[Nesster]

...is floating ever upwards...

'Paralyzed Plutocrats' Keep Economy Locked Up, Too - Yahoo! Finance

Sergio Ermotti, the CEO of the Swiss bank UBS, has peered into the minds of his wealthy clients - and he doesn't like what he sees.

"Today our clients are paralyzed by their fear of losing their wealth in these volatile markets," Ermotti told investors and reporters this morning. "As a result they continue to increase their allocation to cash and other safe assets."

The comments were aimed at explaining UBS's margin troubles in its wealth-management business. But they also sum up the sudden pessimism of today's wealthy investors and spenders.


At this stage of the recovery, what the economy needs is for people with money to be spending and investing. The wealthy are often the "first in and first out" of recessions, taking the initial risk and seeing the earliest signs of light.

But today, rather than confident capitalists, we have paralyzed plutocrats.

The past few days have revealed a rapid decline in the spending and investing confidence of the wealthy. This morning's UBS earnings call highlighted similar trends at wealth-management firms and private banks around the world, where wealthy clients are hoarding cash, shunning stocks and running from risk.

One of the hottest corners of the wealth-management business today is gold vaults - hardly an encouraging sign.

Spectrem Group's latest Millionaire Confidence Index - which measures millionaire's economic and market outlook - showed its lowest reading in nine months and is creeping back toward bearish territory.

The rich are especially worried about Europe. Nearly one in four millionaires surveyed are avoiding individual stocks and mutual funds with a global exposure, and more than 18 percent say they are avoiding fixed-income products from other countries.

But they are also worried about the U.S. economy, the fiscal cliff, government debt and the prospects for their own companies.


"The drops in millionaire confidence are particularly disturbing because generally millionaire households are more positive about economic conditions than others," said Catherine McBreen of Spectrem. "The biggest concerns for investors when reviewing their own household's outlook were the economy and company health."

The paralyzed plutocracy also threatens consumer spending. The top 5 percent of earners account for more than a third of consumer outlays and their spending is highly discretionary and volatile.

Disappointing earnings at Coach (COH) today, along with falling shares of Tiffany (TIF) and Saks (SKS), suggests that aspirational spenders as well as the affluent and genuinely wealthy are keeping their wallets closed.

The Thomson Reuters/University of Michigan Survey of Consumers showed confidence index among those who make more than $75,000 annually has fallen 20 percent since last year.

What would it take to lift the wealthy from their paralysis? Basically, a robust stock rally. And for that to happen we need a grand solution in Europe, a decline in unemployment, removal of the fiscal cliff and decrease in government debt.

In other words, don't count on it. The wealthy, rather than leading the recovery, may be dragging it down.

[jeffkrol]

speaking of "wealth"...........

The number of displaced workers has risen dramatically since the start of the Great Recession, and this year a third of them had to raid retirement savings to make ends meet.

Making matters worse, many who have lost their jobs have defaulted on 401(k) loans, causing taxes and penalties to further deplete their retirement savings.

"Of greatest concern are those who are in their 40s and 50s," says Catherine Collinson, president of Transamerica Center for Retirement Studies, which released a study today on the retirement outlook of the unemployed and underemployed.

Long-term unemployment for older workers has risen substantially, the U.S. Government Accountability Office says. Last year, 55% of unemployed workers age 55 and older had been seeking a job for more than six months.

Older Americans are hit hard two ways. "It is more difficult for them to find employment," Collinson says. "And they have less time to build or rebuild their retirement savings."

Displaced workers in their 40s and 50s have median household retirement savings of only $2,300, the Transamerica study says.

Unemployed and underemployed workers of all ages are under financial stress. And three in 10 do not have health insurance, the study found.

As financial problems mount, many displaced workers are tapping their savings. This year, 35% have taken money from their retirement savings.

During the recession, more workers took loans from their 401(k)s to help them keep up with daily living expenses and unexpected bills. But as the unemployment rate increased and then remained high, the rate of 401(k) loan defaults went up.

"That is the worst possible time, when someone who has lost their job is told that if they don't pay back the loan in full in 60 days, their account will be debited," says Hal Singer, managing director at Navigant Economics, a co-author of another report on defaults released this week. For example, if a displaced worker defaults on a loan of $6,542, it would drain $9,934 from his retirement savings, because of taxes and penalties, Singer's report says.

Retirement savings raided by 35% of laid-off workers | Stevens Point Journal | stevenspointjournal.com

[Parallax]

The number of displaced workers has risen dramatically since the start of the Great Recession, and this year a third of them had to raid retirement savings to make ends meet.

Making matters worse, many who have lost their jobs have defaulted on 401(k) loans, causing taxes and penalties to further deplete their retirement savings.

"Of greatest concern are those who are in their 40s and 50s," says Catherine Collinson, president of Transamerica Center for Retirement Studies, which released a study today on the retirement outlook of the unemployed and underemployed.

Long-term unemployment for older workers has risen substantially, the U.S. Government Accountability Office says. Last year, 55% of unemployed workers age 55 and older had been seeking a job for more than six months.

