Ray Dalio runs the world’s largest hedge fund and has accumulated $17 billion in personal wealth. But now, he’s focusing his analytical skills on the 60% of the U.S. population that has no wealth. In a post published yesterday on LinkedIn, Dalio painted a statistical portrait of the bottom 60%, and it’s a grim one. Some excerpts:
- Real incomes for this group have been flat to down since 1980.
- Only about a third of this group saves any of its income. Most would struggle to come up with $400 in an emergency.
- Those in the top 40% have benefited disproportionately from changes in asset values. The bottom 60% have less liquid forms of wealth (cars, real estate) and more costly forms of debt (student loans, credit card debt).
- As a result, the average person in the top 40% now has ten times the wealth of the average person in the bottom 60%. That’s up from six times in 1980.
- The top 40% also spend four times more on education than the bottom 60%. This creates a self-perpetuating problem, as education increasingly defines the class divide.
- Since 1980, divorce rates have more than doubled among middle-age whites without college degrees, from 11% to 23%.
- Premature death rates for those in the bottom 60% are up by about 20% since 2000. The biggest contributors to that are drugs and poisoning (up 2x since 2000) and suicides (up 50% since 2000.)
In Dalio’s view, the rising inequality is contributing to increased political polarization and reduced trust in government, financial institutions, and the media, which are all at 35-year lows.
You can read the full post here. The kicker is this: Dalio says the divide will only get worse in the next 5 to 10 years, both because of a demographic squeeze that puts stress on pension, healthcare, and debt promises; and because of the effects of technological change on employment and wealth.
More news below.
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As expected, Xi Jinping appears to have emerged from the Chinese Communist Party’s congress with his power much enhanced. Xi was awarded the rare accolade of having his doctrine formally enshrined in China’s constitution, alongside that of Mao Zedong and Deng Xiaoping. “Thought on Socialism with Chinese Characteristics for the New Era” sounds a lot better than “Techno National Socialism” after all. The only surprise from the new line-up of the CCP’s all-powerful Central Committee was the omission of Wang Qishan, who had led the country’s anti-corruption campaign. Fortune
• U.S. to Announce New Refugee Policy
The Trump administration will allow refugee admissions to the U.S. to resume for all countries but with new, improved vetting rules, The Wall Street Journal reported officials and others as saying. The refugee program was put on hold in June for four months as part of the larger travel ban ordered by the president with the aim of stopping potential terrorists. That period expires on Tuesday. WSJ, subscription required
• Dividend, We Fall
The stock market can (just about) accept that a company of GE’s profile and maturity doesn’t grow much. But what it can’t forgive is a cut to the dividend. Coupon-clippers across the country gave the stock a good kicking yesterday, sending it down 6.3%. At least six analysts have either downgraded the stock or cut their price targets since CEO John Flannery said he would review the dividend as he presented an “unacceptable” set of quarterly results. WSJ, subscription required
• Who Is Going to Assess Them All?
A total of 238 cities, from New York to Chihuahua in Mexico via Calgary and even Puerto Rico, petitioned Amazon for the honor of hosting its second North American headquarters. Georgia offered the company a purpose-built city of its own named, somewhat unimaginatively, Amazon. A decision is expected in the New Year. Fortune
Around the Water Cooler
• Amazon, Again
Amazon has displaced Volkswagen as the world’s biggest corporate investor, according to research by PwC. Its R&D spending rose to $16.1 billion in 2017 from $12.5 billion a year earlier. VW slipped to fifth (not helped by exchange rate effects), behind Alphabet, Intel and Samsung. Pharma continues to be the most research-intense branch, though, with Merck, Roche, Eli Lilly, and AstraZeneca all spending between 21% and 25% of revenue on R&D. PWC
• Aramco’s On-Off IPO
Today, we’re publishing Vivienne Walt’s feature from our November issue on the on-off IPO of Saudi Aramco, the world’s biggest oil company. CEO Armin Nasser was forced to deny rumors yesterday on CNBC that the kingdom was about to shelve the deal, amid concerns that investors wouldn’t meet its valuation unless the company offered more transparency and met the listing requirements of western exchanges. Walt’s story is an eye-opener into how much could change if and when the deal happens. Fortune
• Weinstein Probed as the NDAs Start to Fall
New York attorney-general Eric Schneiderman subpoenaed The Weinstein Company as part of a probe into whether studio officials had violated the law in their handling of abuse claims against its disgraced co-founder Harvey. The FT had reported on Friday that the company’s lawyers had refused independent directors access to personnel files detailing allegations against Weinstein long before the issue erupted earlier this month. In what could be an interesting test of the law around non-disclosure agreements, one of Weinstein’s former assistants broke hers in giving an interview to the FT about her experiences. Fortune
• Singapore, London Sound Alarm Over Mobility and Pollution
The island city-state of Singapore said it will not allow any further increase in the number of cars on its streets from February. It cited the “stiff challenge to our urban quality of life” from the sharp increase in traffic that has gone hand-in-hand with a 40% increase in population since 2000. Also yesterday, London introduced a “toxicity charge” on older, more polluting vehicles. The issue of managing road capacity is only going to get more acute as urbanization progresses, handing the future to those who can best crack transportation as a service. Fortune
Summaries by Geoffrey Smith; email@example.com