April 05 2019

The $400 Emergency

We know, this is shocking, but not new. It means that renewing the tires on a car, or a trip to the hospital would probably lead 130m people into a self-destructing cycle of debt and misery.

The long-term battle remains the same: fight inequality as a matter of survival. In a recent post, Ray Dalio, founder of the eponymous Bridgewater, is the latest of a long list of wise investors to fingerpoint the widening gap between haves and have nots in the economy. To name but two data points, the % of 30-year-olds earning more than their parents went down from 90% in the 70s to 50% today, and real household income of the bottom 60% earner was almost flat over the past 50 years, while it grew by ~40% for the top 40% earners. This wealth gap has roots in education, and most importantly networks, as A.L. Barabasi illustrates in his theory of network.

In short, where you are born and who you know is a stronger factor than luck or even performance in achieving success. The Mar19 college admission scandal is an extreme case in point.

Answering a query from an investor recently of what would be the potential trigger points of the next crisis, we believe that inequality untamed is. In a sense, it has already started, as made apparent in the antagonization of the political field in every democracy.

Access to improved financial wellbeing as a means to reduce inequality is a key-debated topic in the fintech industry. As we just walk out from Fintech Sandbox Demo Day in NYC, it reinforces our belief that (i) financial service providers have the mission to be the gatekeepers of morality and social impact in a post 2007 crisis era, (ii) low-cost, diversified, ETF-invested portfolios are the leanest path to investment management. The fact that hedge funds returned 4.9%, while the S&P500 returned 14% in 1Q19 is again supporting this view. (iii) investment advisers’ prime mission is to educate not only on the financial, but also the social and intellectual aspects of wealth.

Let’s bring down this 40% together!

360 Advisory – Markets