Billionaires are hoarding piles of cash

New study finds members of this global elite are stashing an average $600 million each in cash -- 10 times more than a year ago.

By MSN Money Partner 17 hours ago

Image: CEO © Mike Kemp, RubberBall, SuperStockBy Robert Frank for CNBC

 

Billionaires are holding mountains of cash, offering the latest sign that the ultra-wealthy are nervous about putting more money into today's markets.

 

According to the new Billionaire CensusCNBC on MSN Money from Wealth-X and UBS, the world's billionaires are holding an average of $600 million in cash each -- greater than the gross domestic profit of Dominica. That marks a jump of $60 million from a year ago and translates into billionaires' holding an average of 19 percent of their net worth in cash.

 

"This increased liquidity signals that many billionaires are keeping their money on the sidelines and waiting for the optimal moment to make further investments," the study said.

 

Indeed, billionaires' cash holdings far exceed their investments in real estate. Their real-estate holdings average $160 million per billionaire, or about one-fifth of their cash holdings.

Simon Smiles, chief investment officer for Ultra High Net Worth at UBS Wealth Management, said that the billionaire families and family offices he talks to are focused largely on the same question: What to do with all their cash.

 

"The apparent safety of cash, reinforced by the painful psychological experience of the 2008-09 global financial crisis and the subsequent troubles within the European Monetary Union, likely reinforces the tendency to favor this cautious allocation strategy," Smiles said in the report.

 

But he said creeping inflation threatens to erode cash values, so he's advising clients to take on "considered amounts of risk" with interest rate swaps, credit default swaps, or selling rates or foreign exchange derivatives.

 

Yet in today's increasingly frothy market environment, and after the hangover of 2009, today's billionaires prefer a return of their assets

rather than a return on assets. And in fact, they may be happy with a small loss rather than risk a larger one.

 

Smiles said that the large cash holdings aren't specific to billionaires -- millionaires and multimillionaires are also holding cash hordes, on the order of 20 percent to 30 percent of their net worth.

 

The wealthy are still traumatized by the financial crisis in 2009, when many wealthy families were scrambling for cash, he said. What's more, many wealthy families missed out on the big financial-market rallies in 2012 and 2013 and feel like they missed the best chance to invest.

 

"It's the combination of many people having been under-invested in equities and under-invested in wide risk assets having seen rallies and missed those rallies," he said. "Things are no longer cheap, and it's emotionally hard to get invested now."

 

Related at CNBC.com:

 

 
325Comments
16 hours ago
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The main thrust of this story is hold on to your hat, we are gonna drop like a rock.  Billionaires aren't hoarding money if they think the economy is going to get better or even if it is going to correct a little. They are hoarding it because they expect the bottom to fall out and they want to be able to get back in at the bottom.

14 hours ago
15 hours ago
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People wonder what's the problem with the economic growth and financial independence just take one look at our tax structure and the many corporations that are stock piling cash over seas.  Microsoft alone owes over 27 billion on almost 100 billion dollars they have over sea's.  The people are not the problem  the laws that allow them to do so is
16 hours ago
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"Billionaires are holding mountains of cash, offering the latest sign that the ultra-wealthy are nervous about putting more money into today's markets."

The folks with the most WEALTH are always locking in Profits regardless of the state of either the Economy or the Stock Markets. Yet we always see certain folks telling us to do just the opposite. They expect us to be Bag-holders while they laugh all the way to the BANK. They aren't nervous, they are sitting on Mountains of Cash. However everyone else, they should be nervous.
15 hours ago
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What?!? The "job creators" aren't using their mountains of cash to create jobs? What a massive, gigantic, enormous surprise! I guess republicans better find a new moniker for these guys.
15 hours ago
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The Bible says "The love of money is the root of all evil"  Many Billionaires LOVE money.
15 hours ago
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I could really careless what they do with their cash, let me see them spend it if they drop dead like Steve Jobs did, a lot of good all that money did for him .....
16 hours ago
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Why don't we pass laws to make it more financially sensible to invest in business here in the US and not laws that make hoarding money more favorable??  All it would take is common sense legislation from a bunch of idiots that are only interested in hoarding money...........  oh right.  Never mind.

