
American billionaires have gotten $280B richer since the start of the pandemic - spking
https://www.fastcompany.com/90494347/american-billionaires-have-gotten-280-billion-richer-since-the-start-of-the-covid-19-pandemic
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theologic
I am not going to defend the wealth of the ultra rich, however, I do think
that it is important to call out that the headline is wrong. The increase in
wealth of $280B is based on a time period of March 18 to April 10. On March
18th, the market was close to its lows. The SP500 recovered approximately 4.5%
from it's lows, thus making the rich $280B richer. If you had stock at this
time, as a percentage, you would have seen a similar recovery.

If we wanted to measure impacts on the wealthy, we should measured from
February 1st, which was closer to the market high and the beginning of the
crisis in terms of knowing the world had an issue. In this case, the
billionaire class would have lost roughly $3T dollars from Feb 1 to April
10th, if my rough estimates are correct.

Of everybody, Bezos has been doing very well during this down turn because the
bulk of his wealth, Amazon, is custom made for a SIP environment. From
February 1st, his fortunes are only down 10%. However, as a class, the
billionaires have seen a clear impact to their fortunes during this crisis
well beyond Bezos smaller hit.

Actually, and I don't work for Amazon, I think Bezos has done a remarkable job
in creating value. Yes he has a ton of money, but he took extreme measures of
risk and made incredibly smart decisions. His balance sheet is very strong,
and he doesn't need a bailout to emerge very strong.

However, there is a very large class of billionaires that have made bad
decisions, ran up debt, and now get the federal government to bail them out.
These are the people that I believe deserve to face the moral hazard of
creating companies out of other peoples money. Bankruptcy sound horrible, but
in reality, if done smartly, it means that the company's assets are sold to a
bidder, and the slate is wiped clean. The people that suffer are those that
created the massive debt in the first place, and those that financed this
massive debt or bought into the system. I am not saying there won't be people
that are hurt if we allow some bankruptcies. I do question the "no large
corporation should go under." If we had a good computer sim on this, I believe
allowing poorly run companies with over leveraged balance sheets to go under
would ultimately result in a better business environment.

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AbrahamParangi
The rich are richer partly because many are in tech which is doing okay, but
mostly because the government is pumping the asset markets with trillions of
dollars in cash injections.

~~~
maxharris
I was ticked off by that, because I would have made much bigger gains had
stocks been allowed to fall to their true bottoms. Instead I was forced to buy
in (with my entire life savings) or risk losing out.

And yeah, I could have put less in, but I've been sitting on the sidelines,
waiting for a crash for years!

~~~
breitling
This being an election year likely had something to do with that decision

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cwhiz
The stock market is a government backed ponzi scheme. It only works if new
investors keep buying and the government won’t let it fail.

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maxharris
I'm 39. I lost my job last September, when the startup I had worked for the
last four years had folded.

I don't have a 401(k), and I only had $110k saved. For my entire life, I have
I kept my money out of the stock market. I only dabbled a little - only $600
of my savings came from a few shares of AMZN that I bought and sold back in
2017. The rest was from paychecks.

I started to wise up last year, when I read that the yield curve had inverted.
I didn't have a clue as to what event would trigger a drop in stocks, but I
knew something was coming. So my plan for _months_ has been to buy when most
people were panicking, and then to basically just sit on the stocks until
cooler heads prevail.

Over a two week period starting on March 16th, I put every cent of my savings
into the market. I learned on my feet, dumping the ETF shares I bought (VOO)
for only an $89 loss, going directly against diversification, in favor of
buying things I think I understand.

And you know what? I'm up 40 grand, and I really believe in the stocks I
picked. As the other automakers drive off a cliff, TSLA is positioned
perfectly (batteries, autonomy, lower TCO). And AAPL makes great products
instead of depending on advertising. (I have other positions, including a bet
on Chinese eVTOL maker eHang, but I'll keep this brief.)

What I'm doing is pretty damn risky in the short-term. I could still lose all
my gains and much of my principal. And I only have $10k in cash to live off of
if I can't find a job.

Hatred of the billionaires - whose companies invent and produce the things
that drive our living standards up - also hurts conscientious people like me.
Instead of envying the rich, focus on how to _get_ rich yourself.

NB: Gains from stocks are _not_ free money! What I'm doing feels like a full-
time job, as I continually worry about losing everything. This involves an
incredible amount of research and planning, the ability to take on an
incredible amount of risk, and that's stuff that the envious haters never see.

~~~
kennywinker
None of what you are describing requires the existence of billionaires. The
companies, the stock market, the inventions, they would all exist even in a
world where jeff bezos' net worth is only $500mil instead of $107.8bil

~~~
maxharris
The alternative is to beg a risk-averse committee (public ones are much worse
than private ones in this respect, but they are similar in this context) to
invest in big bets.

