Thursday Preview: New Billionaires Are Doing Great, How About You?

by: Philip Davis

218 new billionaires averaged $500M in gains last year - how are YOU doing?

That’s right, the new Forbes list is out where we celebrate the top .000014%!

Thanks to an unprecedented concentration of wealth, the World’s supply of Billionaires jumped 27% in 2009 and the 1,011 people in the club accumulated an AVERAGE of $500M more Dollars EACH! Isn’t that great? That’s $505Bn, or 65% of America’s TARP spending handed over to 1,011 people who are, according to Forbes (The Capitalist’s Tool), clearly better than us.

They sure are doing better than us as America’s 450 Billionaires added $225Bn to their bank accounts (and that’s AFTER taxes) and the saddest thing is that amount is INCLUDED in the $1.6Tn bounce of US Total Net Worth we had after losing 18% of it in 2008. A lot of positive economic statistics are skewed by our top 1%, but even the top 1% is blown away by the top 450 (0.00014%) who are sitting on $3.6Tn of our nation’s total household wealth - 8% or 27M times more than the average citizen. Wow, I guess they are better than you - better in fact than 307,000,000 of you!

As I mentioned in "The Dooh Nibor Economy (that’s "Robin Hood" backwards)," America has become a real wealth-building machine that funnels every last cent off the bottom of the pyramid and sends it straight to the top. Those of us standing near enough to the top (the top 10%) are lucky enough to pick up enough table scraps to make us 1,000 times better than you - our bottom 90% "friends" and that is just great for walking around town but you must pity us because even we are embarrased to show up in our shoddy Armani suits when we are invited to hob-nob with the top 1% in their custom-tailored suits who don’t look at labels but at the thread-count of your sleeve.

Even those "masters of our universe" cower in the presence of that top .00014%, who are, by definition, 26,999 times better than they are! So don’t go thinking the people in the top 10% have it so easy - we have a whole different set of problems to deal with. You only need to make $150,000 a year to join the top 10% club - we have to make over $2M to crack the top 1% and $2M doesn’t even pay 1/10th of the MONTHLY interest on the assets on our top 450.

So congratulations to the Forbes winners, especially from the 462,000 of us that got pink slips last week as the primary driver of wealth in 2009 was corporate cost cutting and increased productivity (and government hand-outs), which allowed those at the top to make more while giving back less than at any point since the roaring 20’s. Ah, those were the days….

25% of Americans feel this country is heading in the right direction according to the latest Rasmussen Report, and that’s a poll of people who still have homes - and phone service. 71% believe this nation is on the wrong track despite the 70% jump in the markets, and I know that comes as a surprise to many of you who had a great year, but a lot of people aren’t in the markets and all this wealth building of the past 12 months has sadly passed them by. This is the highest level of pessimism in the last 14 months and that INCLUDES last March’s market crash. The American dream is becoming just a dream as only 48% of the people surveyed believe it is possible for a person to work his or her way out of poverty, and again, don’t forget they are polling more people like you and me than they are people who are actually impoverished.

Perhaps they are concerned because unemployment was up in 30 states in January with California (12.5%), South Carolina (12.6%), Florida (11.9%), North Carolina (11.1%) and Georgia (10.4%) posting new post-Depression records. Michigan’s unemployment rate is still the nation’s highest, at 14.3%, followed by Nevada, with 13% and Rhode Island at 12.7%. When one out of 10 people you know can’t find work - it’s hard to get all excited for survey questions, isn’t it?

While I am sure all these unemployed people are sitting at home and consuming as many commodities as possible, Anthony Scaramucci of Skybridge Capital has a different theory: "I don’t think inflation will hit the nation without real wage growth, and we’re not seeing wage growth. Also we’ve got excess global capacity in manufacturing." He points to global excess manufacturing and a very crowded trade as drivers that are likely to take gold and other commodities lower, and we welcome Anthony to our little club of naysayers - one of us, one of us, you are welcome, one of us!

February’s 15% jump in commodity prices sent China’s inflation to a 16-month high as consumer prices rose 2.7% in February. This figure was not unjustified as Industrial Production is up 20.7% but, like Americans, the Chinese still aren’t working, and increased productivity over there shows up as a plus to our GDP, not theirs.

That’s right, US productivity is a measure of how many dollars worth of GDP we create per US job, so firing US workers and outsourcing the labor is a FABULOUS way for companies (and the top 1%) to fatten their wallets while giving the government exciting productivity numbers to point to. Remember when 60 Minutes used to be outraged by this kind of stuff? Oh yeah, they are now owned by Billionare Sumner Redstone. Ah Capitalism, ultimately you muzzle all dissent

Where were we? Oh yes, China - so, even worse for China was Producer Prices for February were up 5.4% in Feburary - that’s a 2.7% gap (ie. loss) that could not be passed along to the consumers, possibly because, like their American cousins, they are out of money. Both the Hang Seng and the Shanghai remained flat for the AMAZING 4th consectutive day while the Nikkei gained 1% as commodities pulled back on fears that China may further tighten down to combat inflation.

Europe WAS doing OK until they saw our jobs numbers and now (9:15) they are down about half a point just ahead of the US open. While most of the EU leaders keep saying "remain calm, all is well," Greek hospitals, airports and schools were shut and police scuffled with protesters as unions staged the second general strike this year against government budget cuts. Greek bonds declined and stocks fell as the strike disrupted public services and forced the cancelation of all 479 flights from Athens International Airport. Bus and subway drivers, doctors, journalists and teachers walked off the jobs to protest 4.8 billion euros ($6.5 billion) of wage cuts and tax increases announced by Prime Minister George Papandreou March 3rd.

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“The measures taken so far are unjust, demanding sacrifices from workers that aren’t being demanded from the employers, businessmen and bankers that created this crisis,” said Stathis Anestis, spokesman for the GSEE union. The union said 90% of the union's 2 million members adhered to the strike. Iceland’s people already voted not to bail out their own banks and the Greek people are also looking for a plan that doesn’t place the burden so squarely on the workers. It will be interesting to see how this plays out because, as I’ve said, Spain, Italy and Turkey are on deck.

Meanwhile, Tim Geithner headed over to Europe to do his real job - protecting the interests of Hedge Funds - as he "warned" European Commission that its proposals for more restrictive regulation of alternative fund managers "could affect cross-border investment." The proposed European law will govern the managers of hedge funds, private equity and venture capital funds in Europe. It’s being discussed this morning by the European Union ambassadors. If they agree it’s ready, the proposal will move on to the finance ministers' meeting next Tuesday. The proposed law is meant to have three objectives: investor protection; control of risks to the financial system; and transparency of the operations of fund managers.

The big fight is over the so-called third-country rules which will govern the activities, including fund raising, of funds from countries outside the European Union. Bruised from the financial crisis and the sales of fraudulent funds to European investors by Bernard Madoff, France and Germany are determined to put in place a highly restrictive regime that outsiders say would make it impossible for third-country funds to raise money in some, if not all, countries of the EU.

It looks like we have a bit of a sell-off this morning and I predicted yesterday in Member Chat that we’d hit 10,400 by tomorrow, so I hope I’m right as we still have a bearish short-term stance, but we will continue to watch our technicals and play the hand that’s dealt.