Message From Author: Hey, it’s practically the weekend – time to take a break from the norm around here and take a closer look at some fun and unusual stuff that’s come to light in the past week. While the following tidbits don’t have anything directly to do with 401k plans, I still hope you’ll find it a quick, interesting read.
-401k Specialist Managing Editor Brian Anderson
A record 430 billionaires in 2017 lost that elite status in 2018, according to the latest edition of the Hurun Global Rich List from China’s Hurun Institute, released earlier this week.
The report finds the world had 2,470 billionaires in 2018—including 206 new billionaires and subtracting 430 no-longer-billionaires for a net loss of 224.
Amazon’s Jeff Bezos added $24 billion last year to retain his top spot as the richest man in the world for the second year with estimated wealth totaling $147 billion. Microsoft founder Bill Gates was second at $96 billion and Berkshire Hathaway’s Warren Buffett completed an American clean sweep of the top three wealthiest people in the world with $88 billion, despite a 14% drop in 2018.
Facebook’s Mark Zuckerberg (5th-$80 billion) and Google’s Sergey Brin (8th-$54 billion) and Larry Page (10th-$53 billion) gave the U.S. six of the top 10 spots among the wealthiest people on the planet.
The total wealth of the 2,470 billionaires on the list decreased by $950 billion—or 9 percent—to $9.6 trillion.
“Poor stock market performances and an appreciating dollar were the main reasons for this year’s record drop in billionaires,” Rupert Hoogewerf, founder and lead researcher of Hurun Institute, said in a statement.
The U.S. may top the list, but China has far and away the most billionaires on the list, adding 52 in 2018 while the U.S. only added 13. There are 658 billionaires in China, followed by the U.S. with 584 billionaires and Germany with 117 billionaires.
A few other key findings:
- Beijing (103), New York City (92) and Hong Kong (69) are the cities with the most billionaires.
- 65 percent of the billionaires on the list were self-made, while the other 35 percent inherited wealth.
- Women make up 15.5 percent of the list.
- The average billionaire on the list is 64 years old, one year older than last year. Forty billionaires from last year’s list passed away (including Microsoft’s Paul Allen), handing over $180 billion of wealth.
- President Donald Trump’s wealth dropped $500 million to an estimated $3 billion. Trump has the largest Twitter following (58.2 million) of anyone on the list (Bill Gates is second at 46.4 million, Oprah Winfrey third at 41.9 million and Elon Musk fourth at 24.8 million).
Did you hear about the Texas guy who wants to spend his retirement years staying at Holiday Inn hotels across the country because it would be cheaper than moving into a nursing home?
A Facebook post from Terry Robison of Spring, Texas, has been shared more than 129,000 times. In it, Robison says, “No nursing home for us. We’ll be checking into a Holiday Inn! With the average cost for nursing home care costing $188 per day, there is a better way when we get old and too feeble. I’ve already checked on reservations at the Holiday Inn. For a combined long term stay discount and senior discount, it’s $59.23 per night…”
Robison mentions perks such as free breakfast, occasional happy hours, room service, spa, swimming pool, security, maid service, free toiletries, etc.
Although a fun idea, it has been repeatedly debunked as an unrealistic alternative to nursing home care.
But at least Holiday Inn played along: “While we’re not certain how Mr. Robison arrived at his current budget calculations, we look forward to welcoming him when he reaches his ‘golden age,’” the company said in a statement reported by KHOU 11 News in Houston. “He did miss one big benefit in his long list of reasons to stay with us — kids eat for free at Holiday Inn. So that’s another excuse for the grandkids to come and visit.”
Oracle of Omaha’s latest pearls of wisdom
Warren Buffett has written an open letter to Berkshire Hathaway shareholders every year for the last 40 years–must-read stuff for anyone interested in investing to be sure. Here are a few of my favorite excerpts from the one he released last Saturday:
- “If Charlie and I think an investee’s stock is underpriced, we rejoice when management employs some of its earnings to increase Berkshire’s ownership percentage… Berkshire’s holdings of American Express have remained unchanged over the past eight years. Meanwhile, our ownership increased from 12.6% to 17.9% because of repurchases made by the company. Last year, Berkshire’s portion of the $6.9 billion earned by American Express was $1.2 billion, about 96 percent of the $1.3 billion we paid for our stake in the company. When earnings increase and shares outstanding decrease, owners–over time–usually do well.”
