Stocks are up but 80% of the value is held by the richest 10%

It has to do with earned income tax vs capital gains tax, sales taxes, out-of-balance property taxes, educational opportunity, legal recourse, inheritance, etc.

P.S. I agree with your conclusion, even if your argument is weak.

Question. Be honest. How old were you in 2008 ?

Savings accounts are not stupid if your life savings accumulated over many years is only $2,000 or $3,000 and you never know when you'll need to tap into them for an emergency.

Uh, no it's not.

"The market is not only for millionaires and billionaires. "

Yes, it most definitely is.

And most people who 'know finance' - know this.

The market is 'rigged', or rather, you are at such a disadvantage that it's effectively rigged and doing retail trading is essentially a losing game.

Unless you are pursuing a broad diversification strategy (i.e. buying gold, commodities, real-estate funds etc.) in order to preserve your wealth, you really are not going to win.

Retail trading entities, like ETrade are kind of a scammy thing - not directly per se - but they're selling you as fish to sharks (i.e. hedge/big funds).

If you want to make money playing stocks - you have to 'know more' than the person on the other side of the trade.*

Large funds and hedge funds each have massive, massive advantages including economies of scale, market-making, 'near insider trading' (i.e. they 'interview' insiders and ultimately gain info that's not public), colocating, computing power, the ability to move markets with trades, lead trades, the hire some of the smartest people in the world etc. etc. etc..

Unless you have near-inside (or inside) information on a specific stock - you're basically playing poker against Deep Blue and expecting to win.

Imagine you're playing poker and they are playing 10 hands, have memorized the deck, know 'all the best moves', are using a computer, and they 'take the dealer out for free drinks every night'.

You think you can beat them?

On the whole, I'd argue strongly that the best someone can hope for in trading in long run to ride the alpha of the market overall - and that's it. (Or again, to pursue some very broad strategy without having to pay a private wealth manager fees)

Did you read the story about how DraftKings works? Basically about 5% of the players make all the returns - they play almost professionally, or with data, or take it very seriously and buy data, know the strategies etc.. But DKings needs those Sharks to make the market. And they feed them fish (i.e. you and I), casual players.

Though stocks generally grow with the economy, and underlying trades there is actually an 'investment' - you're really not investing at all. You are speculating about the future surpluses against other people doing the same. Playing the stock market is more like gambling than investing - in Poker you know you're 'playing against others'. Because on E-trade one is theoretically 'investing' one does not think one is playing against others, but that really is the case.

You can try to play 'value investing' but there are just too many people with much more power playing that game as well.

Finally - I would strongly recommend that readers do not take the advice on your blog and borrow on margin for 6%. If you're borrowing at 6%, then you have to get returns > 6% in order to make this profitable. In other words: in order for that to make sense, you have to beat most of the best big fund managers in the world and be a 'truly world class investor'. What are the odds of that?

I think, many people think stock market does nothing for poor, because:

5% of 1,000 = 50

5% of 1,000,000,000 = 50,000,000

No amount of compounding will help the poor and any loss will be much much worse.

I like the investing accrediting idea and wish it applied to stock market as well, but I guess some people might not like reducing of their choices (https://en.wikipedia.org/wiki/Accredited_investor)

"You can trade $6.95 on ETRADE". Yes. Right. By the way, the fuel cost the same per gallon for a Lamborghini than for a used Toyota. Why not buy a Lamborghini then?

Based on current evidence world over, it does appear the case. I know of no one either famous or even within my social circles who's become rich solely by investing in the markets alone. Unless one has deep domain expertise within a sector or has information to which they're privy, it is unlikely one will earn returns that significantly outweigh the market in the medium to long term. So, yes, it is not hard to imagine that equity wealth is concentrated among an elite few who also have an incentive to not let newer members in to improve their own returns.

Robinhood I tried once but hate that it's only for the phone. My terminal is much more capable of trading than my phone.. though I get why Robinhood was designed like that... to appeal to those who are more phone oriented.

From https://www.theatlantic.com/magazine/archive/2016/05/my-secr...:

> The Fed asked respondents how they would pay for a $400 emergency. The answer: 47 percent of respondents said that either they would cover the expense by borrowing or selling something, or they would not be able to come up with the $400 at all. Four hundred dollars! Who knew?

W. Buffet recommends that investors not buy on margin.

Also... ETFs are newish and rather untested at their current saturation levels. You are blindly buying a stock based on it's capitalization. This defeats the purpose of the market, which is to crowd source the balancing of supply & demand.

