Financial Wealth Evaporating

By: John Rubino | Sun, Jun 3, 2012
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Live by the sword, die by the sword. The 1% have spent the past couple of decades accumulating an ever-bigger share of the world's fiat-currency-inflated financial assets. Now, with the air going out of the FIRE (finance, insurance, real estate) economy, the super-rich are discovering that their stocks and bonds, like the paper money on which they're based, are to a large extent illusory:

World's Richest Lose $24 Billion as Adelson Fortune Drops

The world's richest people lost a combined $24.4 billion this week as concerns over Spain's rising borrowing costs and the sputtering American job market caused global markets to tumble.

Casino mogul Sheldon Adelson lost $2.2 billion. Shares of his Nevada-based Las Vegas Sands Corp. (LVS) fell 10.3 percent during the week. On Friday, Macau casinos reported gambling revenue rose 7.3 percent in May, its slowest pace since July 2009. Adelson, 78, is the 22nd richest person in the world, according to the Bloomberg Billionaires Index.

"We seem to be bogged down in a very sluggish pattern," John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview on June 1. "The jobs report was discouraging, and it's been discouraging the past several weeks. It reaffirms this fear that the economy is slowing."

The Dow Jones Industrial Average erased its 2012 gain after U.S. employers created the fewest jobs in a year and Chinese manufacturing slowed. The Standard & Poor's 500 Index sank 2.46 percent on June 1, to close at 1278.04 in New York, its biggest drop since November.

Yields on 10-year treasuries dropped below 1.50 percent for the first time ever Friday as U.S. payrolls climbed by 69,000, less than the most-pessimistic forecast in a Bloomberg News survey, and Chinese manufacturing grew at its weakest pace since December.

Mark Zuckerberg, 28, fell off the Bloomberg index. Shares of Menlo Park, California-based Facebook Inc. (FB), the world's largest social-networking company, dropped 13.1 percent during the week. He is worth $14.1 billion.

Mexico's Carlos Slim, 72, remains the world's richest person with a net worth of $63 billion. The tycoon lost $3.1 billion during the week, as shares of his Mexico City-based telecommunications company America Movil SAB fell 3.04 percent. Bill Gates, 56, ranks second with a net worth of $58.2 billion.

What does this mean?

Even for the people profiled above, losing several billion dollars in a week has to sting. Further down the rich-guy list the losses are probably in the tens of millions, which no doubt hurts as well. So the brands and businesses that cater to people who make statements with their wealth will see fewer impulse buyers, more desperate sellers, and lower profits. They're classic shorts, in other words.

In a few years, the marinas will be full of abandoned yachts and Lamborghini dealerships will be loaded with pre-owned bargains, just waiting for gold bugs (the new financial aristocracy) to use their coins and bars for a little conspicuous consumption.



John Rubino

Author: John Rubino

John Rubino

John Rubino

John Rubino edits and has authored or co-authored five books, including The Money Bubble: What To Do Before It Pops, Clean Money: Picking Winners in the Green Tech Boom, The Collapse of the Dollar and How to Profit From It, and How to Profit from the Coming Real Estate Bust. After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a currency trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He now writes for CFA Magazine.

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