See, this is the fiction that makes everyone panic. For most of the “wealthy”, the majority of their wealth is actually held in stocks/bonds/other market devices, etc…
Even with the relatively small amount that they use to live (compared to their overall “wealth”), they still live very comfortably. Millions per year of the hundreds of millions or billions that make up their “wealth”.
The wealth numbers are often just whatever their current holdings are worth of they sold everything right now.
The value that the “wealthy” get from their holdings isn’t in the capital cost, it’s primarily from the year over year dividends/interest that they get from holding it. The market value of the stock or whatever is basically meaningless, as long as they get their pay out at the end of the year, they couldn’t care less what the holdings are worth today.
However, with all of that said, they do care because a large part of that figure is how confident the market is that the organization behind that holding will be able to deliver their dividends… If confidence is shaken by some organizational change, eg, new CEO takes charge or something, then the confidence that the market has in the organization to deliver goes down, and so does the market cost of those assets.
The fact that they will be paid their dividends is the part that they care about… Nothing else matters. The book value of all their assets will basically never be realized, as long as those companies are delivering what they want, dividends.
If that’s true they won’t make anything on the upswing.
See, this is the fiction that makes everyone panic. For most of the “wealthy”, the majority of their wealth is actually held in stocks/bonds/other market devices, etc…
Even with the relatively small amount that they use to live (compared to their overall “wealth”), they still live very comfortably. Millions per year of the hundreds of millions or billions that make up their “wealth”.
The wealth numbers are often just whatever their current holdings are worth of they sold everything right now.
The value that the “wealthy” get from their holdings isn’t in the capital cost, it’s primarily from the year over year dividends/interest that they get from holding it. The market value of the stock or whatever is basically meaningless, as long as they get their pay out at the end of the year, they couldn’t care less what the holdings are worth today.
However, with all of that said, they do care because a large part of that figure is how confident the market is that the organization behind that holding will be able to deliver their dividends… If confidence is shaken by some organizational change, eg, new CEO takes charge or something, then the confidence that the market has in the organization to deliver goes down, and so does the market cost of those assets.
The fact that they will be paid their dividends is the part that they care about… Nothing else matters. The book value of all their assets will basically never be realized, as long as those companies are delivering what they want, dividends.