The Wealth of the ONE PERCENT (1%)

A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. 


The wealth of the top 1% hit a record $44.6 trillion at the end of the fourth quarter, as an end-of-year stock rally lifted their portfolios, according to new data from the Federal Reserve.


The total net worth of the top 1%, defined by the Fed as those with wealth over $11 million, increased by $2 trillion in the fourth quarter. All of the gains came from their stock holdings. The value of corporate equities and mutual fund shares held by the top 1% surged to $19.7 trillion from $17.65 trillion the previous quarter.

While their real estate values went up slightly, the value of their privately held businesses declined, essentially canceling out all other gains outside of stocks.

The quarterly gain marked the latest addition to an unprecedented wealth boom that began in 2020 with the Covid-19 pandemic market surge. Since 2020, the wealth of the top 1% has increased by nearly $15 trillion, or 49%. Middle-class Americans have also seen a rising wealth tide, with the middle 50% to 90% of Americans seeing their wealth increase 50%.  READ MORE...

US Dollar DOWNGRADED

Multinational investment bank Morgan Stanley downgraded the outlook for the U.S. dollar from ‘Bullish’ to ‘Neutral’ on Friday. The global bank cited that the Federal Reserve initiating interest rate cuts led to the decline of U.S. Treasury yields. Morgan Stanley’s outlook for the U.S. dollar is now officially ‘Neutral’ and downgraded from its previous stance of ‘Bullish’. The downgrade comes at a time when the BRICS alliance is advancing to uproot the U.S. dollar’s global supremacy.  READ MORE...

Fed Coin Tracks Everyone

Rich Dad Poor Dad author Robert Kiyosaki warns that George Orwell’s novel 1984 could quickly become a reality when the US goes ahead with launching a central bank digital currency (CBDC).

In a new episode of The Rich Dad Channel, Kiyosaki says that a “FedCoin,” or a Federal Reserve-issued CBDC, will allow the authorities to become omnipresent and surveil Americans’ every move to make sure they are behaving.

“The big concern with FedCoin, the CBDC, is that we lose our privacy. That they’ll track us, they’ll track every move because they’ll know everything we’re spending money on, what we spend it on, who we give it to and all these, so it becomes George Orwell’s 1984. Big Brother will watch you via our money and that’s the problem with the central bank digital currency, or the Fed Coin…

People like me panic. I said, ‘Oh my God, they’re gonna track me. I don’t want them to know how I’m spending my money. it’s none of their business.’

But now with blockchain and all this, they can track anything they want, so our privacy goes. That’s why when George Gammon says Orwellian, he’s talking about 1984. Big Brother’s going to watch you. That’s where we’re heading.”

Kiyosaki’s comments come as the Federal Reserve explores the benefits and risks of a CBDC. During a speech on Tuesday, Federal Reserve Governor Michelle Bowman says the potential digital dollar should incorporate privacy considerations into its design. She says there should be proper measures to safeguard the privacy of businesses and individuals.

Says Bowman,
“In thinking about the implications of CBDC and privacy, we must also consider the central role that money plays in our daily lives, and the risk that a CBDC would provide not only a window into, but potentially an impediment to, the freedom Americans enjoy in choosing how money and resources are used and invested.”  READ MORE...

A Bermuda Triangle of Financial Risks

The economy is headed into a "Bermuda Triangle" of danger, and markets should brace for a crisis that could rival the 2008, according to economist Nouriel Roubini.

In a recent interview on the McKinsey Global Institute's "Forward Thinking" podcast, the top economist warned that the economy was risking another financial crisis as central bankers continue to tighten monetary policy.

Federal Reserve officials raised interest rates another 25 basis-points this week, and have hiked rates 475 basis-points over the last year to control inflation. That marks one of the most aggressive Fed tightening cycles in history, and could place the economy under three different kinds of stress, Roubini warned.

First, high interest rates could easily overtighten the economy into a recession, experts say, which reduces income for households and corporations.

Second, high interest rates means firms are battling higher costs of borrowing and waning liquidity, which weighs on asset prices. Last year, US stocks plunged 20% amid the Fed's rate hikes, with warnings from other market commentators of an even steeper crash in equities this year.