When Elon Musk went to Russia to try to buy a rocket in 2001, they thought he
was full of shit. So he went to work on building his own.

[https://economictimes.indiatimes.com/news/science/how-
tesla-...](https://economictimes.indiatimes.com/news/science/how-tesla-
founder-elon-musk-tried-to-fund-a-grand-spectacle-in-
space/articleshow/47292702.cms)

Tesla had to vertically integrate its supply chain to build the Model S
because none of the existing suppliers would take him seriously.

To the extent that they have earned their success and steered clear of
regulatory capture and the like, billionaires don't need moral justification
for existing. Having said that, those billions are used to fund big bets that
would otherwise not happen. I am glad they exist!

~~~
kennywinker
> The alternative is to beg a risk-averse committee

That is one possible alternative, not the ONLY possible alternative. For
example, if there truly is value in big bets, we could have systems in place
to allow proven individuals to make big money bets.

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emmp
I wish discussions of networth at these scales were more nuanced. If the stock
of your company goes up 50% or whatever, but you can't exactly sell more than
x% without tanking it or losing control of the company, it's just so much more
complex than you're 50% richer.

This is not to discount that they're filthy rich, and certainly enough of it
is liquid for them to buy in essence anything they want. So much discussion
about billionaires in the press seems to discuss stock fluctuations as if they
were cash injections directly into a bank account, which can't hold at those
scales.

How much could Bezos actually liquidate tomorrow without losing control or
tanking Amazon? That would be an interesting number. I don't have a clue

~~~
kennywinker
I don't think it matters? Like if bezos wants cash he doesn't have to sell
stock he can just borrow against his holdings. I don't know a lot about how
the ultra-rich operate, but I have been lead to believe that this is the
standard practice.

~~~
valuearb
Borrowing a significant amount against public company stock is extremely
risky.

~~~
CSSer
Isn’t the idea that the fed makes it basically free, and if you get in big
trouble they’ll just step in and bail you out?

~~~
valuearb
Macro can’t always save micro.

If Bezos borrows $70B against $100B in stock, then the market crashes 30% in a
week, and the fed pours money in to save it, it’s too late for Bezos, all his
shares are already in his brokers hands.

The myth of the fed bailing out public stocks is pretty silly when we’ve just
suffered through a 30% drop in a week, and a decade ago lost over 50% in under
a year.

~~~
CSSer
I'm sorry, I'm still confused. Perhaps the best question to ask you is where
does the risk come from him borrowing the money either way? He gets it for
virtually free. The fed propping up the market devalues the currency, yes, but
it just gives him more time to act and everyone else is in the same boat with
him. The way I see it, even if his stock goes down, he still has $70B and a
trivial amount of interest to pay.

Also, we should probably use a lower number, because I struggle to think of a
scenario where a single individual would actually need that much capital at
once. If we need to use someone else for a different hypothetical I'm open to
that too, because Amazon's stock has risen 46% since it hit its YTD low on
March 16th, which is 10% higher than its previous all-time high.

~~~
valuearb
First, it’s not free money, loans have to be paid back.

Ok let’s use a smaller number. Bezos owns 55M shares of Amazon trading at
$2,400 a share, worth $132B. He borrows $30B for his rocket company secured by
those shares. His borrowing agreement will require the shares backing those
loans maintain a minimum equity value, let’s say 50%.

Amazon drops over 50% to $1000 per share, dropping his shares value to $55B,
breaching that agreement. His broker will immediately sell a few million
shares to maintain his agreed equity ratio. What happens to Amazons shares
when a few million hit the market in a short period?

Amazon plunges below $500, so broker is forced to sell a few million more to
try to maintain that equity, driving Amazon into the low hundreds, leading to
the sale of more shares, etc, etc. Eventually they dump the remainder of his
shares for under $100/each just to try to recoup the last of the $30B.

He started with full control of his company, and a $130B net worth, he leaves
with no shares, no control, and $30B in cash.

This scenario is a little tortured, but it is likely a big reason why Bezos
sells shares to raise funds for BO. Borrowing risks giving a disinterested
party the right to dump your shares at a fraction of their value due to an
entirely short term event.

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andarleen
And now they are conspiring to make people believe the virus is not as bad as
it is, so workers can get back to slaving away, while the government pushes
people into their hands by providing no assistance whatsoever.

~~~
valuearb
There are no conspiracies or conspirators.

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pstuart
Ye olde crash things, use spare cash buy them on the cheap from those in
distress, lather rinse and repeat game.

~~~
maxharris
What evidence is there that "the rich" created the coronavirus pandemic? Or am
I simply misunderstanding your comment?

~~~
pstuart
I didn't mean to imply that "the rich" created this pandemic, but the part
about being able to buy up assets on the crash and be the only ones to prosper
from it.