- “…Berkshire held $112 billion at year end in U.S. Treasury bills and other cash equivalents, and another $20 billion in miscellaneous fixed-income instruments. We consider a portion of that stash to be untouchable, having pledged to always hold at least $20 billion in cash equivalents to guard against external calamities. We have also promised to avoid any activities that could threaten our maintaining that buffer. Berkshire will forever remain a financial fortress. In managing, I will make expensive mistakes of commission and will also miss many opportunities, some of which should have been obvious to me. At times, our stock will tumble as investors flee from equities. But I will never risk getting caught short of cash.”
- “It would be foolish for us to sell any of our wonderful companies even if no tax would be payable on its sale. Truly good businesses are exceptionally hard to find. Selling any you are lucky enough to own makes no sense at all.”
- “A ‘Russian Roulette’ equation–usually win, occasionally die–may make financial sense for someone who gets a piece of a company’s upside but does not share in its downside. But that strategy would be madness for Berkshire. Rational people don’t risk what they have and need for what they don’t have and don’t need.”
- “On March 11 it will be 77 years since I first invested in an American business. The year was 1942, I was 11, and I went all in, investing $114.75 I had begun accumulating at age six… If my $114.75 had been invested in a no-fee S&P 500 index fund, and all dividends had been reinvested, my stake would have grown to be worth (pre-taxes) $606,811 on Jan. 31, 2019 (the latest data available before the printing of this letter). That is a gain of 5,288 for 1. Meanwhile, a $1 million investment by a tax-free institution of that time–say, a pension fund or college endowment–would have grown to about $5.3 billion. Let me add one additional calculation that I believe will shock you: If that hypothetical institution had paid only 1 percent of assets annually to various ‘helpers,’ such as investment managers and consultants, its gain would have been cut in half, to $2.65 billion. That’s what happens over 77 years when the 11.8 percent annual return actually achieved by the S&P 500 is recalculated at a 10.8 percent rate… You might have eschewed stocks and opted instead to buy [a few ounces of] gold with your $114.75. And what would that supposed protection have delivered? You would now have an asset worth about $4,200, less than 1 percent of what would have been realized from a simple unmanaged investment in American business. The magical metal was no match for the American mettle.”
Retirement studies have some weird data
We get a lot of research studies about retirement readiness – or lack thereof – that talk about Americans’ biggest fears in retirement (usually No. 1: running out of money). One such study I came across this week had some unusual findings that caught my eye.
PurePoint Financial’s second “State of Savings in America” survey finds savings balances are down 35 percent, and 88 percent of Americans are concerned about another economic downturn. And no wonder, as 83 percent of those impacted by the Great Recession say they are still recovering from it. And 80 percent re not very confident they could survive another recession or market downturn in the near future. The reason: 6 in 10 of those who are not confident are still living paycheck to paycheck.
A bit scary perhaps, but that’s not the unusual stuff I’m talking about from this study. This is:
- “Crash diet saving” is a popular tactic. Half of Millennials categorizing themselves as aggressive short-term savers for specific things like weddings and trips, but they don’t consistently save in between these events.
- Saving feels better than weight loss. Respondents noted that saving is their “most rewarding activity,” even more than losing weight (79 percent vs. 47 percent).
- Millennials in particular are into immediate gratification. The study found 1 in 3 respondents overall would choose to take $1,000 now rather than waiting a year for $3,000; this percentage was significantly higher with Millennials at 43 percent. Guess they need that $1,000 now to attend a destination wedding.
- Stashing cash in the mattress much? Surprisingly, the study found 16 percent of respondents admit to hiding cash around their homes. This is up from 12 percent in 2017.