ETFs create a pyramid scheme out of the market. It will work for a while, but near the top (now) you better get your money out.

I think you should read what top hedge fund managers are doing these days. You will be hard pressed to find one that is all in + margin to the overall index fund. Many have significant short positions and a lot of cash.

Your blog post is just another link in the pyramid scheme nature of the whole thing. (I can do it.. so can you!)

You have a list of returns on the SPY, etc.

First off.. notice what happened in 2008? Reset! It was -40% EOY, but have a look at what within 2008! You've got skin for that?

Do you know what a margin call is?

Know how W. Buffet made so much bank off of 2008? He had some cash.

Also.. Those amazing returns from 2009 to now. Quantitive Easing. Mean anything?

It's like complaining that top 10% of good looking people get 80% of all the good acting jobs.

Or that the top 10% of people with athletic prowess win 80% of sporting events.

Or that the top 10% of good chess players win 80% of tournaments.

Or that the top 10% of engineering graduates grab 80% of the good jobs.

Or that the top 10% of people with great grades get 80% of the good jobs.

And, while doing this, blaming those people for one's lack of success in the respective fields.

Well, yeah, the top 10% of the people who are genetically better swimmers will win 80% of the swimming competitions. Me? I suck. Because I am not anywhere close to that genetically optimized group. I can get much harder and improve but I am simply not good enough. And that's OK. I don't know where this idea that we are all equal in every respect comes from. There are people far more capable and far less capable than every single one of us in just about every single human activity and the top 10% within any category will do better than the 90%. That's just the way things work.

Wealth is that same. Some people have money because they are lucky and otherwise dumb as a brick. That's not the case for most people who have money. They've taken risks, worked hard or worked smarter than others (or all three of these factors). And, no, they are not trying to oppress the rest. The gifted swimmer who laps me at that open water meet doesn't even know I exist. Blaming him or her for my shitty standing isn't aligned with reality at all.

Yet, I don't think these realities are going to convince people attached to this rich-hating ideology to reconsider their position. I don't understand where it comes from.

I am speaking only of the US here. I don't know about the circumstances elsewhere. Here in the US, opportunities for advancement have never been better. Not by a long-shot.

Dumping all your money into the market ignores that fact that there's a dependancy between how likely you are to need the money and how well the market is doing. Did equities just crash 30%? That means the economy is probably in the toilet, and you might be about to lose your job. I bet that cash portfolio is looking pretty good right about now.

Every dollar should have a purpose and be invested accordingly. If you're investing for a 10-year+ horizon, then you should absolutely put the money in the stock market because you can afford to ride out any drawdowns. But if for example you're saving for a deposit on a house, or if you can't afford to lose the money, then cash is probably the right choice.

No, by very definition, you shouldn't. That's the entire point of them being at the bottom.

(But buying shares as your money trickles in eg from wages instead of waiting can be a good idea, if the transactions costs are low enough.)

If you're not old enough to live through what happened in 2001/2008 then you have some serious blind spots.

And I don't mean just alive in 2001/2008, I mean riding high on your investment choices thinking you're a genius only to have everything come crashing down.

When things come crashing down again (and they will) you won't pull your money out because you'll think it's just a dip on the way back up.

If you're young enough, that's all you know, small dips that rise to new heights.

If you're older, you've seen dips that go back up, then dip lower, then go back up, and lower, etc... and each step of the way you think, don't sell now it's going to go back up. That later turns into, don't sell now or I'll lose money.

And finally, you've ridden it all the way to the bottom with no cash. Let's hope in this down turn that you still have a job.

Sorry, if that sounds a bit dark, but I've seen this before and you should be careful with how you invest your money. Cash or equivalents should be a component of your portfolio.

I keep a few years of expenses in cash equivalents. Once you achieve that you become immune to market swings and job turnover.

While Roman times are a bit too far, the richest families in Florence in 1427 are still the richest families in Florence https://qz.com/694340/the-richest-families-in-florence-in-14...

And research (https://link.springer.com/article/10.1007/s12110-014-9219-y/...) shows that family’s social status in England can persist for more than eight centuries, or more than 28 whole generations. https://qz.com/301150/this-is-the-proof-that-the-1-have-been...

While recent times has had many additions to the list of richest people in the world with newly created wealth, there's no reason to assume that something will change to the fact that the wealth divide will (in general) stay for generations onwards; if both world wars didn't mess it up, then nothing short of an apocalypsis will.