Older Americans are hit hard two ways. "It is more difficult for them to find employment," Collinson says. "And they have less time to build or rebuild their retirement savings."

Displaced workers in their 40s and 50s have median household retirement savings of only $2,300, the Transamerica study says.

Unemployed and underemployed workers of all ages are under financial stress. And three in 10 do not have health insurance, the study found.

As financial problems mount, many displaced workers are tapping their savings. This year, 35% have taken money from their retirement savings.

During the recession, more workers took loans from their 401(k)s to help them keep up with daily living expenses and unexpected bills. But as the unemployment rate increased and then remained high, the rate of 401(k) loan defaults went up.

"That is the worst possible time, when someone who has lost their job is told that if they don't pay back the loan in full in 60 days, their account will be debited," says Hal Singer, managing director at Navigant Economics, a co-author of another report on defaults released this week. For example, if a displaced worker defaults on a loan of $6,542, it would drain $9,934 from his retirement savings, because of taxes and penalties, Singer's report says.

To put it another way, things are worse now than when Obama took office.

[Nesster]

To put it another way, things are worse now than when Obama took office.

Yes, and will continue to be bad for the first 3 years of his next term. Credit recessions tend to take 7 years to recover.

[seacapt]

Longer if he is re-elected

[Parallax]

So undoubtedly, Obama will get the credit for having fixed it. Does that mean that (God forbid) Romney gets elected he'll get the credit?

The algorithm for figuring it out is quite simple, and is not time dependent.
Are things better than when Obama took office?
Yes -> He's doing a great job.
No -> It's Bush's fault

Are things as good as they should be?
Almost -> Obama's working on it.
No, they should have improved more by now -> It's Bush's fault

Assuming Obama is re-elected; when he leaves office in 4 1/2 years:
If things are better than they are now: Obama was a great president.
If things are worse than they are now: Obama was a still great president; it's Bush's fault.

[jeffkrol]

Longer if he is re-elected

and if Mitt the Twit gets in and his handlers in Congress tell him where to cut.. then we get a depression... nice choices huh...........

[Nesster]

and if Mitt the Twit gets in and his handlers in Congress tell him where to cut.. then we get a depression... nice choices huh...........

But SOMEONE has to restore the confidence of the Creators, the plutocrats, or else we'll NEVER start to grow again...

[seacapt]

Jeff- I'm a small businessman as are most of my customers. Another 4 years of this crap and most of us will be ex small businessmen Regardless of what Obama does at this point there is no financial confidence. People who have money aren't spending it and banks aren,t lending it except to people who really don't have to borrow.

[Wheatfield]

To put it another way, things are worse now than when Obama took office.

The economic problems that your country is suffering through are really independent of who is in the Oval office. The president makes a nice scapegoat, but not much more than that. Where Bush went wrong was his reckless wars, which cost a pile of money and soured much of the world on the USA. Where Obama went wrong was thinking that the Republicans have any interest in anything other than making him look as bad as possible to facilitate them getting a Republican back into the White House, and they don't really seem to care who, as long as it's a Republican.
The monkey in my avatar could be the Republican candidate if he's just join the party.

[jeffkrol]

Jeff- I'm a small businessman as are most of my customers. Another 4 years of this crap and most of us will be ex small businessmen Regardless of what Obama does at this point there is no financial confidence. People who have money aren't spending it and banks aren,t lending it except to people who really don't have to borrow.

buying into mittens dog and pony show isn't going to help either.. and WHY does everyone of "you people" avoid Congresses skin in this game .. the HOR controls the "power of the purse"..............
I don't.............. but it is fun to pick on an "entitled" mitt the twit........

Now don't get me wrong, in many ways Obama is just "Republican-lite"............which is annoying...

We "pretend" it is the pres because we need a scape goat... sheeple need a goat.........

[Nesster]

Now don't get me wrong, in many ways Obama is just "Republican-lite"............which is annoying...

If only the Republicans thought of him as such... I'm certain things would be much better at this point.

[Parallax]

The economic problems that your country is suffering through are really independent of who is in the Oval office. The president makes a nice scapegoat, but not much more than that.

Where Bush went wrong was his reckless wars,

No argument about the Bush or Obama portion, but aren't the first two sentences of your post totally contradicted by the rest?
"It's got nothing to do with the president; besides, it was Bush's fault."

[jeffkrol]

Jeff- I'm a small businessman as are most of my customers. Another 4 years of this crap and most of us will be ex small businessmen Regardless of what Obama does at this point there is no financial confidence. People who have money aren't spending it and banks aren,t lending it except to people who really don't have to borrow.

to reiterate.. GRIDLOCK IN CONGRESS and STUPID, CLUELESS ECONOMISTS... and imagine what happens when your Soc. sec customers get a haircut...........

[jeffkrol]

But SOMEONE has to restore the confidence of the Creators, the plutocrats, or else we'll NEVER start to grow again...

no a payroll Soc SEc / medicare cut would be a good push........

See the things to "restore confidence" i.e give little people spending money are verboten by both parties due to the "edge of the earth".....

go left, go right, either way it is the wrong direction..