Citi Study: Rich Families Hoarding Cash

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EternalOptimist
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Citi Study: Rich Families Hoarding Cash

Post by EternalOptimist » Sat Jan 11, 2014 6:05 pm

A recent study by Citi Private Bank found that wealthy families have about 39% of their assets in cash. Guess they're in the preservation mode?

http://www.cnbc.com/id/101157290
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Re: Citi Study: Rich Families Hoarding Cash

Post by YttriumNitrate » Sat Jan 11, 2014 6:28 pm

So they surveyed people who have a lot of money and keep that money at Citi Private Bank. I'm sorry, but that second part makes me not give a rat's a#$ how those people are investing their money.

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Re: Citi Study: Rich Families Hoarding Cash

Post by abuss368 » Sat Jan 11, 2014 6:29 pm

Market timing until the next crash?
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Re: Citi Study: Rich Families Hoarding Cash

Post by livesoft » Sat Jan 11, 2014 6:30 pm

Maybe they always had 39% of assets in cash? Maybe they just moved bonds to cash? Maybe this is not news?
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Re: Citi Study: Rich Families Hoarding Cash

Post by Ged » Sat Jan 11, 2014 6:39 pm

abuss368 wrote:Market timing until the next crash?
Or using active managers who are doing market timing.

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Re: Citi Study: Rich Families Hoarding Cash

Post by stan1 » Sat Jan 11, 2014 6:44 pm

No willingness or need to take risk.

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Re: Citi Study: Rich Families Hoarding Cash

Post by Gleevec » Sat Jan 11, 2014 6:44 pm

They don't tell you anything about the age distribution. If you are a multimillionaire retiree, with ample retirement savings, why would you take any risk.

If you've already won the game, why play again and risk losing?

Plus, increased taxes on capital gains makes the risk/reward ratio on investment in stocks less favorable; and bonds are not a safe place to park money currently with the Fed winding down

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Re: Citi Study: Rich Families Hoarding Cash

Post by nisiprius » Sat Jan 11, 2014 6:48 pm

Dumb article. Irrelevant to me as I am not that rich. I suspect a conflict of interest as it sounds as if they want to induce these families to invest more in stocks--does Citi Private Bank offer more than checking accounts, I wonder? Which kinds of investments are more profitable for them?
The families were also asked if U.S. stocks were more likely to rise or fall 10 percent over the coming year. Some 65 percent expected a gain. "What does this all suggest?" Wieting asked. "In our view, under-invested bulls."
Does Wieting, then, advocate investing based on one's personal prediction of the next year's stock market return? If 65% of these families said "We think the Panthers will beat the 49ers but we have not placed any bet on the game," would he criticize them for that and call them "under-invested Panther fans?"

P.S. I don't follow sports, just pulled the team names up with Google so if it's actually a game that has already taken place and the outcome is known, well... that's just a dumb mistake, not a feeble attempt at humor.
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Re: Citi Study: Rich Families Hoarding Cash

Post by abuss368 » Sat Jan 11, 2014 7:01 pm

A lot of cash that is losing money every single day to inflation.
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Re: Citi Study: Rich Families Hoarding Cash

Post by dan23 » Sat Jan 11, 2014 7:07 pm

I'm not sure this survey says something about the rich, just something about citi's private wealth clients. The tiger 21 survey they mentioned found little cash holdings (though that group is 10m min, 75m average and the type of people who are willing to pay 30K/yr to belong to such a group).

Also, I believe the 25m min for citi private bank is false though I may be wrong on this - citi offers its private banking to lower net worth people than would qualify by net worth in certain fields - I know they offer private banking to law firm associates who may have negative net worth while clients (not 100% that that and this are the same private banking though): https://www.privatebank.citibank.com/ou ... ciates.htm

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Re: Citi Study: Rich Families Hoarding Cash

Post by nedsaid » Sat Jan 11, 2014 7:49 pm

This is one reason I don't think we are in a stock market bubble. A lot of folks still have fresh memories of the 2000-2002 and 2008-2009 bear markets. There is a lot of cash out there that could continue to fuel a stock market rally. And I expect to see a continuation of the rotation from bonds to stocks.

So even though I am fairly optimistic about the US and International Stock Markets, I am continuing a program of mild rebalancing from stocks to bonds. Next week, I plan to make another purchase into a bond fund. So my personal money flow right now favors bonds over stocks. I am zigging a bit with my money while others are zagging. Quite often, individual investors do the wrong thing.
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Re: Citi Study: Rich Families Hoarding Cash

Post by abuss368 » Sat Jan 11, 2014 8:03 pm

nedsaid wrote:This is one reason I don't think we are in a stock market bubble. A lot of folks still have fresh memories of the 2000-2002 and 2008-2009 bear markets. There is a lot of cash out there that could continue to fuel a stock market rally. And I expect to see a continuation of the rotation from bonds to stocks.