The Early Roman Republic made a distinction between Patricians (aristocrats) and Plebeians (commoners). The former were very wealthy while the latter were definitely not. By the time of the late Republic and the Roman Empire, this distinction was entirely meaningless - there were rich and poor of both of these hereditary classes.

Revolution, by definition, excludes reforming an existing system which is what happened to the Republic. Arguably, the Patricians relented to the Plebeian demands because they needed soldiers to fight in wars. However, usually when one refers to redistribution of wealth through war, one usually talks about victors taking the wealth of the losers.

Someone can buy a property in a growing region and then sit on it and do nothing while it gains value. The fact that it is doing nothing may even drive the price up more, because it reduces supply in that region by not making itself available.

The owner is allowed to refuse to sell at any price, which again means they can make money just by sitting on their scarce asset.

Same for corporate stock really. And for things like gold and bitcoin.

A better system imo would require active bidding on scarce resources. If you are not generating wealth with your resource, someone can take it from you by outbidding the amount of taxes you are paying for it. This forces people to apply their capital and makes it harder to just sit on scarce resources and accumulate wealth.

1) Re-defining the original meaning of the share of stock. Current paper that is stripped of voting rights, various classes and super-classes of stock based on who happens to be the shareholder just seem keenly intent on making the corporate governance process more opaque. If you want the exec to have 100x votes over anyone else, print 100x as many shares.

2) Double taxation of dividends. Distributions by REIT, MLP or a pass-through LLC/LLP don't get taxed at a corporate level. Convert that entity to a corporation and keep the same process, and what you used to call "distributions" is now called "dividends" and gets taxed twice.

3) Slow dilution of existing stock pool via new options and companies printing new shares of stock. If they want to award some shares to their execs, they should go out and buy them in the open market. If they want to raise cash for acquisitions, the debt markets are eager to accommodate. Dilution is the ultimate "trickle up" benefitting current management at the expense of the small shareholders.

Tobin tax

> More taxation for those who earn more than the average ?

Progressive taxation is a good thing.

> Central economic planning so everyone get's the same information regarding where the profits are?

no. but tax subsidized effective public services where a natural monopoly is exploited by the market for private profit gains. public infrastructure. free good education. universal health care with access to mental health and addiction help, no private prisons.

This is beeing paid for with higher taxes on higher incomes or small taxes on market transfers. In the long run this pay for itself due less crime, lower health costs and more productive workers.

> Frankly, sometimes some people need to take a refreshing trip into North Korea instead of perpetually complaining about the downsides of capitalism.

There a lot of countries that look, not without some substance at the USA and think of a third world country in how it treats ports of their citizens. They could be turned into productive elements of society instead of beeing permanently marginalized.

Looks like short term profit won over longterm planning. Maybe the competition avoids these mistakes.

Build abundant housing in cities with economic opportunity. Protect owner property value less, and renter budgets and financial security more. End this insane system where if you're young enough to have "missed the boat" on education and housing being affordable, you're starting out life with enormous debt, enormous rents, or just no realistic access to the modern economy (intellectual work in major cities).

2) Shift the relationship between wages and expenses such that more people can have a decent standard of living and security and retirement at the same time. Probably via productivity growth. (Yes, there is an argument that some people will always raise their expenses to the level of their income and beyond. We can still do better. And blaming people's spending a few hundred extra dollars a year for the fact that their incomes are a few tens of thousands too low is not that helpful).

3) Dampen the effect of your parents' station in life on your own, especially with respect to K12, college, and getting your first professional job. (Probably by having the state expand some of the boosts that upper-middle-class parents give their own children, such as high-quality K12 and affordable college, to kids at all income levels).

When the US borrows, it prints TBills. TBills are what backs the dollar. Very crudely - more TBills = more liquidity.

Also, things like 'quantitative easing' have flushed markets full of liquidity, lifting stocks up - relative to all other forms of capital. Or in other words, it shifts value from other places, into the pockets of those who have most of their wealth in equities etc..

This is the tip of the iceberg.

'Very wealthy people' are usually very smart and hard-working, and about 1/2 of them 'made their own fortunes'. That's all well and good - but the system in America hugely favours capital.

> Most investors have poor returns because they defer to their self-defeating cognitive biases, they don't take the time to understand investing, and they often naively believe they have a simple "system" which will outsmart the market.

