Category Archives: Billionaire

Prince Harry Faces A Monumental Federal And CA State Tax Bill

Prince Harry could face a ‘monumental’ tax bill unless he takes a break from his £11 million Californian mansion next month, according to experts.

The Prince moved to Los Angeles with his wife Meghan and their baby son Archie in early May after leaving a rented mansion in Vancouver, Canada, in March.

The couple were first reported to be staying at a sprawling Beverly Hills mansion owned by TV producer Tyler Perry on May 7 – meaning that, as of today, Harry has been in the US for at least 151 days. If he reaches 183 days he is legally liable to pay taxes there.

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Throttle Up America

“For a successful technology, reality must take precedence over public relations, for Nature cannot be fooled.” – Richard Feynman – Rogers Commission

“It appears that there are enormous differences of opinion as to the probability of a failure with loss of vehicle and of human life. The estimates range from roughly 1 in 100 to 1 in 100,000. The higher figures come from the working engineers, and the very low figures from management. What are the causes and consequences of this lack of agreement? Since 1 part in 100,000 would imply that one could put a Shuttle up each day for 300 years expecting to lose only one, we could properly ask “What is the cause of management’s fantastic faith in the machinery? … It would appear that, for whatever purpose, be it for internal or external consumption, the management of NASA exaggerates the reliability of its product, to the point of fantasy.” – Richard Feynman – Rogers Commission

(Jim Quinn) The phrase “Throttle Up” jumped into my consciousness in the last week when Trump and his coronavirus task force of government hacks and bureaucrat lackeys announced the guidelines for re-opening America, as if a formerly $22 trillion economy, tied to a $90 trillion global economy, could be turned off and on like a light switch. Clap off, clap on. It just doesn’t work that way. The arrogance and hubris of people who think they can declare a global shut down for a virus and think they can easily deal with the intended and unintended consequences of doing so, is breathtaking in its outrageous recklessness and egotistical belief in their own infallibility.

This contemptible belief in their own superiority has permeated every fiber of those who rule over us, particularly among captured central bankers, corrupt politicians, bought off scientists, and billionaire oligarchs. It is the same groupthink, purposeful failure to address risks, and willfully ignoring those in the trenches that murdered seven astronauts on January 28, 1986 and has created the 2^nd Great Depression of today. “Throttle Up” is going to result in the same outcome as it did in 1986.

Thirty-four years ago, on a cold January morning, Space Shuttle Challenger thundered into a crystal-clear blue Florida sky on its 10^th voyage into space. The seven astronauts, including civilian Christa McAuliffe, put their trust in the “experts” from NASA, Thiokol, and Rockwell that the shuttle was safe and launching when the temperature was 30 degrees would not pose any added risks. When Richard Covey in Mission Control informed the crew to “go at throttle up”, they expected what their training told them would happen.

Instead, Space Shuttle Challenger exploded in a horrific display witnessed live on TV by 17% of the American population. School children all over the country were watching in their classrooms because McAuliffe was a school teacher chosen from thousands to go into space. It was a tragedy that shook the nation and led to one of Reagan’s better speeches that night, where he addressed the nation’s school children.

“I want to say something to the schoolchildren of America who were watching the live coverage of the shuttle’s takeoff. I know it is hard to understand, but sometimes painful things like this happen. It’s all part of the process of exploration and discovery. It’s all part of taking a chance and expanding man’s horizons. The future doesn’t belong to the fainthearted; it belongs to the brave. The Challenger crew was pulling us into the future, and we’ll continue to follow them.”

And he ended with this line from the poem ‘High Flight’:

“We will never forget them, nor the last time we saw them, this morning, as they prepared for their journey and waved goodbye and ‘slipped the surly bonds of Earth’ to ‘touch the face of God.’”

Thus, began the politician’s use of death to create heroes when human error, hubris, and recklessness is the true cause of avoidable tragedy and despair. Those seven astronauts were not heroes, they were victims. Just as we are all victims of the incompetency, arrogance, corruption and greed of those who lead our government, financial system, and corporate fascist oligarchy passing for capitalism in this globalist-controlled fraud of a former republic.

Using victims to create false heroes has now been elevated to an art form by politicians, the corporate media and mega-corporations to push whatever agenda supports their narrative. The propaganda machine is their most useful tool, as decades of dumbing down the public through government school indoctrination has created millions of pliable useful idiots who will believe anything presented by “experts” on the boob tube. The fear and panic created by politicians and the media about a virus only marginally more dangerous than the common flu is the perfect representation of this power over reality.

The Space Shuttle Challenger disaster is a perfect analogy for the current debacle being perpetrated on the American people by fecklessly corrupt authoritarian politicians, IYI medical “experts”, and fear mongering fake news media pushing the narrative in whatever direction benefits their bottom line. There is the simple technical reason why the Challenger blew up and then there is the real reason – the truthful explanation. What we must understand from history and experience is, if we don’t accept the narratives pushed by “experts” and think critically based upon facts, the truth will eventually be revealed.

The immediate cause of the explosion was a failure in the O-rings sealing the aft field joint on the right solid rocket booster, causing pressurized hot gases and eventually flame to “blow by” the O-ring and contact the adjacent external tank, causing structural failure. The truth is, decisions made and not made over years sealed the fate of those victims, just as we are facing today with this man-made global catastrophe.

After the shuttle disaster, politicians do what they do best, create a commission to cover-up the true cause and protect the establishment from blame. It was led by William Rogers, a government bureaucrat for decades, along with numerous other people with a vested interest in protecting NASA, the massive defense corporations sucking off the government teat, and the crooked politicians supporting NASA.

There were a couple of members from the trenches, like Sally Ride and Chuck Yeager, but the thorn in the side of the establishment was theoretical physicist and Nobel Prize winner Richard Feynman. Despite being racked by cancer, Feynman reluctantly agreed to join the commission, knowing he was going to be out of his element in the swamp of Washington D.C. The nation’s capital, he told his wife, was “a great big world of mystery to me, with tremendous forces.”

Feynman immediately created problems by thinking outside the box and having the gall to ignore the excuses and lies of high-level managers at NASA, Thiokol and Rockwell, while seeking the opinions of the actual engineers who did the real work. His unwillingness to toe the company line irritated the old guard looking to cover up the truth. During a break in one hearing, Rogers told commission member Neil Armstrong, “Feynman is becoming a pain in the ass.”

The establishment always thinks anyone who questions their authority or expertise is a pain in the ass, at best. Often, they treat anyone with an opposing viewpoint as the enemy, and will undertake any means to shut them up and destroy them. Witness how YouTube and Google are currently memory holing anything questioning the establishment narrative about this virus or Joe Biden’s sexual assault on a young woman as a Senator. Feynman embarrassed the “experts” on national TV when he conducted a simple demonstration of why the shuttle blew up.

“I took this stuff I got out of your [O-ring] seal and I put it in ice water, and I discovered that when you put some pressure on it for a while and then undo it, it doesn’t stretch back. It stays the same dimension. In other words, for a few seconds at least, and more seconds than that, there is no resilience in this particular material when it is at a temperature of 32 degrees. I believe that has some significance for our problem.” – Richard Feynman

The truth is top management at NASA knew the O-rings were defective in 1977 and contained a potentially catastrophic flaw. NASA managers also disregarded warnings from engineers about the dangers of launching posed by the low temperatures of that morning, and failed to adequately report these technical concerns to their superiors. Thiokol engineer Bob Ebeling in October 1985 wrote a memo—titled “Help!” so others would read it—of concerns regarding low temperatures and O-rings.

There were numerous teleconferences on the 27^th of January where Ebeling and other engineers argued against the launch due to the freezing temperatures. According to Ebeling, a second conference call was scheduled with only NASA and Thiokol management, excluding the engineers. Thiokol management disregarded its own engineers’ warnings and now recommended the launch proceed as scheduled. Ebeling told his wife that night Challenger would blow up. He was right.

The Commission attempted to let NASA’s culture off the hook with no recommended sanctions against the deeply flawed organization. Feynman could not in good conscience recommend NASA should continue without a suspension of operations and a major overhaul. His fellow commission members were alarmed by Feynman’s dissent. Feynman was so critical of flaws in NASA’s “safety culture” that he threatened to remove his name from the report unless it included his personal observations on the reliability of the shuttle, which appeared as Appendix F.

The quote at the beginning of this article about upper management believing there was only a 1 in 100,000 chance of disaster, when the odds were really 1 in 100 or less, came from Feynman’s dissent in Appendix F. The fools at NASA and on the Commission didn’t understand or willfully ignored Feynman’s first principle:

“The first principle is that you must not fool yourself — and you are the easiest person to fool.” – Richard Feynman

The truth stands on its own and is self-evident. Feynman is an example of an actual hero, not an MSM touted hero like Bernanke, Paulson, Geithner, Powell and the dozens of other psychopaths in suits who have been portrayed in the press as brilliant financial minds that saved the world. Real heroes take a singular stand for the truth, when everyone else goes along with mistruths, half-truths, and false narratives of those with a subversive self-serving agenda. The world is inundated in a blizzard of lies, designed to further the plans of those who control the levers of power and wealth.

Lies, backed by an unceasing stream of propaganda and fear, are being used to panic the masses into willingly abandon their freedoms, liberties and rights for the chains of false safety, security, and state control over every aspect of their lives. It is astonishing to watch in real time as a vast swath of America cowers in their homes, as demanded by their authoritarian elected leaders, while their livelihoods and net worth are purposely destroyed to benefit the .1% ruling class.

I see multiple analogies today with the shuttle disaster and the lessons learned and not learned. The leadership of NASA did not learn, as the same disregard for facts and data led to the Space Shuttle Columbia disaster seventeen years later.

Just as the mid-level engineers at Thiokol warned of imminent disaster for years before the tragedy, there have been voices in the wilderness (scorned and ridiculed as conspiracy theorists) warning about the reckless arrogance of the Federal Reserve and their Wall Street owners, as they pumped up the largest financial bubble in world history as their solution for the catastrophe created by their previous monetary disaster in 2008. Just as the hubristic out of touch leadership of NASA murdered fourteen innocent astronauts, the Fed has now twice destroyed millions of lives in the last twelve years.

These self-proclaimed experts have known the financial system was going to explode since the middle of 2019 when they began a series of desperate ruses, behind the curtain of the debt saturated Ponzi scheme, to keep the Wall Street cabal and hedge fund billionaires from facing the consequences of their fraudulent monetary machinations.

The surprise cutting of interest rates and emergency repo operations every night as we entered 2020 covered up the imminent disaster, as the mindless Harvard and Wharton MBAs programmed their high frequency trading computers to buy, buy, buy. Best economy ever. Greatest in the history of the world. Stock market at all-time highs. Then the China flu arrived, just in time. A quick 30% plunge in the stock market was all the Fed needed to rescue their true constituents – Wall Street and billionaire hedge funds – with $6 trillion, under the guise of saving the financial system for the little people.

If you want to figure out who benefits from a man-made crisis, just follow the money. The Federal government has committed at least $3 trillion of your grandchildren’s money to the crisis thus far, with the Federal Reserve announcing another $6 trillion of monetary support. That’s $9 trillion, or $70,000 per household. The average household size is 2.5. If we assume each household got their $1,200 Covid-19 rebate (actually just giving them back the taxes they already pay), that’s $3,000 per household.

A critical thinking individual might wonder who got the other $67,000 of stimulus, or 95.7% of the money allocated to “save America”. It certainly hasn’t made its way to small business owners who are going out of business faster than burning gas through a defective O-ring. If only $400 billion is making its way into the pockets of formerly working Americans, where did the other $8.6 trillion go?

It went directly into the pockets of Wall Street bankers, hedge fund managers, and the biggest corporations on the planet. The Fed has used this faux crisis to further enrich and bailout the richest men on the planet, while again dropping interest rates to zero and throwing grandma under the bus again. Let her eat cat food, declares Jerome Powell, champion and hero of downtrodden bankers. He’ll be “earning” $25 million a year from Wall Street as his payoff, the minute he saunters out of the Eccles Building in a couple years.

As unemployment approaches 20%, GDP plunges by 30%, food banks are running out of food, citizens remain locked in their homes under threat of arrest, and human misery approaches 1930 Great Depression levels, the Fed has managed to buy enough toxic debt and artificially rig the stock market, to engineer a 27% surge from its March lows. We should all applaud the brilliance of Powell and his fellow sycophants, as they have saved the asses of the .1%, for now.

The fate of this country was sealed well before this overblown hyped coronavirus appeared, to accelerate our demise. The warnings about too much debt, rigged financial markets, unrestrained politicians running trillion dollar deficits, silicon valley giants conspiring with the Deep State to turn the country into a surveillance state, a military industrial complex creating conflict around the globe, and a state media propaganda machine providing false information to the masses, were dismissed by those who could have acted.

The deficit is now expected to hit $3.7 trillion in 2020, pushing the national debt to $27 trillion. This country is 231 years old and 85% of our debt has been taken on in the last 23 years. The Fed’s balance sheet was $800 billion in 2008. It will shortly surpass $10 trillion, just a mere 1,250% increase in 12 years. Do you understand the analogy with the Space Shuttle Challenger yet?

We’ve left the launchpad at the same rate and angle as the Fed balance sheet. Those in charge assure us they have everything under control, but the coronavirus will prove to be our frozen O-ring. It has been decades of mismanagement, corruption, bad decisions, horrible leadership, delusional thinking, herd mentality, and an inability to summon the courage to deal with critical problems before they blew our country into a million smoking pieces of debris.

Average Americans are trapped in the crew cabin relying on Trump, Powell, Mnuchin, and a myriad of other “experts” to safely launch the American economy back into space. Trump has convened a re-opening task force consisting of dozens of CEOs from the biggest mega-corporations on earth. I know because I watched him read their names for fifteen minutes during one of his daily mind-numbing press conferences. If you had any doubt about who your leaders work for, that list tells you all you need to know. No one from your local steak shop, butcher or candlestick maker are represented on this task force. It reminded me of the list of prominent people chosen for the Rogers Commission.

The belief by those in charge that things can just go on as if nothing has happened are as delusional as the NASA administrators who were willfully blind to the truth of an impending disaster. The actions taken by the political and financial arms of the Deep State have guaranteed this malfunction will prove fatal for our country. The only question is how many seconds we have before our throttle up moment. I tend to be a pessimist, so I am leaning towards an explosion before the November election. The forthcoming financial catastrophic detonation will set off a chain of events considered impossible just a few short months ago.

The core elements of this Fourth Turning (debt, civic decay, global disorder) are going to juxtapose and connect, accelerating into a chain reaction of chaos, civil uprising, global war, mass casualties, the fall of empires, and ultimately the destruction of the existing social order (aka Deep State). Hopefully, heroes of Feynman’s stature will arise to help rebuild our country based upon common sense, truthfulness, factual assessment of our situation, and honoring the essential principles of our Constitution. Reality must take precedence over delusions, propaganda, and lies for us to regain our nation. Are we capable of learning the lessons from this major malfunction?

“Flight controllers here looking very carefully at the situation. Obviously, a major malfunction.” – Steve Nesbitt – NASA Mission Control

Source: by Jim Quinn | The Burning Platform

Trump Organization Seeks Concessions On Loans Backed Personally By President Trump From Deutsche Bank

No business is immune to the country’s coronavirus shutdown, including the President’s. In fact, it was was reported yesterday that the Trump Organization is actively seeking out concessions from Deutsche Bank, one of its lenders, due to the pandemic.

Representatives from the President’s company reached out to Deutsche Bank late in March and talks between the company and the bank are ongoing, according to Bloomberg.

Or, as one person simply put it on social media: “Two broke organizations restructuring debt”.

https://twitter.com/QTRResearch/status/1245787333674352642?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1245787333674352642&ref_url=https%3A%2F%2Fwww.zerohedge.com%2Fpolitical%2Ftrump-organization-seeks-concessions-loans-backed-personally-president-trump-deutsche

Deutsche Bank is said to be having similar talks with other commercial real estate companies in the U.S., as well. The pandemic, and ensuing economic shutdown, has squeezed both borrowers and lenders across the world. Central banks have worked on a plan to try and backstop banks and provide relief to companies, even considering lending to some businesses directly. However, it is going to be tough to paper over every single company that is facing a default.

The request from the Trump organization is noteworthy, since President Trump is arguably the most powerful person in the world and Deutsche Bank has been under scrutiny for years, with many speculating the bank could have solvency issues behind the scenes. The loans, which were taken out by Trump between 2012 and 2015, include a personal guarantee from Trump.

That means that in the case of a default, the lenders would have to collect from a sitting President.

The loans that the bank has provided for the Trump Organization include money for a Florida golf resort, a Washington D.C. hotel and a Chicago skyscraper.

Doral, Trump’s golf resort near Miami, has closed all operations. Trump’s hotel in Washington has shut down its restaurant and its bar. Additionally, a sale of the hotel’s lease has been halted while the commercial real estate market goes up in flames.

Deutsche Bank has been under scrutiny since Trump first took office back in 2016. The bank had previously considered the idea of extending Trump’s maturities to his loans to 2025, after the end of a second potential term, but ultimately decided against entering into any new business with a sitting President.

Source: ZeroHedge

“Tail-End Of A Big Bull Market” – Wine, Diamonds, Classic Cars Are Now Money-Losing Investments For The Ultra-Rich

Luxury assets of the ultra-wealthy, if that were expensive wine, fancy diamonds, and rare antique cars all had a down year as the stock market ramped to new highs, reported The Wall Street Journal.

In the last decade, luxury assets performed exceptionally well as central bankers handed out free money to the elite class to hoard assets of their liking. And naturally, these people, with exceptional taste, bought things that the common man has only seen on television.

Now, these luxury assets are under performing – have been during the past several years – and is a symptom of late-cycle distress.

“The froth has gone out of the market. People have realized you can’t just buy stuff and expect the value to go up,” said Andrew Shirley, a partner at Knight Frank and editor of the group’s Wealth Report.

The Journal blames the under performance on the global slowdown and the lack of Asian demand. Chinese buyers account for 33% of global luxury goods sales.

“There is a lot of uncertainty in Chinese markets and the riots in Hong Kong didn’t make it easy for people to come spend money in Hong Kong either,” said Eden Rachminov, chairman of the board at the Fancy Color Research Foundation.

