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About Me

Darren Winters is a self made investment multi-millionaire and successful entrepreneur. Amongst
his many businesses he owns the number 1 investment training company in the UK and Europe.
This company provides training courses in stock market, forex and property investing and since
the year 2000 has successfully trained over 250,000 people.

Wednesday, 29 October 2014

Speculate To Accumulate

It is now official, the richest 1% of the world’s population are getting wealthier, owning more than 48% of global wealth, according to a Credit Suisse global wealth report. The wealth scale is as follows; a person needs just $3,650, that also includes the value of equity in their home, to be among the wealthiest half of world citizens and more than $77,000 is required to be a member of the top 10% of global wealth holders. To belong to the richest 1% $798,000 is required.

“Taken together, the bottom half of the global population own less than 1% of total wealth. In sharp contrast, the richest decile hold 87% of the world’s wealth, and the top percentile alone account for 48.2% of global assets,” noted the Credit Suisse global wealth report. Total global wealth has now been estimated at $263trillion, which is a new record and more than twice the $117 trillion calculated for 2000. The report found that the UK was the only country in the G7, group of seven of the most advanced economies, to have recorded rising inequality in the 21st century. The wealth gap has widened and is more concentrated than at the beginning of the millennium. A total of just 85 of the richest people across the globe now own one trillion dollars of wealth, which is the combined wealth of the poorest 3.5 billion of the world’s population.

“These figures give more evidence that inequality is extreme and growing, and that economic recovery following the financial crisis has been skewed in favour of the wealthiest. In poor countries, rising inequality means the difference between children getting the chance to go to school and sick people getting life saving medicines,” said Oxfam’s head of inequality Emma Seery.

“In the UK, successive governments have failed to get to grips with rising inequality. This report shows that those least able to afford it have paid the price of the financial crisis whilst more wealth has flooded into the coffers of the very richest.”

But perhaps there’s something more behind the reason why wealth is more skewed towards some people rather than others?

Has something changed in the economy? If we look at wealth creation over the last century we will notice that there was a distinct link between raising productivity in the economy and accumulating wealth. For example, in the last century the most successful auto-mobile entrepreneurs figured out how to mass produce autos for the masses and make a profit, they built factories, employed people, provided work for the local community. The mas-production of autos made them affordable, which improved the mobility of the masses and raised productivity in the economy. Similarly, the entrepreneurs who built the rail roads in the 19 century employed resources, machinery and people. Their wealth was linked to improving productivity in the economy. The rail roads made it cheaper to move goods and people around the country so the economic benefits were spread across the population.

But today the link between productivity and the accumulation of wealth no longer exists. Take the example of a farmer planting seeds in a field and a trader speculating on grain prices. In some respects both activities are similar, the farmer is taking a risk when he decides to cultivate his land and plant seeds, praying that bad weather won't destroy his crops. Likewise, the trader is taking a risk when he purchases a contract for wheat at today's prices for sometime in the future, say six months or a year. While both the trader and the farmer are in fact risk takers there is a fundamental difference between the two, the latter profits are gained by making investments in the economy, purchasing seeds, maybe machinery, a tractor employing a farmhand etc. So, in the case of the farmer, there is a link between production, profit and the creation of wealth.

The global derivatives market today is worth 1,200 trillion dollars, that figure is so large that it is difficult to comprehend. Let me put it another another way, the global derivatives market is twenty times larger than the entire global economy. So we have a market, where there is no production, there are no machines, factories or people employed in the production of goods, which is worth twenty times more in monetary terms than the real economy. Fortunes are literally made and lost over night, new anonymous millionaires are created daily on this mysterious market.

Despite the derivative market's enormous size, 72 times larger the world's biggest economy, the US, the derivatives market is relatively unknown to the public. If you where to ask 10 people outside a supermarket do they know what a derivative is, you would be lucky if more than two would know the answer. Yet everyone knows how David Beckham got famous. Amazing!

Bearing in mind that the derivative market is 20 times larger than the global economy, then it becomes fairly apparent that the top traders, speculators, investors are amongst the world's 100 richest people. Warren Buffet, George Soros are just a few that come to mind, but there is a growing list of mega rich traders.

So it is true that speculating/investing, if it is successfully done, is one of the main routes to accumulating wealth today.

Increased stock-market values raised the wealth of stockholders in Germany on average by 22.6 percent and thirty percent in Canada and France. Most of the world's new wealth was created in China and developing nations between 2000 and 2014. Emerging markets accounted for 11. 4 percent of wealth. Asia and China were the largest emerging wealth creators in the emerging markets. Global wealth will grow in 2019 by 40 percent and reach 369 trillion USD. Emerging markets will account for 26 percent more than double of what they are now .The number of millionaires is expected to increase from 35 million today to 50 million in 2019, according to the report.


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