the finance industry / wall street

Well, context is everything right?

No

There's also the fact that if you are rich, you were probably born rich, and have rich parents, rich friends, rich extended family, etc. While the safety net is being pulled out from under the poor, this particularly safety net is pretty much built into being rich and will never go away.

here is a lot of information about annual income and debt

http://www.federalreserve.gov/pubs/bulletin/2012/pdf/scf12.pdf

especially pp56-73

― I will forlornly return to my home planet soon (dandydonweiner), Wednesday, May 1, 2013 11:33 AM Bookmark Flag Post Permalink

This shows that people in the 90th percentile and up have BY FAR the lowest leverage ratios, so I'm really not sure what you're getting at

am I reading page 59 wrong?

size of debt in dollars is not really a useful measure without comparison to income and assets.

That aside, there's an awfully large amount of secured debt from "other" residential property (if I'm reading that right) which I guess means either second homes or rental property for income. Worst thing that happens if they can no longer service that debt is they lose a vacation home or a rental property.

xp and that info is conveniently provided on p. 72, where we get lots of great information about debt burden to income ratios. People in the 90th percentile and above have about half the ratio of every other decile group. In addition, the percentages of people in the top decile with debt payments making up more than 40 percent of their income, and people in that group who are past due on debt, are tiny compared to the other groups.

smarten up Don

right, as I noted above there is usually an advantage to net worth (and as Adam elaborated on) but that doesn't mean that rich people aren't leveraging themselves like crazy. It just means that for whatever percent of the top (3% ? I dunno, you name it) there is likely a significant safety net that they can likely mitigate most unplanned, negative financial situations.

But that leaves millions of others with a relatively high net worth who are certainly leveraged by their homes and other secured debts. You know that. Not sure why you're trying to fight me over how leveraged most rich people are.

well according to the doc you sent me rich people are like half as leveraged as everyone else!

Don suggested that most rich people live check to check and that does not seem right.

kind of depends what you think is rich--top 10% is $148k of annual income on up and it would seem reasonable that above 5% ($208k on up) probably has an effect on the leveraging. And the halving point starts at $107k hh per year. Maybe it would be better if I defined rich better.

Honestly, I found it odd that aggregate debt was within a few percentage points for all 70% of the country. And, that, it was only around 20%. So in that metric, I'm totally fucking wrong. Like, wayyyyyy wrong. Like always, right?

why would people in the top 5% be more leveraged than people in the top 10-5%?

didn't type that well; what I meant was that the amount of leverage between the top 10% and 5% is probably significant. I am curious to where it really starts dropping because that to me would be an indication of where the truly "financially independent" households like. Sorry I have been terribly sloppy today and wasting so much bandwidth.

I really thought that aggregate debt for most households would be in the 30%+ range. Can't get my head wrapped around that.

I think what's really striking is that there's a huge dropoff in leverage from the 80-90 group to the 90-100 group, whereas 70-80 is pretty similar to 80-90. But I guess that makes sense if the 70-80 is x income to y income, the 80-90 is y income to z income, but the 90-100 is z income to infinity.

Does it say whether those ratios are median ratios, within the decile? Is the ratio listed exactly the 95th percentile mark?

anyway, even if you broke down that top decile further I don't think you'd find a significant percentage of those people were MORE leveraged than most Americans.

well, the point was more if we pull the super rich out of the equation (as affable outliers!) then are the rich still leveraged like the rest of us (by percentage of aggregate debt!)? Honestly, with debt levels around 20% for even 70% of households, my argument about people being leveraged seems HORRIBLE. I need to find a new metric. Or invent one.

I didn't read the details of the breakdown that well. I think it's possible to download the whole table of data and then maybe we could (likely?) slice and dice by whatever we wanted and create our own income stratas.

I thought I'd read before that typical HH debt target (for mortgage purposes and including mortgage) was somewhere around 36%. Was very surprised to see aggregate debt levels below that.

Keep in mind that those debt levels are heavily skewed by renters. Mortgages are going to be by far the biggest ticket debt item for a family, and a family that doesn't have a mortgage is going to have a much tinier debt burden than an equal income family with none. That's why you see relatively even debt-service-to-income ratios, yet the percentages of lower income families with greater than 40% of their income going to service debt are MUCH higher.

yes, I was thinking I could go get a table of home ownership and then manually factor that in but it became too much of a hassle. And really this discussion point was supposed to be essentially about cash flow...so rents are related if I'd not have strayed over into debt.

But still, I would probably assume that at least the middle income strata had a high degree of home ownership, and that those home owners likely were near the limits of their loaning ability, and that therefore the 20% was low.

it's a cliche, but that almost seems like an onion article

not to derail or be too lol obvious, but the kickoff to this conversation seems rather liberally sourced from this chestnut

the orig. article seems a bit dry f/ satire, though even the lonely-at-the-top sentimental horseshit w/ Oliver James waxing on the simple (and apparently inexpensive) joys of one's student years is ripped straight from the novel. (OTOH "Sarah Butcher" seemed f/ at least a few minutes to have effectively pitched the noxious notion of the upper strata as just another besieged bourgeois outpost affected terribly by the financial shenanigans of ~mysterious others~).