So even though I am fairly optimistic about the US and International Stock Markets, I am continuing a program of mild rebalancing from stocks to bonds. Next week, I plan to make another purchase into a bond fund. So my personal money flow right now favors bonds over stocks. I am zigging a bit with my money while others are zagging. Quite often, individual investors do the wrong thing.
Excellent post. I am doing a little of the same right now too. New cash is going a little more into the bond funds to bring them back to the target allocation. I am not selling equities for bonds as I always deploy new cash in the accumulation phase. We are using Total Bond Index and Intermediate Term Tax Exempt. What bond funds are you rebalancing back into?
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Re: Citi Study: Rich Families Hoarding Cash

Post by Fallible » Sat Jan 11, 2014 8:04 pm

nisiprius wrote:Dumb article. Irrelevant to me as I am not that rich. I suspect a conflict of interest as it sounds as if they want to induce these families to invest more in stocks--...
...
This is what the lead alone would tell me (besides not to read further, this after all being CNBC): "A new survey of family offices by Citi finds that the wealthy are cash heavy—meaning they may fall short of the investment returns they're expecting."

Thing is, most people like to read about the rich.
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Re: Citi Study: Rich Families Hoarding Cash

Post by nedsaid » Sat Jan 11, 2014 8:15 pm

Abuss, I am buying into the Vanguard Total Bond Market and the Vanguard TIPS fund at my workplace. I do this as part of my regular investing program. I also invest in an International Bond Fund at work which in 2013 actually had a positive return. That was the only bond fund I owned that went up last year.

At my favorite mutual fund company, I have rebalanced mostly into TIPS and into an Investment Grade Intermediate Term Bond Fund. I am rebalancing in lesser amounts into GNMA and International Bonds.

At a Brokerage IRA, I have been taking my dividends and buying into an Investment Grade Intermediate Term Bond Fund. The particular fund is pretty well known.

The point is not the particular funds but the types of funds. With TIPS down 9% in 2013, they look like a good place to put these funds. I have always favored the investment grade bonds in the Intermediate Maturity range.

At Treasury Direct, I am also buying I-Bonds as I am able.
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Re: Citi Study: Rich Families Hoarding Cash

Post by VictoriaF » Sat Jan 11, 2014 8:26 pm

Fallible wrote:
nisiprius wrote:Dumb article. Irrelevant to me as I am not that rich. I suspect a conflict of interest as it sounds as if they want to induce these families to invest more in stocks--...
...
This is what the lead alone would tell me (besides not to read further, this after all being CNBC): "A new survey of family offices by Citi finds that the wealthy are cash heavy—meaning they may fall short of the investment returns they're expecting."
Ah, the words! Ah, the emotions! They make falling short of investment returns sound as bad as falling short of the retirement goals.

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Re: Citi Study: Rich Families Hoarding Cash

Post by nedsaid » Sat Jan 11, 2014 8:39 pm

Victoria, I have the mental image of the skier crashing and burning on ABC's Wide World of Sports. The thrill of victory and the agony of defeat.
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Re: Citi Study: Rich Families Hoarding Cash

Post by denovo » Sun Jan 12, 2014 2:24 am

Warren Buffett probably has much as half these people combined and he is not hoarding cash
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Re: Citi Study: Rich Families Hoarding Cash

Post by Call_Me_Op » Sun Jan 12, 2014 8:10 am

abuss368 wrote:A lot of cash that is losing money every single day to inflation.
This is really a non-issue - especially for the wealthy. While that money may be losing 1% per year to inflation, their other funds are more than making up for it. And they have some truly dry powder - in case both stocks and bonds tank due to rising rates.
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Re: Citi Study: Rich Families Hoarding Cash

Post by richard » Sun Jan 12, 2014 8:16 am

Call_Me_Op wrote:
abuss368 wrote:A lot of cash that is losing money every single day to inflation.
This is really a non-issue - especially for the wealthy. While that money may be losing 1% per year to inflation, their other funds are more than making up for it. And they have some truly dry powder - in case both stocks and bonds tank due to rising rates.
This is why the wealthy do so well - they know things others don't, such as the likelihood of rising rates.

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Re: Citi Study: Rich Families Hoarding Cash

Post by EternalOptimist » Sun Jan 12, 2014 12:41 pm

Gleevec wrote:They don't tell you anything about the age distribution. If you are a multimillionaire retiree, with ample retirement savings, why would you take any risk.

If you've already won the game, why play again and risk losing?

Plus, increased taxes on capital gains makes the risk/reward ratio on investment in stocks less favorable; and bonds are not a safe place to park money currently with the Fed winding down
I think this is the point, this less about investing per se and more about managing wealth.
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Re: Citi Study: Rich Families Hoarding Cash

Post by LadyGeek » Sun Jan 12, 2014 12:59 pm

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