Colored diamonds in 2019 lost about 1% in the first three quarters.

Fine wine was also another losing asset through Nov., lost 3.6%, according to the Liv-ex 1000 index.

And the biggest loser on the year were classic cars, lost 5.6%, according to Historic Automobile Group International’s (HAGI) Top Index.

HAGI founder Dietrich Hatlapa said the classic car market has been cooling following a massive rise in price after the 2008-09 financial crisis. He said classic car prices saw double-digit gains after the recession, rallying 50% Y/Y through 2013. “We are at the tail-end of a big bull market,” Hatlapa warned.

What’s becoming evident is that ‘Not QE’ and other monetary gimmicks deployed by central banks are failing to raise asset prices of some luxury goods in 2019. Perhaps the world is stumbling into a period where tool kits of central banks are becoming less responsive to stimulate asset price inflation, and if that is the case, then everyone will figure out that prices of luxury goods have been hyper inflated over the last decade with nothing but hot air.

Source: ZeroHedge

Wealth Of The Richest Surged By $1.2 Trillion In 2019

Ben Bernanke with Neel Kashkari

(ZeroHedge) At the same time that ~~dipshits~~ future Nobel Prize winners at the Fed like Neel Kashkari are walking around pondering why the inequality gap continues to widen in the United States, monetary policy has catalyzed another year of surging wealth for the richest in the country while keeping its boot on the neck of the poorest.

In fact, as Bloomberg notes, the wealth of the 500 richest people surged 25% in 2019. And the riches are coming in atypical fashion.

Among those are social media giants like Kylie Jenner, who became the youngest self-made billionaire this year after her cosmetic company signed an exclusive partnership with Ulta Beauty. She sold a 51% stake in her company for $600 million.

Similarly, the Korean family who helped popularize the Washington Nationals’ rally cry, “Baby Shark, doo-doo doo-doo doo-doo”, is now worth about $125 million.

Another great example is Willis Johnson, who made his $1.9 billion fortune by building a network of junkyards to sell damaged cars.

All of these are examples of just how much money made its way to the richest over the last 12 months. The Bloomberg Billionaires Index added $1.2 trillion, now placing their collective net worth at $5.9 trillion.

Only 52 people on the ranking saw their fortunes decline during the year. Jeff Bezos, for example, lost $9 billion – but only due to his divorce.

Bloomberg noted the year’s biggest winners:

The 172 American billionaires on the Bloomberg ranking added $500 billion, with Facebook Inc.’s Mark Zuckerberg up $27.3 billion and Microsoft Corp. co-founder Bill Gates rose $22.7 billion.
Representation from China continued to grow, with the nation’s contingent rising to 54, second only to the U.S. He Xiangjian, founder of China’s biggest air-conditioner exporter, was the standout performer as his wealth surged 79% to $23.3 billion.
Russia’s richest added $51 billion, a collective increase of 21%, as emerging-market assets from currencies to stocks and bonds rebounded in 2019 after posting big losses a year earlier.

Newly minted billionaires included Anthony von Mandl, the man behind “White Claw” hard seltzer and Hong Kong’s Lo family, who are in the business of producing soy milk.

With the market hitting new highs every day and President Trump’s relentless pressure on the Fed to keep rates low, the gap will likely continue to widen heading into 2020 – a year politicians will undoubtedly spend bickering about proposed solutions to the problem, all the while failing to understand that the alarm is coming from the inside, right before their eyes.

The gains are an obvious continued indicator of flawed monetary policy that everybody – except those at the Fed (and Steve Liesman) seems to understand.

As a result, currently, the 0.1% control the biggest share of the pie in the U.S. than at any time since 1929.

Source: ZeroHedge

A Record Number of Homes Closed for $100 Million-Plus During 2019

Six deals topped $100 million in 2019, despite a general slowdown across the U.S. luxury real-estate market. Here is a look at the top-10 home sales

Cartwell sold for $150 million in December – Jim Bartsch

In 2019, a small group of enormous real estate deals, while bearing little relationship to the overall market, had an outsize impact on the national conversation about wealth inequality and the rapidly expanding billionaire class.

A boom in ultrahigh priced deals in Palm Beach this year, including the $111 million sale of an oceanfront estate, raised questions about the number of wealthy New Yorkers fleeing to Florida in response to a 2017 change in federal tax law. A string of $100 million-plus deals completed in Los Angeles put the spotlight on high-end real estate on the West Coast.

Hedge-fund manager Ken Griffin’s roughly $238 million purchase of a New York penthouse, which set a price record for the nation, bolstered the arguments of legislators who support additional property taxes for the super rich.

These megadeals don’t necessarily speak to a broad surge in real estate values. In general, the U.S. luxury real-estate market faced a slowdown in 2019, thanks to oversupply in certain markets, tax changes and a general decline in foreign purchasers.

Read on for a closer look at the top 10 deals of the year, a record six of which topped $100 million, according to research by The Wall Street Journal and appraiser Jonathan Miller. Mr. Miller said he believes the previous record was three $100 million-plus deals, achieved in both 2014 and 2016.

1. 220 Central Park South, New York

Price: Roughly $238 million

Early in 2019, hedge-fund executive Ken Griffin closed on a roughly $238 million apartment. Emily Assiran for The Wall Street Journal

Mr. Griffin’s purchase of the roughly 24,000-square-foot Billionaires’ Row apartment “came to personify the issue of income inequality for many people,” said luxury agent Jason Haber of Warburg Realty of the deal. “Ken Griffin closed right when the legislature began their session. It was like throwing meat to the wolves.”

Soon after, the New York legislature expanded the so-called “mansion tax,” designed to target buyers of properties priced at $2 million or more, and increased property transfer taxes. The deal also helped reignite discussions around a pied-à-terre tax, which would tax multimillion-dollar second homes as a funding source for the city’s beleaguered subway system.

“It served as Exhibit A for why we should look at the possibility,” said Sen. Brad Hoylman, who sponsored the pied-à-terre tax bill.

The purchase was one of a string of record-breaking acquisitions by the billionaire in recent years In 2017, the Citadel founder bought several floors of a Chicago condominium for a record $58.75 million. He also bought a London home for about $122 million, and a piece of land in Florida for $99.1 million (see below).

To some extent, Mr. Griffin’s spending spree has made him a central figure in the debate about wealth inequality in New York. “Anyone who can afford to pay for a $238 million apartment can afford to pay a little more off the top to make the city a better place for everyone,” Sen. Hoylman said. Mr. Griffin has rarely spoken publicly on the issue. At an event this year hosted by Bloomberg News, Mr. Griffin criticized presidential hopeful Sen. Elizabeth Warren, saying he wished she spent more energy on education, rather than attacking “those of us who have been successful.”

The recently completed tower has quickly become New York’s new “it” building. Other buyers include musician Sting and hedge-fund executive Dan Och (see below).

Buyer’s agents: Tal Alexander and Oren Alexander of Douglas Elliman

Seller’s agent: Deborah Kern of the Corcoran Group

A view of Chartwell, which was purchased by Lachlan Murdoch. Jim Bartsch

2. Chartwell, Los Angeles

Price: $150 Million

Lachlan Murdoch, co-chairman of News Corp., which owns Dow Jones & Co., publisher of The Wall Street Journal, paid about $150 million for this Bel-Air estate in December, setting a record for the Los Angeles area, according to people familiar with the deal. Observers said it was the second-priciest sale ever recorded in the country for a single-family home.

Lachlan Murdoch. David Paul Morris/Bloomberg

While the price-tag was huge, the property was the latest in a line of homes to sell for a major discount to their original asking prices, marking the culmination of years of aggressive or arguably aspirational pricing for luxury homes across the country. The roughly 25,000-square-foot mansion came on the market in 2017 for $350 million, making it the most expensive listing in the nation at the time.

Designed by Sumner Spaulding around 1930, the property was owned by onetime Univision Chairman A. Jerrold Perenchio. It came with a Wallace Neff-designed five-bedroom guesthouse, a 75-foot pool, a tennis court and a car showroom with space for 40 vehicles. Mr. Murdoch didn’t respond to requests for comment.

Seller’s agents: Drew Fenton, Jeff Hyland and Gary Gold of Hilton & Hyland; Joyce Rey, Jade Mills and Alexandra Allen of Coldwell Banker Global Luxury; and Drew Gitlin and Susan Gitlin of Berkshire Hathaway HomeServices California Properties.

Buyer’s agent: Drew Fenton of Hilton & Hyland.

Spelling Manor in Holmby Hills sold for nearly $120 million. Jim Bartsch

3. Spelling Manor, Los Angeles

Price: $119.75 million

British Formula One heiress Petra Ecclestone sold Spelling Manor, a sprawling estate built for the late television producer Aaron Spelling, this past summer for $119.75 million, records show. The buyer hailed from Saudi Arabia, according to people familiar with the deal.

Petra Ecclestone. Jeff Spicer/Getty Images

The Holmby Hills property, designed in the style of a French château, is about 56,000 square feet, making it one of the largest private homes in the country. After Ms. Ecclestone bought it from Mr. Spelling’s widow, Candy Spelling, in 2011, she brought in more than 500 workers to do a three-month, multimillion-dollar renovation. The property has a two-lane bowling alley, a wine cellar, a beauty salon, a gym, tanning rooms and a tennis court.

The property is one of several significant Los Angeles area homes to have traded to buyers from the Middle East this year. In May, a Saudi buyer snapped up two neighboring Bel-Air properties for $52 million, The Wall Street Journal reported.

Seller’s agents: Kurt Rappaport and Daniel Dill of Westside Estate Agency; Jade Mills of Coldwell Banker Global Luxury and David Parnes and James Harris of the Agency.

Buyer’s agents: Jeff Hyland and Rick Hilton of Hilton & Hyland.

Read about the next seven featured properties by clicking on the article credit below…

By Katherine Clarke | Mansion Global who republished it from The Wall Street Journal

Does Gold’s Breakout Mean Silver Is On The Launchpad?

Gold and silver prices continue to push higher. They’re starting to get some attention from the mainstream, too. A new uptrend in gold is clearly underway, but silver’s performance has so far trailed gold’s. Let’s take a look at the price behavior over the past six-plus years of both metals to see if we can gain any insights about silver.

Ivanka Trump and Jared Kushner Report $135 Million in 2018 Income

In their second year of government service, Ivanka Trump and Jared Kushner reported income from their companies and investments of as much as $135 million, according to their annual financial disclosure reports made public on Friday.

Ivanka Trump and Jared Kushner reported an income range of $29 million to $135 million for 2018, down from a range of $82 million to $222 million in 2017.CreditCreditToby Melville/Agence France-Presse — Getty Images

All told, the couple’s real estate holdings and other investments were worth as much as $786 million, down slightly from 2017. Their total annual income was between $29 million and $135 million, a range that was lower than what they reported in 2017.

Mr. Kushner’s partial ownership of his family-run real estate business, Kushner Companies, has drawn criticism from ethics experts, particularly as the firm has solicited investments from foreign sources, including in the Middle East, where Mr. Kushner is a top White House liaison.

Although Mr. Kushner held on to the bulk of his stake in the company, which he once ran, he sold some of his assets to a trust controlled by his mother.

One of those divested assets was his share in Kushner Companies’ flagship property at 666 Fifth Avenue in Manhattan. Last year, Kushner Companies struck a deal with Brookfield Asset Management for a roughly $1 billion bailout of the troubled property. Brookfield’s property arm is partly owned by the Qatari government.

Ms. Trump reported 2018 income totaling between $6.7 million and $10.7 million. She has resigned from her leadership roles at her fashion business and her family’s real estate and branding company since her father became president, but she retained stakes in some of those businesses.

Ms. Trump earned just under $4 million from the Trump International Hotel in Washington, which has become a magnet for visiting executives and foreign officials with interests before the federal government.

Ms. Trump reported another portion of an advance from Penguin Random House, for her book “Women Who Work,” this time totaling $263,500. She also reported donating it to the Ivanka M. Trump Charitable Fund. In 2017, she received about $289,000 from that advance.

The couple’s total income was between $29 million and $135 million in 2018, compared with a range of $82 million to $222 million in 2017.

The drop was due, in part, to their divestment of several assets that previously generated tens of millions of dollars in income for the couple, including the stake in 666 Fifth Avenue.

Last year, The New York Times reported that Mr. Kushner apparently had paid almost no federal income taxes for several years running.

Source: by Jesse Drucker and Agustin Armendariz | The New York Times

How A Hijacked Listing For One Of Los Angeles’ Most Expensive Homes Led To A $60MM Lawsuit Against Zillow

(Los Angeles Times) It’s hard to overstate the opulence showcased in developer Bruce Makowsky’s $150-million spec house, dubbed “Billionaire.” Perched above Bel Air, the four-story mansion offers a world of pure imagination within its walls.

A Bel-Air mansion built on speculation is at the center of a legal dispute after a Zillow listing for the $150-million home was hijacked by an unknown user. (Berlyn Photography)

Jockeying for attention across 38,000 square feet are 12 bedrooms, 21 bathrooms, three kitchens, 130 artworks, a 40-seat movie theater, a $30-million fleet of exotic cars, two wine cellars stocked with Champagne, a four-lane bowling alley and a candy room filled with towering cylinders of sweets.

Image is everything when seeking nine figures for a single estate. What, then, happens when that image is allegedly tainted? That’s what a lawsuit filed by the self-assured, suede-jacket-wearing Makowsky against real estate company Zillow aims to find out.

Earlier this year, Zillow falsely showed that the mega-mansion sold for tens of millions less than its asking price. Makowsky sued for $60 million in damages, citing permanent harm to the property’s perception.

On April 19, Zillow filed to dismiss the suit, chiefly citing a section of the Communications Decency Act that protects web operators from being responsible for information published by its users. The hearing is set for June 24.

The sham began in February, when an unknown user with a Chinese IP address and fake phone number side-stepped Zillow’s security measures and toyed with the sale prices displayed on the mansion’s listing.

Zillow displays pages for roughly 110 million homes in the U.S., and it allows owners to go in and change information about their home when necessary. Usually, that means noting a recent remodel or added square footage that may affect a home’s value, but the feature also opens the door for false information.

On Feb. 4, Zillow showed that Makowsky’s home — which is on the market for $150 million — sold for $110 million. It never did. Over the course of the next week, the real estate site falsely reported sale prices of $90.54 million and $94.3 million, as well as a phantom open house that never took place.

Soon after, Makowsky’s attorney Ronald Richards pointed out the falsities to Zillow’s legal team in an email. After some back and forth, included in the lawsuit, Kim Nielson, senior lead counsel for Zillow Group, responded with this:

“Any home on our website can be claimed by the homeowner. There are a series of questions that must be answered, but if someone attempts to claim it enough times, they will know the questions asked (and be able to figure out what information they need to verify their identity).”

She added that not all claims are manually reviewed, which allowed the user to manipulate the listing details without proving their identity.

Later that month, a limited liability company owned by Makowsky filed the lawsuit seeking $60 million in damages. It claims that Zillow “admittedly published false information” and destroyed the property’s perception as an elite listing worth more than $100 million.

Makowsky himself has axed the price twice since bringing the spec house to market for $250 million two years ago. He most recently trimmed the tag to $150 million in January, saying that he was just trying to be realistic.

Makowsky made his fortune selling handbags on QVC before shifting to high-end real estate about eight years ago as the head of BAM Luxury Development Group. (Cindy Ord / Getty Images)

Taking aim at Zillow’s security process, the lawsuit alleges that Zillow has no safeguards in place to stop trolls or criminals from claiming a property and posting false information.

A spokeswoman for Zillow declined to comment on the pending litigation but stressed that it goes to great lengths to display current and accurate data on its website, which is largely sourced from public records.

The complaint also stresses Zillow’s market power. The website leads the real estate industry with an estimated 36 million unique monthly visitors, and Makowsky said multiple colleagues called to congratulate him on a sale that never happened.

But of those millions of monthly visitors to Zillow, few are searching for homes priced in the nine figures other than for aspirational reasons. Fewer have the actual means to afford it.

Only a handful of local L.A. residents, and a small market outside of that, have the ability to buy homes listed for north of $100 million. As of 2017, there were 680 billionaires in the U.S, according to the research firm Wealth-X, and about 2,750 worldwide.

Jerry Jolton, an agent with Coldwell Banker Residential Brokerage, said three things need to come together to sell a home in the $100-million arena: luck, timing and the right client.

“We’re dealing with a very exclusive group of people who’ve attained such wealth,” he said.

Oftentimes, developers eye international wealth when floating a nine-digit listing. However, Jolton said foreign buyers account for only around 21% of L.A.-area homes sales over $20 million.

Beyond visitors to online listing services, Makowsky faces another challenge in his pursuit of a high-dollar deal: comparable sales in the tony Westside area.

Michael Sahakian, also with Coldwell Banker, sold the property that now holds Makowsky’s mansion back in the ’90s. While noting the estate’s opulence, he said its placement in East Gate Bel Air — one of the city’s most exclusive and pricey pockets — will make selling it a challenge.

Most homes there sell for around $2,000 to $3,000 per square foot. For context, Makowsky’s estate is on the market for $3,947 per square foot.

Still, because an acre of East Gate goes for around $20 million, it’s rare for a home larger than 30,000 square feet to go up for sale.

Makowsky, in his early 60s, made his fortune selling handbags on QVC before shifting to high-end real estate about eight years ago as the head of BAM Luxury Development Group.

His development brand is largely a reflection of his own extravagant interests and tastes; many of the lavish furnishings, finishes and other accouterments incorporated into his projects are sourced from his travels around the world. Custom furnishings produced by high-end brands such as Fendi, Bentley and Louis Vuitton often play an integral role in his homes.

Among his notable projects was a testosterone-infused showplace in Beverly Hills that featured a $200,000 sculpture of a giant blue hand grenade and a replica of James Dean’s motorcycle. Originally listed at $85 million, the 23,000-square-foot house sold in 2014 to Minecraft creator Markus Persson for $70 million.

