It's A 1%er's World And We're Just Living In It
The longest economic expansion in history has benefited the wealthiest 1% of U.S. households particularly well, at the expense of everyone else. According to the Federal Reserve, the top 1% now hold nearly as much wealth as the middle- and upper-middle classes combined. They now own more than half of the equity in U.S. public and private companies.
As of June 30, the share of wealth held by the top 10% of U.S. households was 63.8% compared to just 36.2% for the bottom 90%. Going back to the depths of the financial crisis, September 30, 2008 - before the Federal Reserve's policies such as quantitative easing and low interest rates went into hyperdrive, the share of the top 10% was 59.6% compared to 40.4% for the bottom 90%. Going back nearly twenty years from there, to September 30, 1989, the share of the top 10% was 55.4% compared to 44.5% for the bottom 90%.
Since the third quarter of 2006, the bottom 99% of American households saw their assets increase to $87 trillion from $57.1 trillion. The top 1% saw their share rise to $35.5 trillion from $19.2 trillion. Over the same period, the bottom 50% of households saw an increase to $7.5 trillion from $5.6 trillion, which is a 34% increase compared to the 85% increase the top 1% enjoyed. The bottom 50% of households are now stuck with 35.7% of liabilities in the U.S. while owning just 6.1% of assets.
There may be a lot more people saying "OK Boomer" when they read this. Americans born before 1965 now hold $93.3 trillion in household wealth, more than three times the $29.1 trillion held by GenX and millennials. Highlighting just how wide the gap has become, Baby Boomers hold more than 11 times the household wealth millennials do, with $66.5 trillion in household wealth compared to just $5.9 trillion.
Of course they've had more time to get to this point, but the contrast between Baby Boomer and millennial wealth, when broken down by asset class is staggering. Baby Boomers hold $14.1 trillion in real estate compared to only $1.4 trillion for millennials. Baby Boomers hold nearly 35 times the amount of equities and mutual fund shares as millennials. It's not just publicly traded companies they overwhelmingly own. Baby Boomers' share of private companies is 39 times that of millennials. Baby Boomer's pension entitlements alone are nearly three times the aggregate wealth of millennials.
None of this is stopping the Federal Reserve from continuing what they've done the last 10 years. The Fed just cut interest rates for the third time in four months, which has fueled much of this concentrated wealth. They're back to doing not-QE QE. These policies have clearly benefitted the wealthiest Americans while leaving many behind. With the stock market hitting new all-time highs last week on constant "hopes of a trade deal," it's becoming increasingly difficult to argue that the goal is anything but to continue to enrich asset holders.
Not every cow is a happy cow. Ben & Jerry’s and its parent Unilever are being sued for deceptive marketing over their use of the "happy cow" marketing strategy. The suit alleges Ben & Jerry's is not sourcing milk from suppliers who are engaged in humane agricultural practices that meet the "Caring Dairy" standards. The suit alleges the deceptive marketing enables Unilever to sell more ice cream at higher prices, therefore hurting competition. The complaint states "The goodwill generated by Ben & Jerry’s prior reputation for being socially and environmentally conscious was a valuable and significant component of Unilever’s acquisition of the brand, allowing Unilever to capitalize on a growing market of conscious consumers."
Will this be the death of the influencer? Starting next week, Facebook's Instagram will begin testing hiding the number of likes from public view. The company has already tested this idea in Canada, Australia, New Zealand, Japan, Ireland, Italy, and Brazil. Instagram CEO Adam Mosseri said "It's about young people. The idea is to try and depressurize Instagram, make it less of a competition, give people more space to focus on connecting with people that they love, things that inspire them."
What will be the implications when the market has a sustained selloff? U.S.-based exchange-traded funds now account for a record $4 trillion in assets under management. 136 ETF providers now offer 2,062 ETFs to choose from, according to research firm ETFGI. The ETFs are fairly concentrated, with the top 10 ETFs accounting for 28% of total AUM and the top 20 ETFs accounting for nearly 40% of total AUM.
They're going out swinging. Just a few weeks after WeWork co-founder and now former CEO Adam Neumann walked away with a $1.7 billion payday, WeWork employees are demanding their fair share as they prepare for layoffs. More than 150 employees, calling themselves the "WeWork Coalition," wrote a letter asking for "fair and reasonable separation terms." Taking a shot directly at Neumann, the letter said "We are not the Adam Neumanns of this world — we are a diverse workforce with rents to pay, households to support and children to raise." The employees pointed out the issues were a result of management, saying "We don’t want to be defined by the scandals, the corruption, and the greed exhibited by the company’s leadership."
It's highly unlikely people will boycott them. Coca-Cola was named the world's largest plastic polluter for the second year in a row by the nonprofit Break Free From Plastic. A team of volunteers who collected plastic waste found nearly 12,000 Coca-Cola products across 37 countries. Coca-Cola responded "Any time our packaging ends up in our oceans – or anywhere that it doesn’t belong – is unacceptable to us. In partnership with others, we are working to address this critical global issue."