 

 

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Having 20% of your portfolio in cash is just smart. This is an indicator of nothing!
15 hours ago
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$600 million per billionaire? Really? That is just their cash RESERVES? The lowest 20% of American households have a median net worth of $6400 and some of the respondents think that MSN is cooking up an issue?

The income/wealth gap is beyond obscene- It is to be our downfall.  Many in the lower levels of income have little or no savings and cannot afford even an unexpected expenditure of $400- Retirement will be on SS only and our politicians want to reduce benefits because our country can't afford even subsistence support?

$600 million per billionaire- Let's think about the system we have created!

14 hours ago
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Some hoard money and others have whore'd for money...
15 hours ago
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...billionaires ain't the only ones, I'm retired and surviving on a fixed income and I still try to hold on to as much as I can because while I love my country, I wouldn't waste the time it would take to whizz on my government...most especially the current administration...
15 hours ago
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Kind of explains why the economy is still in the toilet.
15 hours ago
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The wealthy are all about making more money...so if they are holding on to cash reserves, not that they're "hoarding" it, it's that there is no market stable enough to invest any real amounts of money on. That's the big thing I take from that, that I shouldn't be investing in anything either. Hell, real estate was always the "big basic" to all major wealth plans; if no one on the upper echelon is buying real estate, than that bubble sure ain't over either.
16 hours ago
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The gross domostic profit of Dominica?  Perhaps the writer meant to say Gross domestic product?

 

LOL the writer, and the editor clearly are clueless and this article shouldn't even have been published.  I guess MSN and the socialists are trying to keep the wealth gap war going.  MSN doesn't care about uniting.  MSN wants to divide americans

15 hours ago
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If someone has 5 billion dollars and 600 million of it is in cash that is only 12% of their worth. Not a high percent. I don't know what is a greater cause for conern. The fact that that much money is idle or it could all enter the market . Too many zeroes for me to feel money is as valuable as society treats it. 
16 hours ago
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Love the title of the article...designed to make the wealthy look bad.  While all the while the fact is the wealthy are just being smart with their money and not wanting to enter the market at this point and time.  It's their hard earned money and if they think it's a risky time to invest, they are probably right, as they didn't get to be billionaires by being stupid.  For those who think there should be laws to force them to invest, then you a fool.  This should be a clear sign to the middle class not to listen to those who solely make their money by conning people to invest in the stock market.  The stock market is a rigged affair, no better than spending your money in Vegas.  Why cause the folks who really profit off the stock market (the folks on Wall-Street and all brokerage firms) inflate and manipulate the system for their own gain.  I mean really and IPO in China gets pimped and pumped up so that lots of people rush in and then watch as the value settles back down to reality while they lost what was invested.  This is the shame of the modern stock system.
15 hours ago
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That tells you what is heading our way, so sit down, place your head between your legs and kiss your financial as goodbye ! 
16 hours ago
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Who cares if they hoard their money.  Even if they spent it, democrats argue that trickle down doesn't work.

 

So even if they did spend it, according to democrats, it wouldn't make a difference in the economy.

 

Knowing this, why is it bad to "hoard" their money?

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Wealth is like manure, doesn't do much good if not spread around.

The top 20% of the populace controls 89% of the wealth. Of that amount, the top 0.01% control 37%. The bottom 80% only control 11%. This shift of wealth to the elite has decimated the middle class.

It's no wonder the congress is hesitant to tax the top 2%, since individually they are in this group. Our constitutional republic has evolved into a plutocracy thanks to over four decades of poor governance due to greed and corruption by our elected reps.

In answer to the question, a balance of power.


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