Source: By Jack Flemming and Neal J. Leitereg | Los Angeles Times

Wealth Of Top 1% Surpasses $100 Trillion: More Than Global GDP And All Central Bank Balance Sheets

Back in March, when looking at the latest political wave sweeping across Europe, Deutsche Bank’s Jim Reid wrote a report which observed that “it’s hard to get away from the fact that populism is currently going through an explosion in support at present” of which today’s vote of no confidence of Swedish prime minister Lofven was just the latest example. DB focused on Europe, as shown in the following chart, and noted that high double-digit youth unemployment has become a hotbed for anti-establishment sentiment, which has everything to do with the economy, and lack of opportunities.

The German bank then warned that the “liberal world order” is in jeopardy, and concluded rather ominously:

As of now the rise in populism hasn’t yet destabilised markets however we find it difficult to get away from the fact that uncertainty levels are bound to remain high while such power brokers remain in major elections. Indeed the unpredictability of Trump’s policies is such an example, with the recent tariff threats which have subsequently escalated market concerns about a trade war being one. At a time when global central banks are moving towards an unprecedented era of tightening and dealing with years of massive asset purchases, risks from rising populist support has the ability to seriously disturb the prevailing equilibrium of the last few years and subsequently markets.

Fast forward to today, when Bank of America strategist Barnaby Martin tackles the thorny issue of ascendant populism, which he attributes to the “lost decade” following Lehman’s collapse and what he dubs the “era of hubris” – a time when the richest 1% has seen its collective wealth surpass $100 trillion.

Martin begins by reminding us that a decade ago, “the collapse of Lehman Brothers sent shock waves through financial markets” to which the response was an unprecedented amount of central bank support, both in terms of its size and creativity.

And as we have observed on countless occasions, with central banks as a tailwind, financial markets have outperformed real assets over the last decade. Even so, the dichotomy in many cases is staggering:

Note that the cumulative total return on ICE BofAML’s Global Broad Market bond index since ‘08 is 50%…yet the growth in house prices globally over this time has been just a miniscule 1%.

Simply said, the last decade has seen those who hold financial assets become richer, as markets have lurched higher; meanwhile those without such assets – the vast majority of the middle class – have been increasingly left behind, however, even as wage growth remained stagnant and indebted governments have struggled to provide strong social support. As a result, a great wave of populism emerged as “issues such as wealth and income inequality have started to polarize societies much more.”

The next chart shows in staggering fashion just how “rich” the rich are today, especially when compared to some other big numbers and markets. According to BofA estimates the wealth of the top 1% globally has surpassed $100tr now…a number greater than the sum of the big-4 central bank balance sheets, current world GDP and the cost of the ‘07/’08 global financial crisis, for instance.

The great divide between the haves and the have nots has manifested itself not only in terms of accumulated wealth, but income as well, as the wealthy have had greater income-generating opportunities at their disposal, mostly due to access to better technology and education. It is therefore mostly the wealthy that have been able to reap the benefits of globalization, and perhaps the reason why the “not so wealthy” have been eager to tear apart the globalist system, and willing to listen, follow and vote for any populist leader who promises that.

Meanwhile, the top 1% richest in the world have witnessed impressive income growth since 1980 – in many cases, multiples of that seen by the less well-off in society. Also notice what Martin calls the “hollowing out” of the middle class over this period – where income growth has been the weakest- as “many have simply found their jobs replaced by either highly-skilled or low-skilled workers.”

Which brings us back to the core topic: the rise of social discontent, manifesting itself in growing populism. Observing the growing wealth and income inequality, Martin writes that these have been “important factors (albeit not the only ones) contributing to the rise in voters’ frustrations and resentment across the world.”

The result, as Deutsche Bank showed back in March, has been for the electorate to increasingly embrace “populist” or “anti-establishment” parties in hope of better times…and to shun mainstream left or right institutions.

As the next chart shows, the growth of populist voter tendencies has been clear since the late ‘80s, with the trend increasing in the post-GFC era.

There are few signs as yet of it fizzling out. At the end of 2017, ten governments in Europe included one or more authoritarian populist parties, according to Timbro. Average voter support for far left populist parties has also notably risen since 2011.

In his conclusion, Martin echoes DB’s Reid, saying that “the continued rise in income and wealth inequality globally suggests that populism is here to stay” and yet it remains to be seen how effective it will be at tackling inequality and placating voter frustrations.

Meanwhile, even economies that have witnessed strong growth in recent times have struggled to generate “inclusive growth” instead becoming the world’s new breeding grounds of pervasive inequality. As the next chart shows, income inequality in China has jumped dramatically since 1990 despite very strong economic momentum.

What is ironic, is that since 2008, the Chinese government – which is terrified of a middle-class revolt – has introduced measures specifically aimed at reducing inequality. But as chart 4 highlights, while this has slowed the rise in income inequality in China, as yet it has not meaningfully reduced it. Will China be ground zero of the next social revolution as the people decide their “communist” leaders have betrayed them and take matters into their own hands.

Source: ZeroHedge

US Treasury Secretary Mnuchin Lists Park Ave. Apartment For $33 Million, Three Times What He Paid For It

No sooner did we report that the housing “recovery” over the last 10 years has skipped many “underwater” communities in the United States, than we found confirmation of the opposite: Treasury Secretary Steve Mnuchin is selling his Park Avenue apartment in Manhattan for three times the price that his aunt paid for it 18 years ago. He has listed the apartment for $32.5 million. His Aunt is listed as the broker on the sale.

The sale is happening at the same time that residents of numerous commuter towns across the United States have seen the values of their houses collapse to less than half of what they were in 2006, prior to the housing crisis.

Mnuchin recently listed the 6500 square-foot, 12 room apartment that he bought from his aunt in 2000. It was purchased then for just $10.5 million. It had been in his family since the 1960s and, when he turns around to list the property this time, he stands to net $22 million more than what he paid for it, if his asking price is met.

The apartment is being listed by Warburg Realty and is located inside of 740 Park Ave., inside the historic Rosario Candela building. Other famous former tenants of this building include the Rockefellers and the Kochs. Currently, Stephen Schwarzman, the CEO of Blackstone Group, lives there. The building was developed by Jacqueline Kennedy Onassis’ grandfather.

Other than that, it’s just your average ordinary run of the mill apartment on Park Avenue: five bedrooms, a wall wood paneled library, a wet bar, a formal dining room, a private elevator, 11 foot ceilings, marble floors and a sweeping spiraling staircase that still has its original banister.

The first floor of the apartment has six bathrooms and an 800 square-foot living room.

Upstairs, the apartment has a master suite, walk-in cupboards, study, two more bathrooms and three extra bedrooms. The apartment spans two levels in the building on both the eighth and the ninth floor and it also has a large kitchen with a “breakfast nook”.

While that all seems extremely glamorous, Mnuchin hasn’t even used this apartment as his main residence, reportedly. Mnuchin was living in California before his appointment to the Trump administration, but has since bought a $12.6 million apartment in Washington DC.

We’re glad to hear that Mnuchin was able to ride out the housing crisis successfully. We were worried about him for a moment.

Source: ZeroHedge

Amazon Tops Trillion-Dollar Market Cap, Bezos Extends Lead As World’s Richest Man

Jeff Bezos was already the richest man in world history, but thanks to the surge in Amazon’s share price today – becoming the third company in history to top $1 trillion market capitalization (after Apple and PetroChina) – his net worth is up almost $70 billion in 2018, nearing $170 billion.

After a brief dip on its earnings, Amazon has not looked back, surging above the key $2050.27 briefly ($2050.50 highs) to become another trillion-dollar market cap company…

Amazon reached this milestone almost exactly one month after Apple. Next up – Microsoft or Alphabet?

Do not worry though – Amazon is not a bubble!

Interestingly, few remember that Apple was not the first company globally to ever hit $1 trillion in market capitalization.

The feat was achieved momentarily by PetroChina in 2007, after a successful debut on the Shanghai Stock Exchange that same year.

And as we noted previously, the $800 billion loss it experienced shortly after is also the largest the world has ever seen.

* * *

This pushes Bezos’ dominance of the global wealth leagues even higher…

Source: ZeroHedge

Out-Of-Warranty Tesla Owners Left With No Better Choice Than Fix Their Own Cars

Due to a lack of reputable mechanics, widespread service centers and aftermarket parts, some out of warranty Tesla owners are left with no choice but to try and fix their cars themselves. Such was the case of Model S owner Greg Furstenwerth, a self described “Tesla fan”. CNBC detailed his journey through repairing his own out of warranty Tesla when the company “treated him like [he] didn’t own a Tesla” after his warranty ran out.

Furstenwerth was one of the first Model S owners, pre-ordering in 2013. He was even one of the first in the state of Hawaii to own a Tesla. Like some fans of the company have done after buying their Teslas, he even undertook a cross-country journey to prove that the world did not need gas powered vehicles and that there was nothing to be anxious about regarding the vehicle’s range capabilities.

“Those were the golden years”, according to Furstenwerth. While the Model S was under warranty, he shared his experience in dealing with Tesla service, which was positive. The interactions with the company were plentiful.

“Tesla used to call me,” he told CNBC. “They’d tell me, ‘hey we noticed that there’s something going wrong with your car.’ Or when I had my flat they did their courtesy roadside service. They really took care of me, actually, as an original pre-order.”

But when the warranty ran out, so did the personal attention: “…as soon as I exceeded my warranty, the interactions all went away. I was treated like I didn’t really own a Tesla,” he told CNBC.

Because he was one of the first to have faith and purchase a Model S, he is now being “rewarded” by being one of the firsts who will need to get repairs done to his Tesla while it is not covered under warranty. The number of customers that are falling out of warranty, like Greg, will increase in coming years.

Greg claims that after he fell out of warranty and needed repairs, the company would not offer him a loaner car or a mobile mechanic to help him when he needed to find a service center outside of Seattle, where he lived.

His next quest was to try and find independent mechanics, but he soon found out that there were very few who were willing and able to work on the Model S. He found out along the way that there are only a few mechanics who can fix the Model S, and they generally do it by buying scrap Model S cars and salvaging parts or reverse engineering parts using 3D printers.

This is apparently because Tesla doesn’t make spare parts, diagnostic tools or repair manuals readily available to people trying to perform service on their cars. And due to the modest size of the car fleet, there is also a surprisingly small aftermarket for Tesla parts.

So Furstenwerth was forced to take it upon himself to figure out how to fix his car on his own.

He learned by “taking it apart and putting it together several times” while at the same time visiting online forums that offered suggestions. He was able to find some parts online, but it was tedious work trying to track them down individually. Among his problems since 2013 have been “leaking tail lights, failing door handles, a passenger window behind the driver that fell out of place and faulty wiring in his driver’s side door,” according to the article.

The process was so painful for him that at one point he even “considered destroying the car”.

The original article includes video showing Furstenwerth disassembling and reassembling his own Model S.

In terms of quality, Furstenworth claims that when he finally got his Tesla open, it was built like a “lego car” and that disassembling and reassembling it was “like putting together legos [and] taking apart legos”.

“If you can put together Legos you can put together a Tesla Model S,” he told CNBC.

After resorting to having to fix his own car, Greg, like many other loyal Tesla fans, isn’t getting mad at the company. Instead, he is trying to help other Model S owners learn how to fix their own cars, too. Despite this, he has some advice for the company:

“I want to see Tesla wildly succeed,” he says. “I have no problem with them being vertically integrated, and running things the way they do for cars that are in warranty. But if they want to get in the mass market, unless they’re gonna run every single service center in every single small town, there’s no way it’s acceptable to have people for minor issues drive and kill an entire day to go to the service center, just for some free Keurig coffee.”

We can imagine that the reaction of other Tesla owners who aren’t such vehement fans, will be far less supportive.

Source: ZeroHedge

Real Motive Behind Saudi Royal Flush Emerges: $800 Billion In Confiscated Assets

From the very beginning, there was something off about Sunday’s unprecedented countercoup purge unleashed by Mohammad bin Salman on alleged political enemies, including some of Saudi Arabia’s richest and most powerful royals and government officials: it was just too brazen to be a simple “power consolidation” move; in fact most commentators were shocked by the sheer audacity, with one question outstanding: why take such a huge gamble? After all, there was little chatter of an imminent coup threat against either the senile Saudi King or the crown prince, MbS, and a crackdown of such proportions would only boost animosity against the current ruling royals further.

Things gradually started to make sense when it emerged that some $33 billion in oligarch net worth was “at risk” among just the 4 wealthiest arrested Saudis, which included the media-friendly prince Alwaleed.

One day later, a Reuters source reported that in a just as dramatic expansion of the original crackdown, bank accounts of over 1,200 individuals had been frozen, a number which was growing by the minute. Commenting on this land cashgrab, we rhetorically asked “So when could the confiscatory process end? As we jokingly suggested yesterday, the ruling Saudi royal family has realized that not only can it crush any potential dissent by arresting dozens of potential coup-plotters, it can also replenish the country’s foreign reserves, which in the past 3 years have declined by over $250 billion, by confiscating some or all of their generous wealth, which is in the tens if not hundreds of billions. If MbS continues going down the list, he just may recoup a substantial enough amount to what it makes a difference on the sovereign account.”

Then an article overnight from the WSJ confirmed that fundamentally, the purge may be nothing more than a forced extortion scheme, as the Saudi government – already suffering from soaring budget deficits, sliding oil revenues and plunging reserves – was “aiming to confiscate cash and other assets worth as much as $800 billion in its broadening crackdown on alleged corruption among the kingdom’s elite.“

As we reported yesterday, the WSJ writes that the country’s central bank, the Saudi Arabian Monetary Authority, said late Tuesday that it has frozen the bank accounts of “persons of interest” and said the move is “in response to the Attorney General’s request pending the legal cases against them.” But what is more notable, is that while we first suggested – jokingly – on Monday that the ulterior Saudi motive would be to simply “nationalize” the net worth of some of Saudi Arabia’s wealthiest individuals, now the WSJ confirms that this is precisely the case, and what’s more notably is that the amount in question is absolutely staggering: nearly 2x Saudi Arabia’s total foreign reserves!

As the WSJ alleges, “the crackdown could also help replenish state coffers. The government has said that assets accumulated through corruption will become state property, and people familiar with the matter say the government estimates the value of assets it can reclaim at up to 3 trillion Saudi riyal, or $800 billion.”

While much of that money remains abroad – and invested in various assets from bonds to stocks to precious metals and real estate – which will complicate efforts to reclaim it, even a portion of that amount would help shore up Saudi Arabia’s finances.

However, this is problematic: first, not only is the list of names of detained and “frozen” accounts growing by the day…

The government earlier this week vowed that it would arrest more people as part of the corruption investigation, which began around three years ago. As a precautionary measure, authorities have banned a large number of people from traveling outside the country, among them hundreds of royals and people connected to those arrested, according to people familiar with the matter. The government hasn’t officially named the people who were detained.

… but the mere shock of a move that would be more appropriate for the 1950s USSR has prompted crushed any faith and confidence the international community may have had in Saudi governance and business practices.

The biggest irony would be if from this flagrant attempt to shore up the Kingdom’s deteriorating finances, a domestic and international bank run emerged, with locals and foreign individuals and companies quietly, or not so quietly, pulling their assets and capital from confiscation ground zero, in the process precipitating the very economic collapse that the move was meant to avoid.

Judging by the market reaction, which has sent Riyal forward tumbling on rising bets of either a recession, or devaluation, or both, this unorthodox attempt to inject up to $800 billion in assets into the struggling local economy, could soon backfire spectacularly.

A prolonged period of low oil prices forced the government to borrow money on the international bond market and to draw extensively from the country’s foreign reserves, which dropped from $730 billion at their peak in 2014 to $487.6 billion in August, the latest available government data.

Confirming our speculation was advisory firm Eurasia Group, which in a note said that the crown prince “needs cash to fund the government’s investment plans” adding that “It was becoming increasingly clear that additional revenue is needed to improve the economy’s performance. The government will also strike deals with businessmen and royals to avoid arrest, but only as part of a greater commitment to the local economy.”

Of course, there is a major danger that such a draconian cash grab would result in a violent blow back by everyone who has funds parked in the Kingdom. To assuage fears, Saudi Arabia’s minister of commerce, Majid al Qasabi, on Tuesday sought to reassure the private sector that the corruption investigation wouldn’t interfere with normal business operations. The procedures and investigations undertaken by the anti-corruption agency won’t affect ongoing business or projects, he said. Furthermore, the Saudi central bank said that individual accounts had been frozen, not corporate accounts. “It is business as usual for both banks and corporates,” the central bank said.

Meanwhile, for those still confused about the current political scene in Saudi Arabia, here is an infographic courtesy of the WSJ which explains “Who Has Been Promoted, Who Has Been Detained in Saudi Arabia“

Source: ZeroHedge

Why Governments Will Not Ban Bitcoin

Those who see governments banning ownership of bitcoin are ignoring the political power and influence of those who are snapping up most of the bitcoin.

To really understand an asset, we have to examine not just the asset itself but who owns it, and who can afford to own it. These attributes will illuminate the political and financial power wielded by the owners of the asset class.

And once we know what sort of political/financial power is in the hands of those owning the asset class, we can predict the limits of political restrictions that can be imposed on that ownership.

As an example, consider home ownership, i.e. ownership of a principal residence. Home ownership topped out in 2004, when over 69% of all households “owned” a residence. (Owned is in quotes because many of these households had no actual equity in the house once the housing bubble popped.)

The rate of home ownership has declined to 63%, which is still roughly two-thirds of all households. Clearly, homeowners constitute a powerful political force. Any politico seeking to impose restrictions or additional taxes on homeowners has to be careful not to rouse this super-majority into political action.

But raw numbers of owners of an asset class are only one measure of political power. Since ours is a pay-to-play form of representational democracy in which wealth buys political influence via campaign contributions, philanthro-capitalism, revolving doors between political office and lucrative corporate positions, etc., wealth casts the votes that count.

I am always amused when essayists claim “the government” will do whatever benefits the government most. While this is broadly true, this ignores the reality that wealthy individuals and corporations own the processes of governance.

More accurately, we can say that government will do whatever benefits those who control the levers of power most, which is quite different than claiming that the government acts solely to further its own interests. More specifically, it furthers what those at the top of the wealth-power pyramid have set as the government’s interests.

Which brings us to the interesting question, will governments ban bitcoin as a threat to their power? A great many observers claim that yes, governments will ban bitcoin because it represents a threat to their control of the fiat currencies they issue.