Finally, high interest rates are pressuring the mountain of debt, both private and public, that was amassed during the years of low rates, Roubini said. He pointed to bankrupt "zombies", which include households, corporations, and governments.

"It's got like, a Bermuda Triangle. You have a hit to your income, to your asset values, and then to the burden of financing your liabilities. And then you end up in a situation of distress if you're a highly leveraged household or business firm. And when many of them are having these problems, then you have a systemic household debt crisis like [2008]," he warned.

Roubini, one of the experts who called the 2008 subprime mortgage crisis, has repeatedly sounded the alarm for another crisis to strike the US economy. The scenario he envisions combines the worst aspects of 70s-style stagflation with something like the 2008 crisis, with a severe recession, stubborn inflation, and mounting debt levels bludgeoning economic growth.   READ MORE...

A Ticking Time Bomb

After Federal Reserve Chair Jerome Powell indicated the bank isn’t finished raising rates, one market expert has warned a crash could come in a matter of days.

"They're playing catch up, and while they were doing quantitative easing in 2021, inflation started to rage and now they're trying to catch up," The Bear Traps Report founder Larry McDonald said on "Mornings with Maria" Wednesday.

"Our 21 Lehman systemic risk indicators that look at equity and credit point to one of the highest probabilities of a crash in the stock market looking out 60 days," McDonald who is also known for writing a best-selling book on the Lehman Brothers collapse cautioned.

The withdrawal of capital from middle-class families has been "spectacular," McDonald argued, as the Fed continues its most aggressive rate hike campaign since the 1980s to crush decades-high inflation. Although the consumer price index has slowly fallen from a high of 9.1% notched last June, it remains about three times higher than the pre-pandemic average.

On Tuesday, Powell stressed on Capitol Hill that the central bank policymakers are prepared to pick up the pace of rate increases, as they’re expecting to go higher than previously thought.  READ MORE...

What Will A Recession in 2023 Look Like?

Recessions, like unhappy families, are each painful in their own way.

And the next one -- which economists see as increasingly possible by the end of next year -- will probably bear that out. A US downturn may well be modest, but it might also be long.

Many observers expect any decline to be a lot less wrenching than the 2007-09 Great Financial Crisis and the back-to-back downturns seen in the 1980s, when inflation was last this high. The economy is simply not as far out of whack as it was in those earlier periods, they say.

While the recession may be moderate, it could end up lasting longer than the abbreviated, eight-month contractions of 1990-91 and 2001. That’s because elevated inflation may hold the Federal Reserve back from rushing to reverse the downturn. READ MORE...

Causes of Inflation

WASHINGTON (AP) — What keeps driving inflation so high? The answer, it seems, is nearly everything.

Supply chain snarls and parts shortages inflated the cost of factory goods when the economy rocketed out of the pandemic recession two years ago. Then it was a surge in consumer spending fueled by federal stimulus checks. Then Russia’s invasion of Ukraine disrupted gas and food supplies and sent those prices skyward.

Since March, the Federal Reserve has been aggressively raising interest rates to try to cool the price spikes. So far, there’s little sign of progress. Thursday’s report on consumer prices in September came in hotter than expected even as some previously big drivers of inflation — gas prices, used cars — fell for a third straight month.

Consumer prices, excluding volatile food and energy costs, skyrocketed 6.6% from a year ago — the fastest such pace in four decades. Overall inflation did decline a touch, mostly because of cheaper gas. But costlier food, medical care and housing pointed to a widening of price pressures across the economy.  READ MORE...

Mortgage Market Resets

U.S. mortgage rates are tumbling even after the Federal Reserve hiked its benchmark interest rate by 75 basis points last week.

In fact, the average rate on a 30-year fixed mortgage has dipped below 5% for the first time since early April, a new report shows.

This is still significantly higher than last year — and the combination of high prices and interest rates is “driving a reset in fundamentals,” says George Ratiu, senior economist with Realtor.com.

“With borrowing costs setting an affordability ceiling for many buyers, home sales are dropping,” says Ratiu.

“In addition, as many homeowners rushed into summer ready to list their property and capture the equity brought about by record-high prices, inventory has improved. This brought a welcome sign in this year’s real estate markets — price cuts.”  READ MORE...