The laws of mathematics will never change. Only 1/200 can be in the top 99.5%tile. If smart kid from a bad background applied himself, he could get into good schools on scholarships. If he also has the social and other skills, he can get hired and work his way up the corporate ladder at a Fortune 500 company, maybe to the CEO, then get those 7 or 8 figure stock options. Likely? No. But not impossible either.
This is why redistribution of wealth must happen. Either you create BS jobs like China or you give food stamps like the USA. If not, velocity of money goes down and we end up in a Depression. The natural state is trickle up. The government must trickle down to counteract this.
If well-off people are eating their principals, it's because they're trying to live above their means. Which just proves the rich are no smarter than the rest of us. Middle-class folks buy houses they can't afford, drive cars they can't afford and buy toys they can't afford and for the most part could easily live without. Mooks in the top whatever percentile are just as stupidly addicted to status symbols. Trying to keep up with the Joneses may be the biggest back-riding monkey in the USA.
??? well-off people have principal to eat. It was money saved for a rainy day. Money in stocks doesn't need to be touched. Money that was in bonds is probably best used converted to cash and eaten.
Why so defensive? I was talking about well-off people who hadn't planned on eating their principal because they wanted to leave it to the kids, the grandkids, charity or their cats. Most people in the top 5% or whatever think they can live off their investment interest and social security and pension but for some, the bills from overspending come due and they have to reset.
The last sentence about Joneses could not be more well said. Credit card max lifestyle has become a fashion as if keeping money in the bank is an outright sin. 2008 crash anyone?
eating principal should be part of your long term plan. It has nothing to do with over spending. If you reinvested your dividends or excess funds from SSI or pension in the good times, it is now waiting for you in the lean years of practically zero interest rates throwing off nothing but inflation adjusted negative return. Like I said, it makes more sense to me to convert to cash and eat rather than rolling into shorter and shorter durations. Doesn't mean my principal is going down each month. It just means it is dependent on the market. One month it may be up, the next it may be down. My income is secure. It's all coming out of cash. My deteriorating bonds reinvest each quarter in hopes someday they may buy a bottom. But as rates rise and if the stock market appreciates they become less and less of a total asset. My problem with you is your belief that anybody who takes a hit in total net worth has poorly planned. Wouldn't it be nice if it just kept growing forever and ever no matter what happened in the market?
Exactly. The current capitalist system does not necessarily reward entrepreneurial skill, or the provision of valuable goods and services. To a large extent it rewards acquiring capital via leverage using other people's money, and then free-riding on population growth, limited land supply, favourable tax treatment, and long-term inflation under the fractional-reserve banking, plus free puts via monetary policy and socialising bailouts during the periodic recessions. In the current system, the way to get wealth is to aggressively acquire capital that is most sensitive to the ever expanding money supply (real estate, corporate stock), use as much OPM/leverage as you can safely get away with (private equity, LBOs, big mortgages), then sit back and let QE and the Fed put make you rich, while you pay zero tax year after year on the capital gains, and then in 30 years when you want to dodge inheritance tax, pay half the % tax rate on your monster unearned capital gain, as what a working stiff pays on their pitiful and diminishing wages.
that is pretty much current situation, but what if current system changes ? There is no way to exit large debt as prices will be down the moment you realise environment change. Only insurance is charcoal burner, proven well in hong kong 70% property crash this bet is for people that cant stand life and have no respect for themselves. Billions of them.
Isn't this the whole point of this website? There are some here doing this and many aspiring to do it.