But since government will do whatever most benefits those who control the levers of power, the question becomes, does bitcoin benefit those holding the levers of power? If the answer is yes, then we can predict government will not ban bitcoin (and other cryptocurrencies) because those with the final say will nix any proposal to ban bitcoin.

We can also predict that any restrictions that are imposed will likely be aimed at collecting capital gains taxes on gains made in cryptocurrencies rather than banning ownership.

Since the wealthy already pay the lion’s share of federal income taxes (payroll taxes are of course paid by employees and employers), their over-riding interests are wealth preservation and capital appreciation, with lowering their tax burdens playing third fiddle in the grand scheme of maintaining their wealth and power.

Indeed, paying taxes inoculates them to some degree from social disorder and political revolt.

I was struck by this quote from the recent Zero Hedge article A Look Inside The Secret Swiss Bunker Where The Ultra Rich Hide Their Bitcoins:

Xapo was founded by Argentinian entrepreneur and current CEO Wences Casares, whom Quartz describes as “patient zero” of bitcoin among Silicon Valley’s elite. Cesares reportedly gave Bill Gates and Reed Hoffman their first bitcoins.

Their first bitcoins. That suggests the billionaires have added to their initial gifts of BTC.

The appeal to the wealthy is obvious: any investment denominated in fiat currencies can be devalued overnight by devaluations of the currency via diktat or currency crisis. Bitcoin has the advantage of being decentralized and independent of centrally-issued currencies.

I submit that not only are the wealthy the likeliest buyers of bitcoin for this reason, they are the only group that can afford to buy a bunch of bitcoin as a hedge or speculative investment. Lance Roberts of Real Investment Advice recently produced some charts based on the Federal Reserve’s 2016 Survey of Consumer Finances (SCF) report– Fed Admits The Failure Of Prosperity For The Bottom 90%.

Put another way: how many families can afford to buy a bunch of bitcoin?

Here is a chart of median value of family financial assets: note that this is far below the 2000 peak and the housing bubble of 2006-07:

Here is mean family financial assets broken out by income category: note that virtually all the gains have accrued to the top 10%, whose net worth soared from $1.5 million in 2009 to over $2.2 million in 2016, a gain of $700,000.

The Fed’s 2016 Survey of Consumer Finances is a treasure trove of insights into wealth and income inequality in the U.S. Here are the highlights: Changes in U.S. Family Finances from 2013 to 2016.

As you’d expect, the report starts off on a rosy note: GDP rose by 2.2% a year, unemployment declined to 5%, and the median family income rose 10% between 2013 and 2016.

Blah blah blah. Meanwhile, on page 10, it’s revealed that the top 1% receives 24% of all income, and the families between 90% and 99% receive 26.5%, for a total of 50.5% of all income flowing to the top 10%.

The top 1% owns 38.6% of all wealth, and the families between 90% and 99% own 38.5%, so the top 10% owns 77% of total wealth.

On page 13, we find that the total median net worth of all families between 40% and 60% went from $57,000 to $88,000, a gain of $21,000, while the median net worth of families in the 60% to 80% bracket rose from $166,000 to $170,000, a grand total of $4,000.

Meanwhile, back in La-La Land, the median net worth of the top 10% soared by $468,000, from $1.16 million to $1.62 million.

Which family has the wherewithal to buy a bunch of bitcoin at $5,900 each as a hedge or investment, the one that gained $4,000 in net worth, the one that gained $21,000 in net worth or the one that gained $468,000?

You see the point: the likely buyers of enough bitcoin to count are the politically powerful financial elite. If any politico was foolish enough to propose banning bitcoin, a few friendly phone calls from major financial backers would be made to impress upon the politico the importance of blockchain technology and cryptocurrencies to the U.S. economy.

Heck, the financial backer might just suggest that all future campaign contributions to the politico will be made in bitcoin to drive the point home.

My vision of cryptocurrency, laid out in my book A Radically Beneficial World: Automation, Technology & Creating Jobs for All, is of a truly decentralized currency that directly funds work that addresses scarcities in localized community economies. The reality of existing cryptocurrencies is that they are probably being snapped up for buy-and-hold storage by the wealthy.

Those who see governments banning ownership of bitcoin are ignoring the political power and influence of those who are buying enough bitcoin to matter.

By Charles Hugh Smith | Of Two Minds

What Is Going On In The Vintage Auto Market?

The fate of asset bubbles under the new regime.

Everyone is hoping that next Friday and Saturday, at Sotheby’s auction in Monterey, California, the global asset class of collector cars will finally pull out of their ugly funk that nearly matches that during the Financial Crisis. “Hope” is the right word. Because reality has already curdled. Sotheby’s brims with hope and flair:

Every August, the collector car world gathers to the Monterey Peninsula to see the magnificent roster of best-of-category and stunning rare automobiles that RM Sotheby’s has to offer. For over 30 years, it has been the pinnacle of collector car auctions and is known for setting new auction benchmarks with outstanding sales results.

This asset class of beautiful machines – ranging in price from a 1962 Ferrari 250 GTO Berlinetta that sold for $38.1 million in 2014 to classic American muscle cars that can be bought for a few thousand dollars – is in trouble.

The index for collector car prices in the August report by Hagerty, which specializes in insuring vintage automobiles, fell 1.0 point to 157.42. The index is now down 8% year-over-year, and down 15%, or 28.4 points, from its all-time high in August 2015 (186).

Unlike stock market indices, the Hagerty Market Index is adjusted for inflation via the Consumer Price Index. So these are “real” changes in price levels.

The index has now fallen nearly 7 points below the level of August 2014. That was three years ago! In fact, the index is now at the lowest level since March 2014.

The chart below from Hagerty’s August report shows how the index surged 83% on an inflation-adjusted basis from August 2009 to its peak in September 2015, and how it has since given up one-third of those gains. This is what the inflation and deflation of an asset bubble looks like (I added the dates):

During the Financial-Crisis, the index peaked in April 2008 at 121.0, then plunged 16% (20 points) to bottom out in August 2009 at 101.39. By then, the liquidity from the Fed’s zero-interest-rate policy and QE was washing across the world, and all asset prices began to soar.

The current drop of 15% from the peak in “real” terms is just below the 16% drop during the Financial Crisis. But the current 28.4-point-drop from the peak exceeds the 20-point drop during the Financial Crisis.

Concerning the current market, the Hagerty report added:

While the auction activity section of the rating had been kept strong by increases in the number of cars sold at auction so far this year, the trend hasn’t continued and auction activity decreased for the second consecutive month thanks to a 2% drop in the number of cars sold compared to last month.

Private sales activity also experienced its second consecutive decrease, again thanks to a small drop in the average sale price as well as a small drop in the number of vehicles selling for above their insured values.

The number of owners expressing the belief that the values of their vehicles are increasing continues to gradually decline, and this is true for the owners of both mainstream and high-end vehicles. The drop is particularly pronounced, however, for owners of previously hot models like the Ferrari 308 and Ford GT.

For the second month in a row, expert sentiment dropped more than any other section.

The asset class of vintage automobiles was among the first bubbles to pop. This didn’t happen in one fell swoop. It’s a gradual process that started in the fall of 2015, and observers brushed it off because it was just a minor down tick as so many before. But since then, it has become relentless and persistent, with plenty of ups and downs. Every expression of hope that it would end soon has been frustrated along the way.

And every day, there’s still hope. For example, back in May, the Hagerty report commented that “prices have started to normalize.” Since then, the index has continued its methodical decline.

This may be what asset class deflation looks like under the new regime. There will be talk of “plateauing,” as is currently the case in commercial real estate. Then there will be talk of prices “normalizing,” as is the case in collector cars. Then there will be talk of “buying opportunities,” and so on. And there are ups and downs, and this may drag on for years.

But month after month, buyers of vintage cars become a little less enthusiastic and sellers a little more eager. Yet, unlike during the Financial Crisis, there are no signs of panic. The tsunami of liquidity is as powerful as before. Financial conditions are easier than they were a year ago. There’s no forced selling. Just an orderly one-step-at-a-time asset bubble deflation.

Now the Fed is tightening. QE ended about the time the classic car bubble peaked. The Fed has raised its target for the federal funds rate four times so far in this cycle. It will likely announce the QE unwind in September and “another rate hike later this year,” New York Fed president William Dudley told the AP. And the below-target inflation is not a problem. Read… Fed’s Dudley Drops Bombshell: Low Inflation “Actually Might Be a Good Thing”

By Wolf Richter | WolfStreet

Another Huge Foreclose Hits NYC Billionaire Row

Meet The Money-Laundering, Nigerian Oil Magnate Behind New York’s $50MM Condo Foreclosure

Yet another luxury condo at Manhattan’s One57 tower, a member of “Billionaire’s Row,” a group of high-end towers clustered along the southern edge of Central Park, had gone into foreclosure – the second in the span of a month. The 6,240-square-foot, full-floor penthouse in question, One57’s Apartment 79, sold for $50.9 million in December 2014, making it the eighth-priciest in the building and likely the largest residential foreclosure in Manhattan’s history.

According to Bloomberg, the owner of the apartment attempted to conceal his/her identity by using a shell company (you know how those kooky billionaires can be) but was able to obtain an ‘unusually large’ mortgage with an even more unusual term: one-year.

In September 2015, the company took out a $35.3 million mortgage from lender Banque Havilland SA, based in Luxembourg. The full payment of the loan was due one year later, according to court documents filed in connection with the foreclosure.

The borrower failed to repay, and now Banque Havilland is forcing a sale to recoup the funds, plus interest.

Of course, it was only a matter of time until the mystery man behind Manhattan’s most recent luxury real estate epic fail was exposed. As such, meet Nigerian oil magnate, Kola Aluko.

As it turns out, the world renowned, Nigerian-born, billionaire playboy is about $25,000 behind on his property taxes. But, that is probably the least of his worries as the New York Post points out that he currently wanted by authorities in both Nigeria and Europe for defrauding the Nigerian government out of oil sale profits.

But Aluko has bigger problem, it seems. The 47-year-old tycoon is under investigation in Nigeria and in Europe for alleged money-laundering crimes.

A Nigerian court, according to various reports, tried to freeze Aluko’s assets, including his One57 unit, as part of the alleged scheme to defraud the government of oil sale profits.

Meanwhile, it seems that the only reason Aluko isn’t already in prison is because the Nigerian courts can’t seem to find him to serve papers. Apparently he’s been hiding out on this 213-foot, $100 million yacht, the Galactica Star, for over a year.

Over the past year, the boat has been spotted making port calls in Cancun, Mexico and Turkey.

Of course, if you’re going to be an international playboy then you need to have rich and famous friends and, as it turns out, rappers Jay-Z and P. Diddy seemed to have fulfilled that role for Aluko. Back in 2012 the rap duo apparently hosted Aluko’s birthday party in Beverly Hills. Then, just a few years later in 2015, Jay-Z and wife Beyonce rented Aluko’s mega-yacht for the bargain basement price of just $900,000 per week to sail around the Mediterranean.

Well, presumably it was fun while it lasted.

Source: ZeroHedge

Bitcoin for Dummies — What Is It, and How Does It Work?

You might have been hearing about Bitcoin more frequently in the past few years. Recently it made a lot of news because of the ransomware attacks that affected countries around the world by demanding Bitcoin ransom to release embargoed documents on computers. So what the heck is Bitcoin, and how does it work?

First, let’s get this out of the way: bitcoin is money. It’s money as much as the dollar or euro or yen is money. And it’s fully interconvertible with these or any other currencies. Bitcoin is different than these national currencies in many key ways, however, because Bitcoin is a type of digital money that basically runs itself without any government intervention and minimal regulation.

Bitcoin is both the network for using the currency as well as the currency itself. It’s usually denoted Bitcoin (big B) when talking about the network and bitcoin (small b) when talking about the actual currency. For example, I have about four bitcoin in my online wallet, and I use the Bitcoin network to send payments.

How do you get bitcoin? There are two ways: Either you buy bitcoin, or you mine bitcoin. Buying bitcoin is quite easy. There are many online exchanges that will sell you bitcoin in exchange for whatever currency you normally use (dollars, etc.). I use Coinbase to buy my bitcoin, and it’s the most mainstream and scrutinized of the current exchanges. It was founded by Wall Street types in order to help Bitcoin become more mainstream. There are many others you can use, such as Kraken or CoinMama.

You can also buy bitcoin in person at various bitcoin ATMs around the world. There are now about 1,200 such ATMs in 60 countries around the world, and they’re growing rapidly. Here’s a site that allows you to find the nearest ATM.

Last, you can buy bitcoin through real people by using localbitcoins.com to find people in your area who will sell you bitcoin without going through an online exchange at all.

The second way to get bitcoin is by ”mining” them. You mine bitcoin using fast computers specially built for doing this. These specialized machines crunch numbers to discover the right codes. Every 10 minutes, the Bitcoin network releases a new block of bitcoin and the party or parties who discovered the right codes gets that block of coins (currently 12.5 coins per block). Bitmain is one of the bigger mining machine manufacturers and their newest model, the T9, sells for about one bitcoin.

This number crunching for “mining” is why bitcoin is referred to as a “crypto currency”: it’s all about using very large numbers that take massive computing power to preserve the integrity of the system and avoid hacking. The Bitcoin system basically turns electricity into money.

Security concerns?

So far, Bitcoin has never been hacked. There’s a common misconception that it has. Many companies that buy and sell bitcoin — bitcoin exchanges — have been hacked. Most famously, MtGox, one of the earliest exchanges, was hacked in 2013 and people lost a lot of money. But even then the Bitcoin network wasn’t hacked. Only the exchange was hacked.

That said, security is very important for those buying and selling bitcoin because the code itself is the currency. It’s a string of numbers and letters called a “hash key.” If someone has your hash keys, they have your bitcoin. There’s nothing extra beyond the hash key.

Your bitcoin are kept generally in an online wallet at an exchange like Coinbase or Xapo. Here’s a site that compares the security of the various means for storing bitcoin. Coinbase wins that comparison currently for online wallets and the Ledger Nano wins for hardware wallets.

You can also keep your bitcoin in an online “vault,” which adds extra layers of security for bitcoin that you don’t plan to use for a while. For example, it takes a couple of days to withdraw bitcoin from the Coinbase vault, and various types of authentication are required before the transaction is complete.

For those who want to take matters more into their own hands and avoid having to trust an online wallet or vault, you can keep your bitcoin in a physical hard drive, or you can even just write your codes by hand on paper and keep them in your physical wallet in your pocket.

Personally, I use a variety of online wallets and vaults in order to prevent any single mishap or hack from hitting me too hard. I can’t be bothered with keeping the codes offline but maybe I will one day as an extra layer of security.

How much is Bitcoin worth?

The price of one bitcoin has grown from nothing in 2009 when the Bitcoin network was created to more than $1,800 in May. If you had invested $1,000 in bitcoin in 2010, you would be sitting on more than $12 million now. How has it gone up so much? Well, because increasing numbers of investors have decided to place their confidence in the system.

We can look at the stats to get a good feel for how fast Bitcoin has grown. Blockchain.info keeps detailed stats.

» The number of bitcoin in circulation has grown from zero in the beginning of 2009 to almost 16.5 million now, with only about 4.5 million more to mine (but this will take about a century to complete because mining becomes intentionally more and more difficult).

» The Bitcoin price grew from nothing to almost $1,200 at the end of 2013, plummeted to around $200 in 2014, and rose again to more than $1,800 in May.

» Bitcoin’s market capitalization has gyrated similarly, but is now about $30 billion, up from zero in 2009 and $12 billion at the end of 2016, and is enjoying a strong upward trend in 2017.

» All crypto currencies combined now have a market cap over $60 billion, including Ripple, Ethereum, Litcoin and many others, many of which are also on very strong upward trajectories.

» The number of Bitcoin wallet users (required to buy and conduct business using bitcoin) has grown from zero in 2009 to more than 7 million by mid-2016 and 14 million now.

» Bitcoin daily transactions have grown from nothing in 2009 to 210,000 in mid-2016 and more than 350,000 by May.

So we’re seeing the Bitcoin system roughly doubling in size each year, and there’s little reason to believe that this rate of growth will slow down at this point. If anything, it’s likely to increase.

What does “deflationary” currency mean?

Bitcoin is different than regular money in that there’s a limit to how many can be created: just 21 million. Ever. The idea behind this limit is that the value of this currency can’t be inflated away by policymakers. The dollar loses about 2 percent in value each year because of planned inflation, and this provides a strong incentive to invest rather than save — and that’s literally why the Federal Reserve has a target inflation rate of 2 to 3 percent.

Bitcoin is the opposite: It’s designed to always increase in value, so simply buying and holding may be a very good investment strategy. This is why Bitcoin is described as a “deflationary” currency rather than an inflationary currency.

There’s also a limit on how small each Bitcoin can be divided: into 100 million parts. This tiny part of a bitcoin is called a satoshi, in honor of its mysterious and anonymous creator Satoshi Nakamoto.

What is the blockchain?

The magic ingredient in Bitcoin is the distribution of trust in a vast electronic network. This distribution moots the need for the “centralization of trust” that is the function of central banks like the Federal Reserve. Central banks issue money, control interest rates and act as a lender of last resort in “fiat currency” systems like in the United States. The distribution of trust to the network performs these roles in the Bitcoin ecosystem. This trust network is called the “blockchain,” and it is the heart of Bitcoin.

The blockchain is an electronic record (ledger) of all bitcoin transactions that is stored on every node of the ever-increasing network of the Bitcoin ecosystem. Because it is completely distributed and constantly updated in real time, using very difficult cryptographic keys that require massive amounts of computing power, the blockchain can’t be shut down by any outside force. This fully decentralized system renders Bitcoin as a system practically immune from hackers. As mentioned above, individual bitcoin exchanges can and have been hacked, but Bitcoin itself has never been hacked.

The beauty of the blockchain and Bitcoin ecosystem is that it allows any person or people using it to avoid the centralized (and often abusive) power of central banks and of national governments entirely. ABN Amro bank chief said it well in 2015: “What the Internet has done for information and the way we communicate, the blockchain will do for value and the way we look at trust. The financial world is going to flip upside-down.”

We are witnessing that upside-down flip right now in real time. This is why we’ve seen literally $30 billion in new money come into the Bitcoin and other crypto currency space in the past six months alone.