The article you cite directly contradicts this. It claims that investors who have the best returns are those who specifically don't take the time to understand investing, and that there very much is a simple "system" that works, namely, forget about your investment account entirely, or at least let it sit dormant for a few decades and do nothing.

More to the point, your comment smells like justifying the wealth disparities, and counters the WP article ("If you start out with wealth, you don’t have to be a financial genius to tap the miracle of compounding and end up with real money.") with... nothing but a vague claim that smart investors can make a lot of money.

I had to read it several times as I thought I was misreading it. I have many other anecdotes on that point, but that one takes the cake.

The only alternative that makes sense to me is to follow Peter Lynch's advice and buy what you know. Do this with money you can afford to lose.

When Apple released the original iPod I begged my Dad to buy me one and raved about it. Based on my excitement, he bought several thousand shares of aapl and still holds them. The gain on that single investment is greater than all the income he earned in his lifetime. You cannot expect to make these kinds of investments. Take a sliver of what you have and put it behind something you believe in. Put the rest in index funds.

Edit: I meant to tie this comment back to the original title about wealth disparity. Point being, my Dad has created generational wealth from a single lucky investment. It's just luck and a system that let's you keep your winnings.

The original purpose was to point out the unsustainable nature of land ownership amongst other things.

Capital vs labor is a big issue but the non knowledge worker vs knowledge worker divide shouldn't be ignored either. Knowledge workers also employ similar capital leverage compared to the capital class through its employment.

https://www.justetf.com/uk/find-etf.html?groupField=none&sor...

You can (and should) generally buy these using a local broker in the country you live in. For tax reasons it's generally better to buy a EU-domiciled fund instead of a US-based one, but that depends on the country you live in. Here in Germany buying a US-domiciled Vanguard fund would be tax hell, but the Irish ETFs are usually very good for the US stock market.

So yes their wealth and buying power affects you and everyone else economically.

What happens then to reduce inequality is anyone's guess, but in the XX century the Russian Revolution, World Wars, and the Great Depression have been very effective.

Other than that one could make the point that for someone who is already very rich, getting marginally richer doesn't do much while lifting someone from abject poverty is something that has a great effect on that person's life (in other words utility is probably sub-logarithmic).

Look at what industry pays the most. It's finance. Why? Because people who work with moving the world's money around tend to know a lot about the rules of taxation, the structure of markets, where opportunity will be, and so on.

This is a feature of this low inflation market. There's no incentive to do anything but hoard cash.

Anything that significantly can alter social mobility must affect early life. Things like giving access to better education for your children, or living in neighbourhoods and circumstances that give access to better contacts and networks can affect social mobility, as can other more context related factors. Since stock markets only give relatively high returns over several decades, as it is quite volatile over shorter periods of time, it's not a reliable source of social mobility.

So while financial markets can improve your pension and retirement, effects on the much more important social mobility metrics is rather tenuous, except in very rare cases.

There are obviously exceptions, but from what I've seen most tech billionaires have these kinds of backgrounds.

Not true. The US ranks very poorly compared to other advanced economies when it comes to income inequality and social mobility [1].

Also most of the examples you give prove exactly this: Mark Zuckerberg was just a kid in a Harvard dorm, and so was Bill Gates (one of your "examples"). Ted Turner went to Brown, and all almost every person in the list you gave went to a very good school, if not Ivy League. And yet most Americans claim that they can't afford college [2]. It is naive to claim that "most people aren't rich due to a lack of opportunity", because that's exactly what's happening.

[1]: "How to get rich in America", The Economist -http://www.economist.com/blogs/economist-explains/2017/02/ec...

[2]: "83% of Americans say they can't afford college", Edward Jones study -http://www.thinkadvisor.com/2015/05/13/83-of-americans-say-t...

It used to be that that was fine. You could work in factory doing honest manual labor, and still provide for a family and buy a house. That's not possible anymore, without taking on a mountain of debt. When you look at the stagnation of wages compared to productivity[0], it's not strange that people think "where did all that money go?", and then look at the increasing inequality [1] and decide where to lay the blame[2]

[0] https://upload.wikimedia.org/wikipedia/commons/7/73/US_produ...

[1] https://ddoublep.files.wordpress.com/2014/09/cbpp-income-gai...

[2] https://upload.wikimedia.org/wikipedia/commons/8/8c/Historic...

The interesting bit is that Zuck, being the son of a well-to-do guy who wasn't astronomically rich, ended up handing a couple of richer twins tens of millions of dollars, all thanks to how the legal system is set up.