/parenthetical bs

http://www.huffingtonpost.com/2013/05/01/alexis-goldstein-jim-himes_n_3196206.html#slide=more34585

http://blogs.wsj.com/moneybeat/2013/05/02/crude-broker-talk-surfaces-in-london-trading-probe/

http://news.efinancialcareers.com/us-en/134725/how-to-tell-your-wife-or-husband-you-got-a-bad-bonus/

"bad bonus"

https://www.youtube.com/watch?v=TQXuazYI_YU

Was that "bad bonus" piece for real?

this is amazing:

3. Don’t accuse your wife or girlfriend of being a hypocrite
One equity researcher who said he hasn’t had a bonus for five years, advised bankers to resist the temptation to criticize wives’ reactions to the size of their bonus

“My own experience is that a lot of wives and girlfriends of investment bankers don’t necessarily like the fact that their partner is in banking – they’d rather be with someone who’s doing something much more worthy. Spouses pretend that they don’t like the money and the long hours, but the fact is that they also love the expensive holidays and meals out.

“Banking partners are therefore a bit hypocritical. It’s tempting to point this out when a bonus doesn’t come through. I’ve never actually said that to my girlfriend though as it would just cause an argument,” he added.

http://www.nytimes.com/2013/05/06/opinion/a-disappointing-debut-at-the-sec.html?nl=todaysheadlines&emc=edit_th_20130506&_r=0

Mary Jo White's initial review for early actions taken

http://www.forbes.com/sites/davidmarotta/2013/04/21/is-a-3-million-ira-sufficient-for-retirement/

Forbes defending the rich folks rights to enormous IRAs, and neo-con Hyatt at the Post even thinks Forbes is wrong. This will never pass anyway

http://www.washingtonpost.com/opinions/fred-hiatt-obamas-modest-proposal-to-cap-retirement-entitlements/2013/05/05/de9eea7a-b402-11e2-bbf2-a6f9e9d79e19_story.html?tid=pm_pop

wow so much wrong with that Forbes article

forbes blogs are like bleachercrowd / gawkers new thing etc. etc.

the crowdsourcing of linkbait

http://blogs.forbes.com/help/how-do-i-become-a-contributor/

ilx should start a forbes blog

Assuming 4.5% inflation, a 20-year-old starting to save for retirement today will need a $9.97 million portfolio value at age 65 to have a lifestyle of $60,000 in today’s dollars.

We haven't had inflation of 4.5% or close to it since the early 1990s.

the bigger point though is that Obama's proposal is not a cap on how much you can save for retirement, which is what the article makes it sound like

this is like finding fault w/ a comment for a yahoo news article

Is it really? The guy has written dozens of pieces for Forbes and has his own wealth management firm

yes...in charlottesville virginia

with 66 twitter followers
https://twitter.com/MarottaOnMoney

What I also don't get about the cap proposal -- traditional IRAs already have a tax-free contribution limit per year, so what would the cap change?

again he has not written '66 pieces for forbes', forbes allows basically anyone to start a forbes blog

the seeking alpha of money magazines

Don't care about a Forbes blog, or the W, Post editorial re a Forbes blog, here's the USA Today(!):

The president's proposed budget would cap IRAs and other retirement plans at $3 million, but it could fall below that in future years.

It's not easy to get more than $3 million in a retirement account, which includes IRAs, 401(k) and 403(b) plans. Currently, the cap would affect just 0.03% of retirement accounts, says the Employee Benefit Research Institute.

But despite the above:

Capping IRA could deter savings without helping reduce the deficit, Ronald O'Hanley, president of Asset Management and Corporate Services at Fidelity Investments, argued at a speech to the U.S. Chamber of Commerce Wednesday. Most retirement programs are tax deferrals, not tax breaks, he argues: Savers pay taxes when they withdraw. "Not only will such a proposal further challenge retirement savings, it will not generate additional revenue," he says.

http://www.usatoday.com/story/money/personalfinance/2013/04/10/presidents-budget-plan-iras-cap/2071529/

Sure buddy.

http://news.efinancialcareers.com/uk-en/141013/goldman-sachs-hires-particle-physicist-from-the-large-hadron-collider/

New rules to regulate derivatives, adopted last week by the Commodity Futures Trading Commission, are a victory for Wall Street

That's from the New York Times

http://truth-out.org/video/item/16500-banks-win-big-as-regulators-refuse-to-rein-in-700-trillion-derivatives-market

A discussion of it from elsewhere

Upthread there are comments from Hurting 2 and others about how you can't charge Wall Street folks for actions that are not crimes.

This won't help:

May 24 New York Times

DEALBOOK
Banks' Lobbyists Help in Drafting Financial Bills
By ERIC LIPTON and BEN PROTESS
In a sign of Wall Street's resurgent influence in Washington, bank lobbyists are aiding lawmakers in drafting legislation that softens financial regulations

'lobbyists help draft bills' is not a news story

It's news to the extent that the details go counter to the Obama and Democratic party PR meme re enforcement of Dodd-Frank (yep I know its only been pr and never really true). I was gonna add that myself, but it's worth mentioning how its still going on, business as usual, although that's no surprise either.

http://dealbook.nytimes.com/2013/05/23/banks-lobbyists-help-in-drafting-financial-bills/

One bill that sailed through the House Financial Services Committee this month — over the objections of the Treasury Department — was essentially Citigroup’s, according to e-mails reviewed by The New York Times. The bill would exempt broad swathes of trades from new regulation.

do you know what that means

it means absolutely nothing because the bill will not be passed

Representative Maxine Waters, the ranking Democrat on the Financial Services Committee, was among the few Democrats opposing the change, echoing the concerns of consumer groups.