Obviously, the decentralized nature and independence from government influence has appealed to libertarians and techno-optimists since Bitcoin’s creation. Bitcoin long has had a bad rep because it’s been used by various versions of the Silk Road website to buy and sell drugs and other illegal items. But there’s far more to Bitcoin than illegal drugs.

Bitcoin is now accepted by thousands of companies and vendors around the world. Japan recently recognized Bitcoin as a legitimate currency, and this means that more than 260,000 stores in Japan soon will start accepting Bitcoin.

We are very likely seeing the beginning of a very large wave of growth for Bitcoin and other crypto currencies like Ethereum.

Investing in Bitcoin

How should you invest in Bitcoin? I’ve always advised people that you shouldn’t invest anything in Bitcoin that you don’t mind losing. That’s generally still good advice because this currency and the technology behind it are still very new. They could just disappear for a variety of reasons.

But the highly positive trends in terms of wallet growth, acceptance by businesses and governments, as well as market cap and price, discussed above have led me recently to change my mind a little and suggest that Bitcoin should in fact be a part of any smart investor’s portfolio.

It shouldn’t be a large part, but it should definitely be a part of it. With returns like we’ve seen on Bitcoin in the past eight years, it’s reasonable to accept some risk.

Will Bitcoin change the world?

The last thing I’ll look at is the revolutionary potential for Bitcoin and other cryptocurrencies in terms of how they may change the world. I wrote a piece in 2015 looking at how Bitcoin may stop China from replacing the United States on the world stage. This would be a good thing and could happen if enough Chinese simply start to prefer using bitcoin instead of yuan to conduct business. If China can’t control its currency it can’t control the world.

I also looked in a piece last year at whether Bitcoin is likely to be the future of money more generally. I concluded then and still believe that Bitcoin (or maybe some other coin built on the blockchain) will probably either grow in the next couple of decades to become a global currency or shrink down such that it becomes just an interesting historical footnote.

What happens if Bitcoin or something like it does replace national fiat currencies around the world? First, it makes it much harder for nations to raise massive amounts of money through printing or borrowing. This means that deficit spending will shrink or even go away. And, according to at least some Bitcoin libertarian optimists, this would also stop nations from waging war as much because they’d have to finance such wars as they go, with real money, rather than using deficit spending. A more peaceful world would indeed be a nice consequence of the Bitcoin revolution.

In closing, Bitcoin is a potentially transformative new type of currency that promises to create a more borderless and peaceful world, and an increasing flow of information and goods. It also may well lead to many unpredictable effects that we’ll simply have to sit back and watch as they unfold.

By Tom Hunt | Noozhawk

This is What the Most Expensive House in the United States Looks Like

In Bel Air, California, ultra-luxury home developer Bruce Makowsky has unveiled his most ambitious project yet, 924 Bel Air Road. Listed at US$250 million it is the most expensive home ever listed in the United States.

To attract the clientele Makowsky is targeting, he is selling more than just a home he is selling a lifestyle. Whoever buys 924 Bel Air not only gets the home, but a full-time, 7-person staff for 2 years, a US$30 million car collection and all of the artwork, wine, furnishings and extras you can imagine.

Below you will find a gallery of this insane property along with a video tour and a list of some of the most unbelievable highlights and inclusions. For more information visit 924belair.com.

– List price: US$250 million (previous US record $195 million mansion in Manalapan, Florida)
– 38,000 sq. ft. over 4 floors with 2 commercial elevators lined in alligator skin and handcrafted, polished steel staircase
– 12 bedrooms, 21 bathrooms, 3 kitchens, 6 bars, massage and spa room, fitness center, bowling alley
– 2 wine and champagne cellars, 85 ft Infinity pool, 40-person home theatre, 18×12 ft retractable outdoor tv screen
– Includes $US 30 million car collection, all artworks, wine and champagne collection, helicopter, boat
– Comes with 7 pre-paid, full-time staff including chef, chauffeur and masseuse for two years.

In an interview with CNBC, Makowsky likens the home more to a mega yacht than a house, stating:

Megayachts have gone from 150 feet to 300 feet or more and they can cost up to $500 million,” he said. “People spend two weeks a year on a yacht, but they live in a house. I wanted this to be the ultimate megayacht, but on land.” [source]

According to CNBC, the “auto gallery” features some of the rarest, fastest and most expensive cars in the world and come with the home. The collection includes a one-of-a-kind Pagani Huayra ($2 million+); the famous “Von Krieger” 1936 Mercedes 540 K Special Roadster($15 million+); and 10 of the rarest and fastest motorcycles ever built.

The most expensive home ever sold globally is believed to be a US$221 million penthouse in London, England. Globally, there are homes listed for more than US$300 million but none in the U.S. tops Makowsky’s US$250 million listing. [source]

Source: Twisted Sifter

The Root Of America’s Rising Wealth Inequality: The “Lawnmower” Economy (and you’re the lawn)

This predatory exploitation is only possible if the central bank and state have partnered with financial Elites.

After decades of denial, the mainstream has finally conceded that rising income and wealth inequality is a problem–not just economically, but politically, for as we all know wealth buys political influence/favors, and as we’ll see below, the federal government enables and enforces most of the skims and scams that have made the rich richer and everyone else poorer.

Here’s the problem in graphic form: from 1947 to 1979, the family income of the top 1% actually expanded less that the bottom 99%. Since 1980, the income of the 1% rose 224% while the bottom 80% barely gained any income at all.

Globalization, i.e. offshoring of jobs, is often blamed for this disparity, but as I explained in “Free” Trade, Jobs and Income Inequality, the income of the top 10% broke away from the bottom 90% in the early 1980s, long before China’s emergence as an exporting power.

Indeed, by the time China entered the WTO, the top 10% in the U.S. had already left the bottom 90% in the dust.

The only possible explanation of this is the rise of financialization: financiers and financial corporations (broadly speaking, Wall Street, benefited enormously from neoliberal deregulation of the financial industry, and the conquest of once-low-risk sectors of the economy (such as mortgages) by the storm troopers of finance.

Financiers skim the profits and gains in wealth, and Main Street and the middle / working classes stagnate. Gordon Long and I discuss the ways financialization strip-mines the many to benefit the few in our latest conversation (with charts): Our “Lawnmower” Economy.

Many people confuse the wealth earned by people who actually create new products and services with the wealth skimmed by financiers. One is earned by creating new products, services and business models; financialized “lawnmowing” generates no new products/services, no new jobs and no improvements in productivity–the only engine that generates widespread wealth and prosperity.

Consider these favorite financier “lawnmowers”:

1. Buying a company, loading it with debt to cash out the buyers and then selling the divisions off: no new products/services, no new jobs and no improvements in productivity.

2. Borrowing billions of dollars in nearly free money via Federal Reserve easy credit and using the cash to buy back corporate shares, boosting the value of stock owned by insiders and management: no new products/services, no new jobs and no improvements in productivity.

3. Skimming money from the stock market with high-frequency trading (HFT): no new products/services, no new jobs and no improvements in productivity.

4. Borrowing billions for next to nothing and buying high-yielding bonds and investments in other countries (the carry trade): no new products/services, no new jobs and no improvements in productivity.

All of these are “lawnmower” operations, rentier skims enabled by the Federal Reserve, its too big to fail banker cronies, a complicit federal government and a toothless corporate media.

This is not classical capitalism; it is predatory exploitation being passed off as capitalism. This predatory exploitation is only possible if the central bank and state have partnered with financial Elites to strip-mine the many to benefit the few.

This has completely distorted the economy, markets, central bank policies, and the incentives presented to participants.

The vast majority of this unproductive skimming occurs in a small slice of the economy–yes, the financial sector. As this article explains, the super-wealthy financial class Doesn’t Just Hide Their Money. Economist Says Most of Billionaire Wealth is Unearned.

“A key empirical question in the inequality debate is to what extent rich people derive their wealth from “rents”, which is windfall income they did not produce, as opposed to activities creating true economic benefit.

Political scientists define “rent-seeking” as influencing government to get special privileges, such as subsidies or exclusive production licenses, to capture income and wealth produced by others.

However, Joseph Stiglitz counters that the very existence of extreme wealth is an indicator of rents.

Competition drives profit down, such that it might be impossible to become extremely rich without market failures. Every good business strategy seeks to exploit one market failure or the other in order to generate excess profit.

The bottom-line is that extreme wealth is not broad-based: it is disproportionately generated by a small portion of the economy.”

This small portion of the economy depends on the central bank and state for nearly free money, bail-outs, guarantees that profits are private but losses are shifted to the taxpaying public–all the skims and scams we’ve seen protected for seven long years by Democrats and Republicans alike.

Learn how our “Lawnmower Economy” works (with host Gordon Long; 26:21 minutes)

source: ZeroHedge

Trailer Park Millionaires: get rich on housing for the poor

Some of the richest people in the US, including billionaires Warren Buffett and Sam Zell, have made millions from trailer parks at the expense of the country’s poorest people. Seeing their success, ordinary people from across the country are now trying to follow in their footsteps and become trailer park millionaires.

For the Wealthiest, a Private Tax System That Saves Them Billions

Buying Power

For the Wealthiest, a Private Tax System That Saves Them Billions

Daniel S. Loeb, shown with his wife, Margaret, runs the $17 billion Third Point hedge fund. Mr. Loeb, who has owned a home in East Hampton, has contributed to Jeb Bush’s super PAC and given $1 million to the American Unity Super PAC, which supports gay rights.

By NOAM SCHEIBER and PATRICIA COHEN for The New York Times, December 29, 2015

WASHINGTON — The hedge fund magnates Daniel S. Loeb, Louis Moore Bacon and Steven A. Cohen have much in common. They have managed billions of dollars in capital, earning vast fortunes. They have invested large sums in art — and millions more in political candidates.
Moreover, each has exploited an esoteric tax loophole that saved them millions in taxes. The trick? Route the money to Bermuda and back.

With inequality at its highest levels in nearly a century and public debate rising over whether the government should respond to it through higher taxes on the wealthy, the very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes. Some call it the “income defense industry,” consisting of a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means.

In recent years, this apparatus has become one of the most powerful avenues of influence for wealthy Americans of all political stripes, including Mr. Loeb and Mr. Cohen, who give heavily to Republicans, and the liberal billionaire George Soros, who has called for higher levies on the rich while at the same time using tax loopholes to bolster his own fortune.

All are among a small group providing much of the early cash for the 2016 presidential campaign.
Operating largely out of public view — in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service — the wealthy have used their influence to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans.

The impact on their own fortunes has been stark. Two decades ago, when Bill Clinton was elected president, the 400 highest-earning taxpayers in America paid nearly 27 percent of their income in federal taxes, according to I.R.S. data. By 2012, when President Obama was re-elected, that figure had fallen to less than 17 percent, which is just slightly more than the typical family making $100,000 annually, when payroll taxes are included for both groups.

The ultra-wealthy “literally pay millions of dollars for these services,” said Jeffrey A. Winters, a political scientist at Northwestern University who studies economic elites, “and save in the tens or hundreds of millions in taxes.”

Some of the biggest current tax battles are being waged by some of the most generous supporters of 2016 candidates. They include the families of the hedge fund investors Robert Mercer, who gives to Republicans, and James Simons, who gives to Democrats; as well as the options trader Jeffrey Yass, a libertarian-leaning donor to Republicans.

Mr. Yass’s firm is litigating what the agency deemed to be tens of millions of dollars in underpaid taxes. Renaissance Technologies, the hedge fund Mr. Simons founded and which Mr. Mercer helps run, is currently under review by the I.R.S. over a loophole that saved their fund an estimated $6.8 billion in taxes over roughly a decade, according to a Senate investigation. Some of these same families have also contributed hundreds of thousands of dollars to conservative groups that have attacked virtually any effort to raises taxes on the wealthy.

In the heat of the presidential race, the influence of wealthy donors is being tested. At stake is the Obama administration’s 2013 tax increase on high earners — the first substantial increase in two decades — and an I.R.S. initiative to ensure that, in effect, the higher rates stick by cracking down on tax avoidance by the wealthy.

While Democrats like Bernie Sanders and Hillary Clinton have pledged to raise taxes on these voters, virtually every Republican has advanced policies that would vastly reduce their tax bills, sometimes to as little as 10 percent of their income.

At the same time, most Republican candidates favor eliminating the inheritance tax, a move that would allow the new rich, and the old, to bequeath their fortunes intact, solidifying the wealth gap far into the future. And several have proposed a substantial reduction — or even elimination — in the already deeply discounted tax rates on investment gains, a foundation of the most lucrative tax strategies.

“There’s this notion that the wealthy use their money to buy politicians; more accurately, it’s that they can buy policy, and specifically, tax policy,” said Jared Bernstein, a senior fellow at the left-leaning Center on Budget and Policy Priorities who served as chief economic adviser to Vice President Joseph R. Biden Jr. “That’s why these egregious loopholes exist, and why it’s so hard to close them.”

The Family Office

Each of the top 400 earners took home, on average, about $336 million in 2012, the latest year for which data is available. If the bulk of that money had been paid out as salary or wages, as it is for the typical American, the tax obligations of those wealthy taxpayers could have more than doubled.

Instead, much of their income came from convoluted partnerships and high-end investment funds. Other earnings accrued in opaque family trusts and foreign shell corporations, beyond the reach of the tax authorities.

The well-paid technicians who devise these arrangements toil away at white-shoe law firms and elite investment banks, as well as a variety of obscure boutiques. But at the fulcrum of the strategizing over how to minimize taxes are so-called family offices, the customized wealth management departments of Americans with hundreds of millions or billions of dollars in assets.
Family offices have existed since the late 19th century, when the Rockefellers pioneered the institution, and gained popularity in the 1980s. But they have proliferated rapidly over the last decade, as the ranks of the super-rich, and the size of their fortunes, swelled to record proportions.
“We have so much wealth being created, significant wealth, that it creates a need for the family office structure now,” said Sree Arimilli, an industry recruiting consultant.

Family offices, many of which are dedicated to managing and protecting the wealth of a single family, oversee everything from investment strategy to philanthropy. But tax planning is a core function. While the specific techniques these advisers employ to minimize taxes can be mind-numbingly complex, they generally follow a few simple principles, like converting one type of income into another type that’s taxed at a lower rate.

Mr. Loeb, for example, has invested in a Bermuda-based reinsurer — an insurer to insurance companies — that turns around and invests the money in his hedge fund. That maneuver transforms his profits from short-term bets in the market, which the government taxes at roughly 40 percent, into long-term profits, known as capital gains, which are taxed at roughly half that rate. It has had the added advantage of letting Mr. Loeb defer taxes on this income indefinitely, allowing his wealth to compound and grow more quickly.

The Bermuda insurer Mr. Loeb helped set up went public in 2013 and is active in the insurance business, not merely a tax dodge. Mr. Cohen and Mr. Bacon abandoned similar insurance-based strategies in recent years. “Our investment in Max Re was not a tax-driven scheme, but rather a sound investment response to investor interest in a more dynamically managed portfolio akin to Warren Buffett’s Berkshire Hathaway,” said Mr. Bacon, who leads Moore Capital Management. “Hedge funds were a minority of the investment portfolio, and Moore Capital’s products a much smaller subset of this alternative portfolio.” Mr. Loeb and Mr. Cohen declined to comment.

Louis Moore Bacon, shown with his wife, Gabrielle, is the founder of a highly successful hedge fund and a leading contributor to Jeb Bush’s super PAC. Among his homes is one on Robins Island, off Long Island. Bloomberg News, via Getty Images

Organizing one’s business as a partnership can be lucrative in its own right. Some of the partnerships from which the wealthy derive their income are allowed to sell shares to the public, making it easy to cash out a chunk of the business while retaining control. But unlike publicly traded corporations, they pay no corporate income tax; the partners pay taxes as individuals. And the income taxes are often reduced by large deductions, such as for depreciation.

For large private partnerships, meanwhile, the I.R.S. often struggles “to determine whether a tax shelter exists, an abusive tax transaction is being used,” according to a recent report by the Government Accountability Office. The agency is not allowed to collect underpaid taxes directly from these partnerships, even those with several hundred partners. Instead, it must collect from each individual partner, requiring the agency to commit significant time and manpower.

The wealthy can also avail themselves of a range of esoteric and customized tax deductions that go far beyond writing off a home office or dinner with a client. One aggressive strategy is to place income in a type of charitable trust, generating a deduction that offsets the income tax. The trust then purchases what’s known as a private placement life insurance policy, which invests the money on a tax-free basis, frequently in a number of hedge funds. The person’s heirs can inherit, also tax-free, whatever money is left after the trust pays out a percentage each year to charity, often a considerable sum.

Many of these maneuvers are well established, and wealthy taxpayers say they are well within their rights to exploit them. Others exist in a legal gray area, its boundaries defined by the willingness of taxpayers to defend their strategies against the I.R.S. Almost all are outside the price range of the average taxpayer.

Among tax lawyers and accountants, “the best and brightest get a high from figuring out how to do tricky little deals,” said Karen L. Hawkins, who until recently headed the I.R.S. office that oversees tax practitioners. “Frankly, it is almost beyond the intellectual and resource capacity of the Internal Revenue Service to catch.”

The combination of cost and complexity has had a profound effect, tax experts said. Whatever tax rates Congress sets, the actual rates paid by the ultra-wealthy tend to fall over time as they exploit their numerous advantages.

From Mr. Obama’s inauguration through the end of 2012, federal income tax rates on individuals did not change (excluding payroll taxes). But the highest-earning one-thousandth of Americans went from paying an average of 20.9 percent to 17.6 percent. By contrast, the top 1 percent, excluding the very wealthy, went from paying just under 24 percent on average to just over that level.

“We do have two different tax systems, one for normal wage-earners and another for those who can afford sophisticated tax advice,” said Victor Fleischer, a law professor at the University of San Diego who studies the intersection of tax policy and inequality. “At the very top of the income distribution, the effective rate of tax goes down, contrary to the principles of a progressive income tax system.”

A Very Quiet Defense

Having helped foster an alternative tax system, wealthy Americans have been aggressive in defending it.

Trade groups representing the Bermuda-based insurance company Mr. Loeb helped set up, for example, have spent the last several months pleading with the I.R.S. that its proposed rules tightening the hedge fund insurance loophole are too onerous.

