dollars on their holdings. But by simply investing in stocks and reinvesting the dividends, you can get a lot closer to that kind of wealth than you think.<\/p>\n

An Unfair Advantage<\/h3>\n

\"MartinThe principal driver behind the new Gilded Age is a decade of ultra-low interest rates.<\/p>\n

This has pushed up asset values to unsustainable heights and made it far too cheap and easy for the rich to borrow.<\/p>\n

Someone in the middle class, with few assets, can\u2019t really take advantage of ultra-low rates. Sure, you could refinance a mortgage. That\u2019s not going to make you rich, though.<\/p>\n

If you\u2019re rich, with lots of assets, you can borrow against those assets. That allows you to buy more <\/i>assets and ride the rocket to the moon.<\/p>\n

Doing so doesn\u2019t make you a bad person. Just look at our president. Trump suffered six bankruptcies from 1991\u20132009 but has since ridden the asset bubble to glory.<\/p>\n

Now, if funny money just made Trump rich, we could be happy for him. The problem is, it makes us poorer too.<\/p>\n

When interest rates are so far from their natural level, all kinds of bad investment decisions are made \u2014 causing productivity growth to go to hell.<\/p>\n

With no productivity, there are no increases in pay. So nobody except the ultra-rich ever gets any richer.<\/p>\n

We\u2019re not alone, either. We\u2019ve seen this happen in the U.S., Britain, EU and Japan as well.<\/p>\n

Now U.S. interest rates are beginning to creep up, and maybe productivity growth will return too. We\u2019ll see.<\/p>\n

Ultimately, the solution is to push interest rates up to their natural level of about 3% above inflation (at full employment) and let the chips fall where they may.<\/p>\n

Stock and asset prices will initially collapse, so you should have a healthy holding of put options. After that, provided we don\u2019t have crazed regulators in government, the markets will adjust.<\/p>\n

Overleveraged billionaires will go bust (sorry, Mr. President!). Same goes for companies like AT&T, Boeing and GE \u2014 all of which have bought back stock too enthusiastically.<\/p>\n

The rest of the people will eventually dig themselves out of the rubble and unearth a healthy economy. One with rapid productivity growth and moderate asset prices.<\/p>\n

It may not happen soon. But it will happen.<\/p>\n

If You Can\u2019t Beat \u2019Em\u2026<\/h3>\n

\"LouisTalk about presenting two opposing outlooks on the situation, Jonathan and Martin!<\/p>\n

In this case, the middle ground is instructive, as is the common thread among both of my colleagues.<\/p>\n

Notice that regardless of the outlook \u2014 bullish or bearish \u2014 both advocated investing.<\/p>\n

You have to be in the markets to win in the markets!<\/p>\n

Even in small increments, the payoff can be material to the middle class.<\/p>\n

Our sights shouldn\u2019t be set on becoming the next billionaire, though. Instead, we should focus on leveraging the resources (big or small) that we\u2019ve all been given.<\/p>\n

If we actually take time to track our spending, we\u2019ll be amazed how much \u201cexcess\u201d capital we can find to invest.<\/p>\n

The key is first deciding <\/i>to invest \u2014 and then committing to stay the course for decades.<\/p>\n

Success, like interest, compounds over time, no matter how nasty the global economy gets for brief periods of time.<\/p>\n

So don\u2019t bemoan the new Gilded Age. Join it!<\/p>\n

Ahead of the tape,<\/p>\n

Louis Basenese
\nChief Investment Strategist, Wall Street Daily<\/em><\/p>\n

The post New Gilded Age Haunts American Middle Class<\/a> appeared first on Wall Street Daily<\/a>.<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

By WallStreetDaily.com Dear Reader, Compounding interest is a force of nature. It\u2019s such a daunting force, in fact, that it\u2019s chiefly responsible for 99% of the wealth residing in the hands of 1% of the population. There are now 1,542 billionaires living among us. Last year, another 145 multimillionaires cracked the billion-dollar mark. How\u2019d they […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-115866","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/115866","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=115866"}],"version-history":[{"count":3,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/115866\/revisions"}],"predecessor-version":[{"id":115878,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/115866\/revisions\/115878"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=115866"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=115866"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=115866"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}