How the 0.001% invest • Hacker News Board

Re: How the 0.001% invest

#141

Post by switzer » Mon, Dec 17, 2018, 5:44 PM UTC

diminoten wrote: post #114

WhompingWindows wrote: post #92

Earlier quoted context omitted.

It's extremely interesting - you're not interested in the investments of someone who buys investigative journals and makes rocket/space exploration companies? While these may be little side-projects to you and Jeff, to the rest of us they are very very important.

Why are they very very important? Not the companies, but the fact that Jeff Bezos in particular has invested in them; what's "very very important" about that? Do you think these companies wouldn't exist or be as capable without Bezos? Why do you think that?

Look at the changes that have occurred with Washington Post in the five years since Bezos bought them. Pretty clear that WaPo benefitted from Bezos' leadership.

https://www.fool.com/investing/2017/06/23/the-washington-pos...

Re: How the 0.001% invest

#142

Post by pvarangot » Mon, Dec 17, 2018, 5:46 PM UTC

dgudkov wrote: post #139

drewrv wrote: post #129

Earlier quoted context omitted.

At a micro level, taking money out of a deposit and investing it does not create inequality. At a macro level, the fact that simply having wealth begets more wealth in a way that labor cannot accomplish is a driving force behind inequality.

>simply having wealth begets more wealth It's not a 100% rule. Lots of wealth has been lost due to wrong investment. Many rich people lose their fortunes.

Even if it happened rarely capital gains would be a force driving inequality as the barrier to entry into investing your capital to offset for doing actual work remains high. That it sometimes fail would be sad for the ones it failed for, but still doesn't stops it from being a driving force for a big effect on the economy.

Re: How the 0.001% invest

#143

Post by [deleted] » Mon, Dec 17, 2018, 5:57 PM UTC

petra wrote: post #127

alehul wrote: post #116

Earlier quoted context omitted.

To offer a better and less political answer: the reason that an UHNWI doesn't park their entire net worth in an index fund is because there is some probability, however minute, that the markets will collapse and never recover. Additionally, we could say that success in active investing is (often) a function of how much you're willing to spend to find the right opportunities. For an UHNWI, this is likely enough to bea…

>> we could say that success in active investing is (often) a function of how much you're willing to spend to find the right opportunities Is this also true at the level of the small investor ? Say I'm willing to spend a few hours a day learning and researching about stocks. Does this mean that over time, I'll be able to significantly beat the index funds ? Or is it, more likely, a fool's errand, because that as a sm…

[deleted]

Re: How the 0.001% invest

#144

Post by diminoten » Mon, Dec 17, 2018, 6:00 PM UTC

SeanAppleby wrote: post #137

diminoten wrote: post #114

Earlier quoted context omitted.

Why are they very very important? Not the companies, but the fact that Jeff Bezos in particular has invested in them; what's "very very important" about that? Do you think these companies wouldn't exist or be as capable without Bezos? Why do you think that?

He doesn't mean it's particular to Bezos, but that wealthy people throwing massive (to anyone but them) amounts of money into extremely speculative bets on large issues for the long run of society is a big deal. The government and major corporations are slow and inertial, invested in iterative improvements on existing paradigms, as low risk small improvements are baked into the foundation of the incentive structure f…

That's not at all what he said, and nothing you've said answers my question -- why is Jeff Bezos in particular "very very important"?

Re: How the 0.001% invest

#145

Post by jjeaff » Mon, Dec 17, 2018, 6:09 PM UTC

cascom wrote: post #122

savanaly wrote: post #106

Earlier quoted context omitted.

>They said this is partly because they get access to deals that don't hit the wider market and you need serious cash to get in the room to have that chat. This is something I hear a lot and I just don't get. Are the people on the other side of those deals just...not greedy? After all, you are implying that the deal has better expected returns than what people are buying on margin in public markets, so why doesn't the…

you're missing a couple of other factors, one is timing and being bale to move quickly, a perfect example is the warren buffet's investment in GS during the financial crisis [1]. GS didn't show that deal to the world - it went to someone that they knew could act quickly (one decision maker) and stroke a big check.... [1] https://qz.com/67052/heres-how-warren-buffett-made-3-1-billi...

As the articles alluded to, buffets investments during the crisis (I think he also took a big bet on BoA), were not a result of him being able to move quickly. They didn't need the money as badly as they needed the good PR. If the headlines read that GS had raised some capital from a bunch of "no name" investors, that wouldn't have had nearly the impact of their press release that THE Warren Buffet just invested billions in GS - so obviously he thinks we are a good bet.

Now of course, buffet also needed timing and the ability to act fast, but lots of people had money to invest then.

Re: How the 0.001% invest

#146

Post by cporios » Mon, Dec 17, 2018, 6:10 PM UTC

dgudkov wrote: post #112

I struggle to understand the point of the article. >Rich clients have taken a closer look at private banks’ high fees and murky incentives, and balked. OK. Rich clients were not happy with the way external managers managed their funds and decided to do it themselves. I get it. >As they grow even bigger in an era of populism, family offices are destined to face uncomfortable questions about how they concentrate power…

I am honestly curious as to what you found confusing. I think it's fairly well structured and written.