The major industry group representing private equity funds spends hundreds of thousands of dollars each year lobbying on such issues as “carried interest,” the granddaddy of Wall Street tax loopholes, which makes it possible for fund managers to pay the capital gains rate rather than the higher standard tax rate on a substantial share of their income for running the fund.

The budget deal that Congress approved in October allows the I.R.S. to collect underpaid taxes from large partnerships at the firm level for the first time — which is far easier for the agency — thanks to a provision that lawmakers slipped into the deal at the last minute, before many lobbyists could mobilize. But the new rules are relatively weak — firms can still choose to have partners pay the taxes — and don’t take effect until 2018, giving the wealthy plenty of time to weaken them further.

Shortly after the provision passed, the Managed Funds Association, an industry group that represents prominent hedge funds like D. E. Shaw, Renaissance Technologies, Tiger Management and Third Point, began meeting with members of Congress to discuss a wish list of adjustments. The founders of these funds have all donated at least $500,000 to 2016 presidential candidates. During the Obama presidency, the association itself has risen to become one of the most powerful trade groups in Washington, spending over $4 million a year on lobbying.

And while the lobbying clout of the wealthy is most often deployed through industry trade associations and lawyers, some rich families have locked arms to advance their interests more directly.

The inheritance tax has been a primary target. In the early 1990s, a California family office executive named Patricia Soldano began lobbying on behalf of wealthy families to repeal the tax, which would not only save them money, but also make it easier to preserve their business empires from one generation to the next. The idea struck many hardened operatives as unrealistic at the time, given that the tax affected only the wealthiest Americans. But Ms. Soldano’s efforts — funded in part by the Mars and Koch families — laid the groundwork for a one-year elimination in 2010.
The tax has been restored, but currently applies only to couples leaving roughly $11 million or more to their heirs, up from those leaving more than $1.2 million when Ms. Soldano started her campaign. It affected fewer than 5,200 families last year.

“If anyone would have told me we’d be where we are today, I would never have guessed it,” Ms. Soldano said in an interview.

Some of the most profound victories are barely known outside the insular world of the wealthy and their financial managers.

In 2009, Congress set out to require that investment partnerships like hedge funds register with the Securities and Exchange Commission, partly so that regulators would have a better grasp on the risks they posed to the financial system.

The early legislative language would have required single-family offices to register as well, exposing the highly secretive institutions to scrutiny that their clients were eager to avoid. Some of the I.R.S.’s cases against the wealthy originate with tips from the S.E.C., which is often better positioned to spot tax evasion.

By the summer of 2009, several family office executives had formed a lobbying group called the Private Investor Coalition to push back against the proposal. The coalition won an exemption in the 2010 Dodd-Frank financial reform bill, then spent much of the next year persuading the S.E.C. to largely adopt its preferred definition of “family office.”

So expansive was the resulting loophole that Mr. Soros’s $24.5 billion hedge fund took advantage of it, converting to a family office after returning capital to its remaining outside investors. The hedge fund manager Stanley Druckenmiller, a former business partner of Mr. Soros, took the same step.

The Soros family, which generally supports Democrats, has committed at least $1 million to the 2016 presidential campaign; Mr. Druckenmiller, who favors Republicans, has put slightly more than $300,000 behind three different G.O.P. presidential candidates.

A slide presentation from the Private Investor Coalition’s 2013 annual meeting credited the success to multiple meetings with members of the Senate Banking Committee, the House Financial Services Committee, congressional staff and S.E.C. staff. “All with a low profile,” the document noted. “We got most of what we wanted AND a few extras we didn’t request.”

A Hobbled Monitor

After all the loopholes and all the lobbying, what remains of the government’s ability to collect taxes from the wealthy runs up against one final hurdle: the crisis facing the I.R.S.
President Obama has made fighting tax evasion by the rich a priority. In 2010, he signed legislation making it easier to identify Americans who squirreled away assets in Swiss bank accounts and Cayman Islands shelters.

His I.R.S. convened a Global High Wealth Industry Group, known colloquially as “the wealth squad,” to scrutinize the returns of Americans with incomes of at least $10 million a year.
But while these measures have helped the government retrieve billions, the agency’s efforts have flagged in the face of scandal, political pressure and budget cuts. Between 2010, the year before Republicans took control of the House of Representatives, and 2014, the I.R.S. budget dropped by almost $2 billion in real terms, or nearly 15 percent. That has forced it to shed about 5,000 high-level enforcement positions out of about 23,000, according to the agency.

Audit rates for the $10 million-plus club spiked in the first few years of the Global High Wealth program, but have plummeted since then.

Steven A. Cohen, shown with his wife, Alexandra, is the founder of SAC Capital and owns a home in East Hampton. He is a prominent art collector and has focused his political contributions on a super PAC for Gov. Chris Christie.

The political challenge for the agency became especially acute in 2013, after the agency acknowledged singling out conservative nonprofits in a review of political activity by tax-exempt groups. (Senior officials left the agency as a result of the controversy.)

Several former I.R.S. officials, including Marcus Owens, who once headed the agency’s Exempt Organizations division, said the controversy badly damaged the agency’s willingness to investigate other taxpayers, even outside the exempt division.

“I.R.S. enforcement is either absent or diminished” in certain areas, he said. Mr. Owens added that his former department — which provides some oversight of money used by charities and nonprofits — has been decimated.

Groups like FreedomWorks and Americans for Tax Reform, which are financed partly by the foundations of wealthy families and large businesses, have called for impeaching the I.R.S. commissioner. They are bolstered by deep-pocketed advocacy groups like the Club for Growth, which has aided primary challenges against Republicans who have voted in favor of higher taxes.
In 2014, the Club for Growth Action fund raised more than $9 million and spent much of it helping candidates critical of the I.R.S. Roughly 60 percent of the money raised by the fund came from just 12 donors, including Mr. Mercer, who has given the group $2 million in the last five years. Mr. Mercer and his immediate family have also donated more than $11 million to several super PACs supporting Senator Ted Cruz of Texas, an outspoken I.R.S. critic and a presidential candidate.
Another prominent donor is Mr. Yass, who helps run a trading firm called the Susquehanna International Group. He donated $100,000 to the Club for Growth Action fund in September. Mr. Yass serves on the board of the libertarian Cato Institute and, like Mr. Mercer, appears to subscribe to limited-government views that partly motivate his political spending.

But he may also have more than a passing interest in creating a political environment that undermines the I.R.S. Susquehanna is currently challenging a proposed I.R.S. determination that an affiliate of the firm effectively repatriated more than $375 million in income from subsidiaries located in Ireland and the Cayman Islands in 2007, creating a large tax liability. (The affiliate brought the money back to the United States in later years and paid dividend taxes on it; the I.R.S. asserts that it should have paid the ordinary income tax rate, at a cost of tens of millions of dollars more.)

In June, Mr. Yass donated more than $2 million to three super PACs aligned with Senator Rand Paul of Kentucky, who has called for taxing all income at a flat rate of 14.5 percent. That change in itself would save wealthy supporters like Mr. Yass millions of dollars.
Mr. Paul, also a presidential candididate, has suggested going even further, calling the I.R.S. a “rogue agency” and circulating a petition in 2013 calling for the tax equivalent of regime change. “Be it now therefore resolved,” the petition reads, “that we, the undersigned, demand the immediate abolishment of the Internal Revenue Service.”

But even if that campaign is a long shot, the richest taxpayers will continue to enjoy advantages over everyone else.

For the ultra-wealthy, “our tax code is like a leaky barrel,” said J. Todd Metcalf, the Democrats’ chief tax counsel on the Senate Finance Committee. ”Unless you plug every hole or get a new barrel, it’s going to leak out.”

The Making of the Most Expensive Mansion in History

On a hilltop in Bel Air, a 100,000-square-foot giga-mansion is under construction, for no one in particular. The asking price—$500 million—would shatter records, but, as ridiculous as it sounds, in L.A.’s unbridled real-estate bubble, this house could be billed as a bargain.

My mansion really is worth $500M, claims the man behind most expensive home ever built which boasts five swimming pools, a casino and a VIP nightclub

The Bel Air home, which will be finished in 2017, is close to those of celebrities such as Jennifer Aniston and Elon Musk
The property has panoramic views of the LA basin and Pacific Ocean and will cover more than 100,000 square feet
The price works out to about $5,000 per square foot, which the property’s developer Nile Niami says is a good price for what the buyer is getting
The home will have five swimming pools, a casino, a nightclub and a lounge with jellyfish tanks replacing the walls and ceilings
Niami, behind films including action-thriller The Patriot, hopes to double the world-record for the most expensive home ever sold

A mega-mansion in Bel Air has been listed for a whopping $500million – but the extravagant home is worth its value, the real-estate developer claims.

Sitting on a hilltop with views of the San Gabriel Mountains, LA basin, Beverly Hills and the Pacific Ocean, the home will have five swimming pools, a casino, a nightclub with VIP access, a lounge with jellyfish tanks replacing the walls and ceilings, and many other amenities.

The home, which will be finished in 2017 and boasts neighbors including Jennifer Aniston and Elon Musk, will be more than 100,000 square feet – twice the size of the White House.

A home being built in the Bel Air neighborhood of Los Angeles, California, by real-estate developer Nile Niami is being listed for $500million. Above is a depiction of what it will look like when finished.

The 100,000-square-foot home, which is still being built (pictured) is close to several celebrities’ houses.

The 100,000-square-foot home, which is still being built (pictured) is close to several celebrities’ houses

The price works out to about $5,000 per square foot, which Hollywood producer-turned-developer 47-year-old Nile Niami notes is less than half of what some billionaires pay for Manhattan penthouses.

Niami, pictured in 2013, said the property will be worth the cost.

‘We have a very specific client in mind,’ Niami told Details magazine. ‘Someone who already has a $100million yacht and seven houses all over the world, in London and Dubai and whatever.

‘To be able to say that the biggest, most expensive house in the world is here, that will really be good for LA.’

Niami, behind films including action-thriller The Patriot, hopes to double the world-record for the most expensive home ever sold with the $500million asking price.

He grew unpopular with neighbors last fall, when he sliced off the top of a hill to create panoramic vistas on his four-acre lot.

For weeks, dump trucks filled the neighborhood’s narrow streets as they removed about 40,000 cubic yards of dirt from the property.

Drew Fenton, the real-estate broker listing the property, said that the home is important to Los Angeles.

‘It is by far the most important estate project in Los Angeles over the last 25 years and will raise the bar for all other estates built in the city,’ he told Details.

The home will have several features that most residential properties don’t, including a two-story waterfall, temperature-controlled room for storing fresh flowers, a cigar lounge and an indoor-outdoor dance floor.

It also will have a 30-car garage, 40-seat screening room and a 6,000-square-foot master suite.

The price works out to about $5,000 per square foot, which Hollywood producer-turned-developer Niami notes is less than half of what some billionaires pay for Manhattan penthouses.

But when inside the master suite, ‘it doesn’t look that big, because everything else is so big’, Niami said.

It will have three smaller homes, four swimming pools including a 180ft long infinity pool and a 20,000-square-foot artificial lawn to comply with California’s drought-induced water restrictions.

A glass-walled, high-ceiling library will take part of the first floor, but Niami said not to expect to find books in the room.

‘Nobody really reads books,’ he said. ‘So I’m just going to fill the shelves with white books, for looks.’

Niami sells his homes fully furnished and decorated to the buyers’ tastes.

The property’s chief architect, Paul McClean, told Details that listing prices are not often the reality.

Drew Fenton, the real-estate broker listing the property, said that the home is important to Los Angeles in that it will ‘raise the bar for all other estates built in the city.’

Drew Fenton, the real-estate broker listing the property, said that the home is important to Los Angeles in that it will ‘raise the bar for all other estates built in the city’

‘The numbers right now are crazy, no matter how you look at them,’ he said. ‘But for most people who buy these kinds of houses, it’s not a decision that they calculate based on price per square foot.

‘It’s more about the emotional draw. With Nile, we’re trying to sell a lifestyle, a sense of how people imagine they would live.’

Niami said he does not know who sold him the Bel Air plot – the secret transaction took place through a bank trust where the owner remained anonymous.

The real-estate developer declined to say how much he paid for the property, which originally included a decrepit home that has since been torn down.

As for who he’d like to live in his soon-to-be mega-mansion: ‘It doesn’t make a difference as long as they pay the money.

Ultra Wealthy Buying Homes Globally for Investment Diversification, Gain Citizenship

by Michael Gerrity in the World Property Journal

According to a study by Wealth-X and the Sotheby’s International Realty, a growing number of ultra-high net worth (UHNW) individuals view homes as ‘opportunity gateways’, driving buying decisions that are based on potential opportunities from owning these luxury residential properties.

The UHNW Luxury Real Estate Report: Homes As Opportunity Gateways reveals two trends that are fueling the rise in the number of ultra wealthy individuals who are buying luxury homes:

1) International home-buying by UHNW individuals (defined as those with at least US$30 million in assets) from emerging nations seeking a safe investment diversification.

2) Home-buying as part of a program to gain citizenship or residency status in foreign nations.

The report provides insight into the UHNW residential real estate opportunities in Sydney and Vancouver for buyers seeking safe investment diversification; and Malta, the Bahamas and Sao Paulo, which may appeal to ultra wealthy buyers who are seeking citizenship or residency through property investment.

Key report findings include:

12% of second homes purchased by UHNW individuals in emerging countries (those who reside in BRICS nations) are located outside their country of residence.

Recent market fluctuations in emerging nations are leading a new generation of UHNW investors to consider investing in luxury residential real estate in Western markets.

Chinese UHNW individuals make up the third largest share of foreign UHNW homeowners in the United States, behind only Canada and the United Kingdom.

Twenty nations in Europe and the Americas now offer citizenship or residency programs to individuals willing to invest in domestic residential real estate.

Many residential real estate markets with such programs – including Sao Paulo, Malta, and the Bahamas – offer good long-term investment opportunities.

The UHNW Residential Real Estate index, tracked by Wealth-X, rose to 115.2 in Q2 2015, an 8.3% rise year-on-year, and the sixth consecutive quarter in which the index has risen. The continued rise in the index reflects the confidence of UHNW individuals to invest in luxury residential real estate.

The index takes into account the full range of luxury residential properties that are owned by the world’s wealthiest individuals. Wealth-X data shows there are 211,275 UHNW individuals globally, who collectively hold nearly $3 trillion in real estate assets, equal to 10% of their net worth.

Wealth-X President David Friedman commented, “Wealth-X is pleased to partner with the Sotheby’s International Realty brand for this third luxury real estate report for 2015. This new joint study explores the trends and home-buying motivations of a distinct group of ultra wealthy individuals in the emerging markets. As their wealth grows, so will their investment fueled by various motivations, be it to diversify their portfolio or to gain citizenship or residency in a foreign country.”

According to Philip White, president and chief executive officer, Sotheby’s International Realty Affiliates LLC, this joint report was designed to provide an understanding of the trends driving buying decisions of ultra-high net worth individuals around the world. “The research reveals trends that go beyond traditional motivations and help guide real estate investments that contribute to long-term wealth,” he said. “It underscores the important role real estate plays in a larger strategy to build a valuable asset portfolio.”

Forget Mega Yachts — this mobile private island just upped the ante on billionaire toys

By Dennis Green in Business Insider

KOKOMO AILAND by MIGALOO PRIVATE SUBMERSIBLE YACHTS Migaloo SubmariesPart yacht, part private island, Kokomo Ailand is a new model for luxury on the high seas.

Yacht design has gotten pretty extravagant in recent years, but nothing compares to Kokomo Ailand.

More mobile island than yacht, Kokomo is a floating, semi-submersed vessel with a level of luxury that rivals a four-star resort. According to renderings, the “private floating habitat” features multiple decks and amenities, a sky-high penthouse suite, and a beach club.

The company behind it, Migaloo Private Submarines, hasn’t received any orders yet, but it claims Kokomo can be built to specification immediately with existing technology. According to a representative, “the price depends strongly on the client’s wishes.”

Keep scrolling to see the renderings for this insane new billionaire toy.

Part massive yacht, part private island, Kokomo Ailand has all the trappings of a luxury resort.

Migaloo Submaries

The owner’s penthouse sits 260 feet above sea level with two elevators, a glass-bottomed Jacuzzi, a private beach club, and ocean views.

Migaloo Submaries

Eight engines allow the mammoth platform to chug along at speeds up to 8 knots, or about 9 mph.

Migaloo Submaries

One of the most exotic features is the jungle deck.

Migaloo Submaries

It includes palm trees, vertical gardens, and waterfalls.

Migaloo Submaries

There’s also a spa deck with a gym, a massage parlor, and beauty salons.

Migaloo Submaries

The garden deck is reserved for outdoor dining and lounging.

Migaloo Submaries

The real draw is the beach deck, replete with multiple pools, barbecue areas, underwater dining, a shark-feeding station, and an outdoor cinema.

Migaloo Submaries

Designed with infinity pools and private balconies, the VIP and guest deck is under the beach deck.

Migaloo Submaries

A helipad allows easy entry and exit to the island.

Migaloo Submaries

The Art of Capital Flight

Contemporary art and apartments in major cities such as New York, London and Vancouver has become the two most important stores of wealth internationally. Forget gold as an inflation hedge; buy paintings.

by Kenneth Rogoff in Project Syndicate

CAMBRIDGE – What impact will China’s slowdown have on the red-hot contemporary art market? That might not seem like an obvious question, until one considers that, for emerging-market investors, art has become a critical tool for facilitating capital flight and hiding wealth. These investors have become a major factor in the art market’s spectacular price bubble of the last several years. So, with emerging market economies from Russia to Brazil mired in recession, will the bubble burst?

Just five months ago, Larry Fink, Chairman and CEO of BlackRock, the world’s largest asset manager, told an audience in Singapore that contemporary art has become one of the two most important stores of wealth internationally, along with apartments in major cities such as New York, London, and Vancouver. Forget gold as an inflation hedge; buy paintings.

What made Fink’s elevation of art to investment-grade status so surprising is that no one of his stature had been brave enough to say it before. I am certainly not celebrating the trend. I tend to agree with the philosopher Peter Singer that the obscene sums being spent on premier pieces of modern art are disquieting.

https://i0.wp.com/www.pablopicasso.org/images/paintings/the-women-of-algiers.jpg

The Women of Algiers, 1955 by Pablo Picasso

We can all agree that these sums are staggering. In May, Pablo Picasso’s “Women of Algiers” sold for $179 million at a Christie’s auction in New York, up from $32 million in 1997. Okay, it’s a Picasso. Yet it is not even the highest sale price paid this year. A Swiss collector reportedly paid close to $300 million in a private sale for Paul Gauguin’s 1892 “When Will You Marry?”

Picasso and Gauguin are deceased. The supply of their paintings is known and limited. Nevertheless, the recent price frenzy extends to a significant number of living artists, led by the American Jeff Koons and the German Gerhard Richter, and extending well down the food chain.

For economists, the art bubble raises many fascinating questions, but an especially interesting one is exactly who would pay so much for high-end art. The answer is hard to know, because the art world is extremely opaque. Indeed, art is the last great unregulated investment opportunity.

Much has been written about the painting collections of hedge fund managers and private equity art funds (where one essentially buys shares in portfolios of art without actually ever taking possession of anything). In fact, emerging-market buyers, including Chinese, have become the swing buyers in many instances, often making purchases anonymously.

But doesn’t China have a regime of strict capital controls that limits citizens from taking more than $50,000 per year out of the country? Yes, but there are many ways of moving money in and out of China, including the time-honored method of “under and over invoicing.”

For example, to get money out of China, a Chinese seller might report a dollar value far below what she was actually paid by a cooperating Western importer, with the difference being deposited into an overseas bank account. It is extremely difficult to estimate capital flight, both because the data are insufficient and because it is tough to distinguish capital flight from normal diversification. As the late MIT economist Rüdiger Dornbusch liked to quip, identifying capital flight is akin to the old adage about blind men touching an elephant: It is difficult to describe, but you will recognize it when you see it.

Many estimates put capital flight from China at about $300 billion annually in recent years, with a marked increase in 2015 as the economy continues to weaken. The ever-vigilant Chinese authorities are cracking down on money laundering; but, given the huge incentives on the other side, this is like playing whack-a-mole.

Presumably, the anonymous Chinese buyers at recent Sotheby’s and Christie’s auctions had spirited their money out of the country before bidding, and the paintings are just an investment vehicle that is particularly easy to hold secretively. The art is not necessarily even displayed anywhere: It may well be spirited off to a temperature- and humidity-controlled storage vault in Switzerland or Luxembourg. Reportedly, some art sales today result in paintings merely being moved from one section of a storage vault to another, recalling how the New York Federal Reserve registers gold sales between national central banks.

Clearly, the incentives and motives of art investors who are engaged in capital flight, or who want to hide or launder their money, are quite different from those of ordinary investors. The Chinese hardly invented this game. It was not so long ago that Latin America was the big driver in the art market, owing to money escaping governance-challenged economies such as Argentina and Venezuela, as well as drug cartels that used paintings to launder their cash.

So how, then, will the emerging-market slowdown radiating from China affect contemporary art prices? In the short run, the answer is ambiguous, because more money is leaking out of the country even as the economy slows. In the long run, the outcome is pretty clear, especially if one throws in the coming Fed interest-rate hikes. With core buyers pulling back, and the opportunity cost rising, the end of the art bubble will not be a pretty picture.

A Luxury Tear Down In LA’s Bird Streets

http://www.trbimg.com/img-55bc0e76/turbine/la-fi-0802-tear-downs-03-jpg-20150731/900/900x506

A luxury tear-down in the Bird Streets. 9212 Nightingale Drive, priced at $13.8 million, the 5,000-square-foot house on more than half an acre is being marketed as the site for a 12,000-square-foot home that developers hope would garner as much as $70 million.

By Neal J. Leitereg in The Los Angeles Times

The actual house didn’t factor much into the equation when Dr. Dre parted with his Hollywood Hills West home in January for $32 million.

The contemporary-style residence behind gates on Oriole Way was not purchased for its 9,696 square feet of space, but rather for its land value and potential to build an astonishing $100-million-plus estate on what has been called the best view lot in Los Angeles.

Such is life in the so-called Bird Streets, an enclave that has long been popular among celebrity and mogul types, where a developers flush with cash look to double down on a surging luxury market.

At 9212 Nightingale Drive, a home taken down to the studs and built new last year is now being shopped as a tear-down, according to listing agent Benjamin Bacal of Rodeo Realty Beverly Hills. That’s how popular and sought-after the area has become.

Priced at $13.8 million, the 5,000-square-foot house on more than half an acre is being marketed as the site for a 12,000-square-foot home that developers hope would garner as much as $70 million.

If that sounds like a pie-in-the-sky figure, Bacal points to two other homes on the same street where $70 million seems to be the magic number.

Three doors down, Global Radio founder and president Ashley Tabor has invested more than $30 million into a two-house compound he bought from Megan Ellison, the film producer and daughter of billionaire Larry Ellison, in 2013 for $26.25 million.

In similar fashion, billionaire Ted Waitt, who co-founded Gateway Inc., has put about $30 million toward his home on Nightingale. Also purchased from Ellison in 2013, the corner-lot property cost $20.5 million.

Each could end up worth $70 million, as long as the tear-down market stays red hot.

Wealthy Russians Rush to Buy Up Luxury Greek Villas

Russian buyers are scrambling to buy bargain properties in Greece as the financial meltdown has eroded luxury real-estate prices, Damien Sharkov reported for Newsweek.

Just to give you an idea of the scale of sales: The Greek real-estate agency IRM Aegean Estate has put properties in package deals, with two villas in Corfu —private beach and all — selling together for $4.9 million.

According to the G erman magazine Bild, the number of luxury Greek villas bought by Russians has more than doubled in the past year, Newsweek reported.

That’s partially because of Russia’s own currency crisis — rich people are looking for safe places to park cash — but also because real-estate prices in Greece have fallen roughly 50% since 2009, Bild reported.

“If a villa on the Greek island of Syros still cost €1.6m a few years ago, it is now selling for just €800,000,” IRM founder Isabelle Razi told Newsweek. That’s a fall to roughly $870,000 from $1.74 million with today’s exchange rates.

The strengthening relationship between Russian buyers and their Greek holdings is mirrored by ties between their national governments.

Last month the two countries agreed to build a $2.27 billion gas pipeline, Sharkov reported for Newsweek, and some critics are concerned the move signifies a tug-of-war between the West and Russia, as Athens may be inching toward the Kremlin’s umbrella of influence.

An Inside Look At Manhattan’s Billionaires’ Row

Along Manhattan’s 57th Street, stretching from Columbus Circle on the west side to Park Avenue on the east, you’ll soon find more than a half-dozen glittering, ultra-exclusive condominium towers that will offer unparalleled views of Central Park — and virtually the entire city. Welcome to Manhattan’s Billionaires’ Row, the current trophy real estate of the 1%.

The mega projects, with some penthouse floor plans such as those at 432 Park Ave. expanding to more than 8,200 square feet, are expected to list on average for more than $14.5 million (or $4,375 a square foot). Some even have living rooms bigger than most condominium units in Manhattan (the average size of a condo unit in Manhattan being 1,100 square feet.)

The sky-high prices on Billionaires’ Row will also help push the average price for a unit at new developments in Manhattan to $7 million (or $2,787 a square foot) by 2017, according to Gabby Warshawer, head of research for CityRealty, a New York real-estate research firm. Manhattan condo units on average were just $1 million as recently as 2005, says Warshawer.

An inside look at ‘Billionaires’ Row’

For the Manhattan, and global, elite, trophy apartments in the sky, overlooking Central Park, will set new marks for luxury and price.

Aside from the luxuriously appointed apartments and the central location, there’s something else that’s appealing about the apartments: As Noble Black, a real-estate agent who has marketed condominium units in One57, points out, unlike many city co-ops — whose boards are famously picky and have turned down such notables as pop singer Madonna and former President Richard Nixon as potential residents — buyers on Billionaires’ Row don’t need to open up their financial books to co-op boards or even submit to interviews.

Here’s a look at what $14 million–plus will buy you along Billionaires’ Row …

These sky-high trophy homes overlooking Central Park set new marks for both luxury and price

157 West 57 St.

One57, built by developer Extell, was the first on the Billionaires’ Row strip to be built and is 75 stories tall and more than 1,000 feet high. The building, which includes a Park Hyatt hotel with services catering to owners’ every whim, with room service, maid service and a spa and gym, saw its penthouse apartment sell for a record $100.5 million in December 2014 to a yet-unnamed buyer. All told, the entire building’s 92 condo units were worth an estimated $2 billion and will sell for an average of $6,300 a square foot, according to CityRealty.

111 West 57th St.

Built by JDS Development Group, this extraordinarily slender skyscraper will rise 80 stories and more than 1,400 feet. That’s taller than the Empire State Building. The 60 apartments will start at $14 million according to the developer’s website and rise to $100 million, according to CityRealty. Completion is expected in 2018.

550 Madison Ave.

The rehab of the 37-story Sony Building will include a $150 million penthouse and possibly a five-star hotel. The skyscraper, completed in 1983, was sold to Joseph Chetrit, a real-estate developer for more than $1 billion in 2013. The sell-out price for the property will likely approach $2 billion, or more than $4,400 a square foot, CityRealty says.

432 Park Ave.

Currently the tallest residential building in the city at 1,396 feet, the condominium development by CIM Group/Macklowe Properties recently sold its penthouse for $99.5 million.The building’s total sales will be worth an estimated $3 billion (or nearly $6,300 a square foot), according to CityRealty, assuming the 144-unit building is sold out. Closings on the remaining units — which range from $17 million to $81 million — are expected to start at the end of the year.

53 W. 53rd St.

Hines Development’s 77-story condominium has been in the works for 10 years but has only recently started marketing its 100-plus units. The 1,050-foot-high trapezoidal tower with geodesic elements is set to be completed in 2018 and to include a unit priced at $70 million, according to CityRealty. All told, the sell-out price is anticipated at upward of $2 billion.

by Daniel Goldstein for Market Watch

RIAs Join Brokers In Promoting Securities-Backed Lending

These loans are growing quickly beyond wire houses, but some are concerned about the risks and conflicts of interest

Traditionally a major focus at bank-owned brokerage firms, securities-backed loans — where a wealthy investor puts up their portfolio as collateral for a big-money purchase &mash; are increasingly being marketed through independent registered investment advisers.

In the past two years, use of the products has soared as custodians beef up their lending capabilities. Pershing Advisor Solutions, a subsidiary of The Bank of New York Mellon Corp., began offering the loans to RIAs last year and has already issued 254 of them worth $1 billion through more than 20% of its 570 RIA clients. Fidelity Investments, which serves about 3,000 RIAs, has seen balances for securities-backed loans increase 63% in its RIA segment over the past two years.

“Non purpose loans have gotten more attention over the last year-plus with the custodians,” said John Sullivan, a former lending specialist at Smith Barney who is now a relationship manager at Dynasty Financial Partners. “Every effort is being made by firms like Dynasty and the various custodians that are out there to be able to replicate or in some cases exceed the existing platform” at the wirehouses.

For years, the loans have been a popular product at the wirehouses, including Bank of America Merrill Lynch and Morgan Stanley Wealth Management. They are billed as a way for wealthy investors to make large purchases, such as a yacht or vacation home, without having to sell a portion of their portfolio or incur capital gains taxes in the short term. Bank of America Merrill Lynch had $11.7 billion in margin loans outstanding, according to its most recent SEC filings from March.

There is no upfront cost to set up a securities-based line of credit, and firms offer competitive rates, which are sometimes lower than a traditional bank loan and are particularly attractive now with low interest rates. The loans can be made in a relatively shorter period of time than traditional bank loans as well. They take as few as eight business days at Pershing.

But there are other reasons firms, including the wirehouses like securities-backed lending. The loans provide another income source from clients in fee-based accounts and can be more profitable for the firm than other investment products because they don’t have to share as much of the revenue with their advisers who sells the clients on the loan.

“Lending growth will enhance the stability of revenue and earnings for the firm as a whole and make our client relationships deeper and stickier,” Morgan Stanley & Co.‘s former chief financial officer, Ruth Porat, said in an earnings call in July.

RIAs specifically don’t receive any additional compensation from a bank or custodian for selling securities-backed loans, but there are other benefits. For example, the loans allow wealthy clients to make multimillion dollar purchases without cutting into the assets under management. Bob LaRue, a managing director at BNY Mellon, said new business from clients often results as well — and, of course, the dollars left in the portfolio have the potential for gains, which raise AUM.

Herein lies the rub, according to Tim Welsh, president and consultant of Nexus Strategy, a wealth management consulting firm. “They don’t sell, so the assets under management stay the same — so it inherently has a conflict of interest,” he said.

That can be a problem, Mr. Welsh said, particularly because client demand typically is highest for these kinds of loans at the wrong time.

“In every bull market I’ve seen, this is always a predictor of the top,” Mr. Welsh said. “When people start borrowing money against their assets, they’re really confident that they’re going up. And investors are always one step behind in terms of tops and bottoms.”

The risk is that if the value of a client’s portfolio drops, the firm can sell the securities or ask that the client put down more money to back that up. Using securities as collateral can be subject to greater volatility than other types, such as a home equity loan.

“When the markets rationalize, bills come due, and if you don’t have liquidity, all of a sudden you have to sell,” Mr. Welsh said. “It definitely raises the risk profile up immediately.”

Adviser Josh Brown of Ritholtz Wealth Management has dubbed the growth in these loans a “rich man’s subprime.”

“Once again, super-cheap financing based on an asset whose value can fluctuate wildly (a stock and bond portfolio, in this case) is being used for the purchase of assets that can be significantly less liquid, like real estate, fine art or business expansion,” Mr. Brown wrote in a story last year on the growth of the loans in the wirehouse space. “Don’t say I didn’t warn you.”

Regulators have taken notice as well. The Financial Industry Regulatory Authority Inc., which oversees broker-dealers, warned in January that it was looking into the marketing of securities-backed loans as part of this year’s regulatory agenda.

“Finra has observed that the number of firms offering [securities-backed loans] is increasing, and is concerned about how they are marketed,” the regulator said.

That said, Mr. Sullivan and others who defend securities-backed lending said it works well if that risk is taken into account.

“It’s really about staying invested for the long-term and meeting short-term cash flow needs with some borrowing that’s not going to exceed a certain percentage on the assets,” Mr. Sullivan said.

Mr. LaRue said advisers have to consider whether it makes sense to trade leverage for the tax benefits.

“The appropriateness of leverage depends on each individual client’s needs,” he said. “If you are borrowing [to avoid the capital gains] taxes and keep a favorable investment strategy in place, then perhaps leveraging those assets at a low interest rate makes sense.”

By Mason Braswell for Investment News

The Biggest Threat To Your Retirement Portfolio: Mild Dementia

Summary

Self-directed investors take appropriate steps to protect their assets should they become fully disabled, but ignore the threat posed by the changes characteristic of early dementia.
The many different causes of dementia have very different patterns of onset. Some are particularly dangerous to investors because sufferers don’t immediately lose their memories – just their judgment.
Because physicians are slow to pronounce people incapable of managing their affairs, a proactive strategy is needed to protect you from yourself should you lose judgment or emotional control.

by Psycho Analyst in Seeking Alpha:
The Biggest Threat To Your Retirement Portfolio: Mild Dementia

By the time they have reached retirement age, most investors who have significant assets have made wills, set up trusts, and acted responsibly to make sure that after their deaths their money goes where they want it to go. Most have also drawn up Powers of Attorney, which give someone they choose the ability to manage their affairs if they are incapacitated by illness or dementia and no longer able to manage them on their own. They also discuss with their spouse or heirs how they would suggest these beneficiaries invest their money once they have passed on.

Having done this, these retirees relax, convinced they have taken care of all the unpleasant situations we all prefer not to think about, and can safely go back to not thinking about them.

But this kind of planning does not take care of the biggest threat to the assets of these self-directed investors: the very poor decisions they are likely to make with their investments should they become one of the one in seven people who will begin to experience the earliest phases of dementia in their late sixties or subsequent decades.

Dementia Can Be Very Hard to Detect

Unless you have seen a loved one go through this process, you are probably unaware of how insidious it can be, and, most importantly for your assets, how long a person who is in these early phases of mental deterioration can keep their loved ones from realizing just how poorly they are functioning and continue to manage their money while making increasingly poor decisions as their brains erode.

The most typical pattern with many forms of dementia is that loved ones only realize there is a problem after the big checks have been written to scammers, the good investments sold at bad prices, or the abusive annuities and whole life policies purchased.

People are able to make these disastrous investing decisions in the earliest stages of dementia because their loved ones, who assume dementia announces itself with forgetfulness, don’t realize there are quite a few syndromes that develop into dementia whose first symptoms are not forgetfulness, but are instead loss of judgment, impulse control, and emotional balance.

Dementia Is Not One Condition But Many With Different Patterns of Onset

That is because there are many different conditions that produce dementia which afflict the elderly. They include the classic form of Alzheimer’s, where the earliest symptoms are the loss of memory and verbal abilities. But the elderly also develop vascular dementia, where they experience a series of micro strokes that slowly diminish their faculties. And when this happens, the symptoms depend heavily on which parts of the brain are affected by the strokes.

Other conditions that cause differing forms of cognitive deterioration including Parkinson’s Disease, Lewy Body Dementia, and Frontotemporal Dementia. In some of these conditions, the emotions deteriorate before other cognitive abilities fade, leaving the person prone to excessive fear or rage. In others, risk-taking behavior accelerates. People with these conditions may lose their fear of strangers and their ability to discriminate between friends and exploiters, making them very easy to con.

Similar changes in mood, cognition, and behavior can also be caused by pharmaceutical drugs commonly prescribed to the elderly, sometimes in combinations that can be toxic to the elderly brain.

When memory loss is evident, relatives are quick to suspect dementia. If you get lost driving home, your loved ones likely to take a look at how you are managing your finances and if they see problems, intervene. People who have these forms of dementia are themselves more likely to be aware that something is wrong, early on, too, and ask for help.

If you are repeatedly forgetting how to find your investment accounts on your computer and forgetting which bank you put your money in, as terrible as your condition may be, it is less threatening to your portfolio than when you have other, more subtle forms of deterioration. Because when these more subtle forms occur, people are much less likely to be aware that they have become impaired, and are much more resistant to having others take over managing their affairs.