> How on Earth is it related to populism?

A populist would generally be opposed to the concentration of wealth and power in a small subset of the population. Populism is on the rise today, as is the trend of family investment offices which are a result of concentrated wealth and power. Thus family offices are destined to face uncomfortable questions by populists.

> they didn't create inequality. Yes, you're agreeing with the author. The surrounding sentances from the sentence you quoted:

"[...] the objections to them [family offices] will rise exponentially. The most obvious of these is the least convincing — that family offices have created inequality. They are a consequence, not its cause."

The article does not say that family offices have created inequality, it actually says that they have not.

Regarding the "point of the article":

This is an Economist "Leader", which is a one-page summary of the three-page full article published in the print version of the newspaper. It says the following:

1) Explains what "family offices" are: rich individual's DIY private investment firms.

2) Explains why the populist argument "family offices create inequality" is wrong.

3) Presents three arguments for "family offices are bad" with which the author does not agree, and their rebuttals:

a) "family offices destabilize the financial system" - but data shows that actually they are doing the opposite.

b) "family offices magnify the power of the wealthy" - but this is against the interests of their owners who want to diversify.

c) "family offices might beat regular investors because they have privileged access to information" - they don't outperform the markets right now, but privileged access to information and insider trading could be a problem with family offices.

The author arrives at the conclusion that family offices are a force for good, but more regulation and transparency might be required to address (3c).

Re: How the 0.001% invest

#147

Post by the_watcher » Mon, Dec 17, 2018, 6:10 PM UTC

jniedrauer wrote: post #132

dgudkov wrote: post #112

I struggle to understand the point of the article. >Rich clients have taken a closer look at private banks’ high fees and murky incentives, and balked. OK. Rich clients were not happy with the way external managers managed their funds and decided to do it themselves. I get it. >As they grow even bigger in an era of populism, family offices are destined to face uncomfortable questions about how they concentrate power…

> If the author's explanation of what family offices are is correct, they didn't create inequality. If you take your money from a deposit and decide to invest yourself you don't create inequality. You undertake higher risk and potentially receive higher award. Inequality is a mathematical statement about the distribution of wealth. It has nothing to do with risk or fairness or "rewards". If you accumulate wealth in o…

The point is that whether or not a super rich person has that money in a family office or not, the inequality is the same

Re: How the 0.001% invest

#148

Post by jjeaff » Mon, Dec 17, 2018, 6:13 PM UTC

compiler-guy wrote: post #133

petra wrote: post #127

Earlier quoted context omitted.

>> we could say that success in active investing is (often) a function of how much you're willing to spend to find the right opportunities Is this also true at the level of the small investor ? Say I'm willing to spend a few hours a day learning and researching about stocks. Does this mean that over time, I'll be able to significantly beat the index funds ? Or is it, more likely, a fool's errand, because that as a sm…

It's a fool's errand. There are people who spend 80 hours a week doing this kind of analysis at firms that pay millions of dollars a year for the most sophisticated data and analysis, and those folks still don't beat the market more than randomly. These firms pay hundreds of millions of dollars to improve their trading systems' latency by just a few milliseconds. You don't have a chance unless you are doing the same…

I'll just add my agreement. Fool's errand.

Some of the high frequency traders can rake it in. But they are using teams of highly paid analysts to look for opportunities and those opportunities don't last long before they have to move on to the next thing. And I would assume it's getting harder and harder for them as time goes on and more enter that market.

Re: How the 0.001% invest

#149

Post by throwizzle » Mon, Dec 17, 2018, 6:15 PM UTC

potatofarmer45 wrote: post #42

I've worked for a family office in Hong Kong. What was really telling for me was how the rate of return KPI was measured. We were not benchmarked against the S&P 500, or any index. We were measured directly against the fund of another frenemy family. So long as the fund outperformed the other family, all was good. It's crazy because you could be underperforming treasury bonds, and still be good because the other offi…

A close friend of mine works for the Rothschild family office. He described to me how Lord R and his son don't see eye-to-eye on the family money. A lot of time has apparently been spent on reports making Lord R look better than his son at investing.

Re: How the 0.001% invest

#150

Post by jjeaff » Mon, Dec 17, 2018, 6:15 PM UTC

wil421 wrote: post #104

barrow-rider wrote: post #103

Earlier quoted context omitted.

Depends on risk tolerance and how flashy they want to be. Donald Trump, if his public finances are to be believed, would have roughly the same net worth had he just invested the money his dad gave him in mutual funds. Instead he managed to create a series of failing companies and questionable ties... but managed to live the high life and stamp his name on bloody everything.

Well it got him into the White House. I guess for Trump the image of being an important business man is worth much more than money.

Which is why it's so interesting that the NY Times article ( that exposed his success as a product of a huge inheritance) didn't get much traction among any of his followers.