Loss of Impulse Control, Mood, and Judgment, Not Memory, Pose the Biggest Threats to Your Portfolio

In these more subtle forms of dementia, the first symptoms are not memory loss. Instead they involve loss of impulse control, emotional balance, or judgment. When dementia presents in this fashion, and you start exhibiting more signs of rage or anxiety than normal, your loved ones will tend to assume you are just getting crotchety, as is to be expected with the elderly.

But when that anxiety leads you to sell all your stocks one morning because you read a MarketWatch scare headline that terrified you, the damage to your retirement can be irreversible. Likewise, if the emotion that goes out of control as your frontal cortex deteriorates is greed, you may sell all your dividend stocks and put them into the tech IPOs or penny stock biotech, because some pumper posting online has told you it is a sure ten-bagger that will make you rich.

While doctors can usually pick up that a patient is suffering from classic Alzheimer’s with a few simple screening tests, they are slow to diagnose dementia in older people based only on more subtle changes in their mood, emotions, or even behavior.

Relatives may be helpless to call a doctor’s attention to these problems as HIPAA forbids doctors to even discuss a person’s health with a concerned relative or friend unless the patient has specifically authorized them to do so in writing.

Relatives may not even know there is a problem when the person with very early dementia is an experienced investor who manages their own portfolio. While they may notice there is a problem when grandpa, who never gambled, starts going to the casino every week, when grandpa starts gambling with naked options bought on margin, the only evidence is buried in his account statements, which are available online only to those who are able to log into grandpa’s account.

So this is why it is when people are in these very early phases of dementia that the worst kinds of financial elder abuse occur. This is when elderly retired professors likely wire all the money in their savings accounts to Nigeria. It is then that elderly widows fall in love with handsome young strangers they meet on cruise ships and turn their assets over to them to invest. There is an entire industry made up of boiler shop weasels who do nothing but telemarket the elderly all day hoping to find one in this state on whom they can unload penny stocks and sleazy annuities.

It Can Happen Here

Readers who are currently managing their assets very well will nod their heads, all the while thinking, “This can’t happen to me.” But the sad fact is that it can. Because the hallmark of this kind of dementia is that it can happen to anyone and when it does, it comes on so insidiously that, unlike classic Alzheimer’s, the person affected has no idea that it has affected them. NIH research has found that one in seven Americans over age 71 is affected by some form of dementia. Various studies suggest that the incidence rises with each subsequent decade of age.

If you are affected by the earliest stages of dementia, it will be very hard for you to realize anything is wrong, even if you have made plans about handing over control of your investments should you become impaired. You might start buying and selling more impulsively without noticing it. You may lose your ability to analyze stocks using the techniques that you used to build up your portfolio and rely increasingly on what TV pundits or writers on sites like this tell you are “can’t fail” opportunities. While markets are rising, the damage might be slight. But your ability to weather a bear market may decline, and worst case, you will end up like the many retirees who sold everything in 2008 and never reentered the market.

So, to protect your assets as you age from what you might do as you begin to lose your judgment or emotional control, you need to do more than choose someone to exercise your Power of Attorney, because that person can only step in when you have been declared incompetent.

What You Can Do Now To Keep Your Investments Safe Later

The first and most important thing is to make sure that your loved ones understand how dangerous the early, hard to detect changes caused by dementia can be. Make them aware that what may seem like small behavioral changes they see in you may be more significant than they appear and that the time to act is before you have made some unrecoverable error of judgment.

Make Your Doctor an Ally

Sign the forms available at your physician’s office that give your loved ones the ability to talk to your doctors about your mental state, if they see behaviors that trouble them so that the doctor can help them determine if you may be posing a risk to yourself. If there is any doubt, get a referral to a gerontologist, a doctor who specializes in the treatment of the elderly.

Periodically ask your loved ones if they detect differences in your emotions, judgment, or behavior, which might mean that you are making questionable decisions. If they admit that they do, take immediate steps to bring in another individual to keep an eye on your investments.

Instruct your loved ones that if your emotional control goes and you get angry in inappropriate ways when told you are mismanaging your investments, they should contact your physician and begin the process of bringing in someone else to check that you are still capable of managing your assets.

To facilitate this process give your doctor now, while you are obviously mentally capable, a notarized statement describing the kinds of circumstances under which you would want the doctor to declare you incapable of managing your finances. Also give a copy of this statement to your POA.

Make it clear that significant signs of poor judgment or loss of emotional control, not just memory loss, should be grounds for such a declaration. Without such a declaration from your physician, your POA cannot take over the managing of your finances no matter how much you may need it. And without such a statement from you, doctors may err on the side of caution and declare you mentally capable as long as you know what day it is and can repeat a list of words a few minutes after hearing them.

Bring Your POA into Your Investment Process Now While You Are Functioning Well

Another important thing to do is to give the person you have appointed as your Power of Attorney the ability to see how you are investing, so they can intervene before you make severe mistakes. Give them the ability to access and review your investment records. If you are not comfortable having them access your accounts, at least ask them to review your transactions periodically to make sure that you aren’t departing from your usual investment style. Let this person periodically look over your bank and credit card statements, too, looking for unusual spending patterns.

If you aren’t comfortable giving them this access now, when you can explain the decisions you make and how you are using your money, you might consider finding another person to act as your POA. If you don’t trust them with your accounts now, when you are there to oversee things, how can you trust them to manage your money for you should you become incapacitated?

By working jointly with your POA now, you will get a much better idea of whether they are the right person to manage your affairs should the need arise. They, in turn, will get a much better understanding of why you are invested the way you are and how to manage your investments in harmony with the principles you embrace.

You should also discuss with your POA any major gifts you plan to make to charities. A lot of seemingly legitimate charities, including religious groups, hospitals, and universities, target well-off older people with high-pressure sales tactics, wining and dining them and offering to name things after them in return for large donations. To avoid being exploited by charities as you age, write out a list now of which institutions you plan to contribute to and in what amounts, and give this document to the person you have chosen as your POA so they can refer to it in the future and keep you from being swayed by marketers who appeal to your vanity as your emotions and judgment begin to weaken.

Another approach that may be helpful to some investors, rather than relying entirely on their appointed power of attorney, is to develop a “buddy system” with another retiree or two who invest using a style similar to their own. Keep each other up-to-date with portfolio changes, and ask that if your buddy observes behavior that sets off warning signals, they inform your family that it might be time to call for help.

Consider Paying a Professional

If the person you have appointed as your POA turns out not to be able to understand your current investments, this is a good sign that you are investing in a way that could be very perilous to your retirement savings should anything happen to you. Since you may live for a decade or more in a condition where your POA would have to manage your resources, and since managing them well means the difference between living in an upscale assisted living facility and a hellhole nursing home, it is essential that if your POA can’t understand and manage your current investment strategy on their own, you either find one who can, simplify your investments to where your current POA can manage them, or turn your assets over to a well-recommended professional fee-paid investment advisor.

If your POA is your spouse, you might want to reconsider this choice if they are near your age because the risk of developing subtle mental changes also applies to them. Some studies suggest that dementia is actually more prevalent among older women than it is in men, possibly because less healthy men are less prone to survive to older ages so older men who do survive are more healthy.

If you can’t find a relative who has the understanding, education and integrity needed to manage your investments, you may have to enlist the services of a carefully screened, fee-paid financial advisor. This will involve trade-offs, as advisors will invest their way, not yours. But even the worst advisor is more likely to preserve your wealth better than an ignorant relative or a spouse who is also becoming demented.

And if you need to find such an advisor, the time to do it is now, when your brain is working well. Intellectual incapacity can strike very suddenly, and you should not expect a POA who is overwhelmed with the responsibility of handling your affairs to be able to find someone capable of managing your affairs when they are in the middle of a crisis involving hospital visits or moving you to a rehabilitation facility or into assisted living.

When you interview advisors, ask probing questions to see how well they listen and how willing they are to invest your money the way you want it invested. Ask who takes over if they retire or leave. If you can’t find an advisor you trust, or balk at paying their hefty fees, an inexpensive, partially automated advisory service like the Vanguard Personal Advisor Service might be a safe choice. If Vanguard’s index funds are good enough for Warren Buffett to recommend to his own wife, they probably will work for you. The fee-paid Vanguard service supposedly will also optimize your investment allocation to take into account your tax situation.

If you don’t have family or don’t trust your family with your financial affairs, it is essential that you find someone now who can take on this role. Perhaps a trusted accountant or attorney would be the appropriate person to turn to. Yes, it will cost money, but not nearly as much as you can lose if you don’t take steps to protect yourself from what happens should you unknowingly experience the early stages of dementia.

Sales of $100 Million Homes Rise to Record Worldwide

Source: Bloomberg BusinessThe Odeon, Monaco Penthouse: most expensive penthouse in the world

The ultra-luxury housing market is scaling new heights as a record number of properties around the world command prices topping $100 million.Demand for mega-mansions and penthouses has accelerated as wealthy buyers seek havens for their cash and search for alternative investments such as art and collectible real estate, according to a report Thursday by Christie’s International Real Estate, owned by auction house Christie’s. Five homes sold for more than $100 million last year, with at least 20 more on the market with nine-figure asking prices, the brokerage said.“You’re looking at a universe of over 1,800 billionaires who are starting to become members of this club of collectors of the most unique and incredible real estate in the world,” Dan Conn, chief executive officer of Christie’s International Real Estate, said in a telephone interview. “It’s something they’ll hold onto for a lifetime, the same way they’ll hold onto a Picasso or a Warhol or any number of the great pieces of art we’ve sold over the years.”

Sales are likely to increase this year with more newly built properties and off-market homes trading for at least $100 million, Conn said. Demand is growing among affluent Americans and Europeans; billionaires from unstable economies, such as Russia and Middle Eastern countries; and buyers from mainland China, who were barred from investing overseas before 2012 and since have snapped up houses in cities including Hong Kong, Los Angeles, New York and London, he said.

The penthouse and pool area of the Tour Odeon residential apartment block. At least 18 residences have asking prices of $100 million or more, led by the $400 million Monaco penthouse. Source: Realis/SCI Odeon via Bloomberg

‘Can Boast’

“People want trophy homes,” Eyal Ofer, a Monaco-based shipping and real estate magnate, said in interview earlier this week at the Milken Institute Global Conference in Beverly Hills, California. “They’re a scarce commodity. And they’re better than gold because you can boast about it.”

Last year’s sales of homes for at least $100 million were led by an East Hampton, New York, estate purchased for $147 million by Barry Rosenstein, managing partner at hedge fund Jana Partners. The other top sales were a $146 million villa in Saint-Jean-Cap-Ferrat, France; a $120 million estate in Greenwich, Connecticut; a $104 million Hong Kong residence; and a $100.5 million duplex penthouse in New York’s One57 condominium tower, according to Christie’s.

Not all the properties went for close to the asking price. The Greenwich estate that sold for $120 million was originally listed for $190 million.

‘Fundamentally Different’

The fact that asking and sales prices for ultra-luxury properties are reaching new heights isn’t a sign of problems in the broader market and shouldn’t raise concerns that last decade’s housing bubble will be repeated, Conn said.

“I think of this market as fundamentally different from the rest of the market,” Conn said in an interview Thursday on Bloomberg Television’s “Market Makers.” “In order to buy one of these properties, you have to be in the billionaires club.”

Just one home sale exceeded the $100 million mark in 2013, following four such transactions in 2012 and three in 2011, Christie’s reported.

Residences currently on the market with asking prices at that level include a $400 million Monaco penthouse, a $365 million London manor and a $195 million estate in Beverly Hills, California, according to Christie’s. France’s Cote d’Azur, a getaway for jet-setters, has homes with asking prices of $425 million and $215 million.

The report analyzed home sales in 10 cities known for prime property and 70 additional markets, including weekend getaways, vacation resorts and suburban locations. The 10 cities are Dubai, Hong Kong, London, Los Angeles, Miami, New York, Paris, San Francisco, Sydney and Toronto.

Location, Privacy

The average starting price for a luxury home was $2 million in the areas Christie’s studied. It defines a luxury home as having a combination of location, such as a prominent street address, and amenities such as privacy, urban conveniences or collectible architectural quality.

London luxury homes averaged $4,119 a square foot, the most expensive of the top 10 cities. Beverly Hills and neighboring areas of Los Angeles had the highest luxury entry-price point, at $8 million. Toronto had the fastest sales pace, with prime properties finding a buyer an average of 31 days after listing. Dubai had the highest share of international and non-local buyers, at 75 percent.

Gundlach, new “King Of Bonds” sees 10Y Treasury testing 1.38% in 2015

Having totally and utterly failed in 2014, the consensus for 2015 is once again higher rates (well they can’t go any lower right?) with year-end 2015 expectations of 3.006% currently (having already plunged from over 3.65% in July). However, at the other end of the spectrum, DoubleLine’s Jeff Gundlach told Barron’s this weekend, the 10-yr Treasury yield may test the 2012 low of 1.38% as the Fed’s short-term rate increase is poised to trigger “surprising flattening” of the yield curve. Source: Zero Hedge

Gundlach’s forecast is ‘very’ anti-consensus…

as the curve has already flattened dramatically…

Following the 2002-06 path almost unbelievably perfectly…

Gundlach adds,

U.S. GDP growth for ’15, ’16 may not achieve 3%+ target as dollar strength hurts exporters, oil price drops cause deflationary pressure, job and spending cuts for energy industries, Gundlach said

USD appreciation will continue as growth stumbles in other parts of the world, making U.S. bonds “all the more attractive” for foreign buyers, Gundlach said

“Trouble lies ahead” for the euro zone; people in Europe “are obviously losing confidence and scared” as German yield turns negative, Gundlach told Barron’s

And here is Jeff Gundlach’s latest chartapalooza presentation…
12-9-14 This Time – JEG Webcast Slides – FINAL for Distribution

—————————————————————–

Glory To The New Bond King

This story by Matt Schfrin appears in the November 24, 2014 issue of Forbes.

The master of his domain: DoubleLine founder Jeffrey Gundlach relaxes among his Warhols in Los Angeles (photo: Ethan Pines

Bill Gross’ spectacular fall from the top of the bond market has put tens of billions in play at a time when minuscule yields demand a fixed-income superstar. A brilliant, battle-scarred billionaire, Jeffrey Gundlach, stands ready to be coronated.

Bond manager Jeffrey Gundlach is wearing a white T-shirt, faded blue jeans and worn leather boat shoes as he traipses about the blooming morning glories in his perfectly landscaped backyard, perched high above a canyon overlooking the deep blue Pacific Ocean. It’s the middle of the afternoon on a work Monday in October; European bank stocks are tumbling; oil prices are down 25% since June; and against the backdrop of an anemic economy and 2.25% ten-year Treasury, the Federal Open Market Committee is about to make an important announcement. These are unsettling times in the financial markets, but for Gundlach it’s a picture-perfect autumn day in southern California, and he is living in paradise.

What’s next for the Fed? Gundlach would much rather discuss the iconic framed “Lemon Marilyn,” by Andy Warhol, above his mantel or how his “Progressions,” by minimalist Donald Judd, in the hallway is influenced by the Fibonacci sequence. “It is negative and positive space governed by a rule that happens to describe the shape of the solar system, which is exactly the opposite of what was popular in the ’50s, all this emotional stuff,” he says, pointing to his de Kooning. A few moments later he is explaining to a visitor that the geometry of the lot on which his new 13,000-square-foot, $16 million Tuscan mansion sits was designed to be in perfect harmony with the canyon cliff side it mirrors.

It is a paradise, but importantly Gundlach is finally feeling at ease because his new sanctuary is well fortified. Anyone wanting to get close to him or his prize paintings must breach the 8-foot wall surrounding his suburban residence or face the scrutiny of an armed naval vet at his front gate who asks visitors for a picture ID. Gundlach makes a point to show off one of the 50 concrete foundation caissons supporting his property. Each measures 3 feet in diameter and extends down as much as 75 feet through the porous desert soil into California bedrock.

After 30 years of staring into the black-and-green abyss of a Bloomberg terminal managing bond portfolios, Gundlach is making a statement with his magnificent new residence, one that underscores his ascendance in the business. Casa Gundlach is unlikely to succumb to the sudden mudslides known to take down other California palaces in places like Mill Valley or Malibu. And with a stellar performance record, $60 billion in assets under management and a killer contemporary art collection accumulated over the last decade, Jeffrey Gundlach has finally joined the billionaires club. More importantly, Los Angeles-based DoubleLine Capital, the house that Gundlach built in under five years, couldn’t be on better footing.

Just about a month earlier Bill Gross of Pacific Investment Management Co., the reigning master of the bond universe for two decades, requested an audience with Gundlach. In a scene that can only be described as Shakespearean, the incumbent bond king drove an hour up the 405 Freeway in the middle of the afternoon to Gundlach’s new castle to more or less grovel at his feet. Gross was certain PIMCO’s German owners were about to fire him, and he was asking his nemesis for a job–a portfolio manager position at DoubleLine. Gross said he wanted to run an “unconstrained” bond fund a small fraction of the size of the $200 billion-plus Total Return Fund he was famous for building. With the sun falling over the Pacific and shimmering on the surface of Gundlach’s infinity pool, Gross was deep in suck-up mode.

“He said to me, ‘I’m Kobe Bryant, you’re LeBron James. I’ve got five rings, you’ve got two, but you are maybe on your way to five and you’ve got time,’ ” says Gundlach, 55. (Gross, 70, refuses to comment on the meeting.) “ Bill was in his own world,” says a house-proud Gundlach, with a tone of disdain. “He doesn’t say anything [about my place]. Nothing. Doesn’t eat anything or even take a sip of water in three hours.”

Gross left the meeting with no deal in hand and ultimately jumped to Denver-based stock manager Janus Capital. From his office in Orange County’s Newport Beach, Gross now manages a $79 million mutual fund for Janus, roughly 0.03% the amount of assets he used to control.

Though a Gundlach-Gross alliance would have surely quickened the asset flight to DoubleLine from PIMCO–which has reported redemptions of $48 billion since Gross was forced to resign on Sept. 26–Gundlach claims to be relieved. “Our clients would have asked, ‘What is this? How is this going to work?’ I hear he is a difficult guy.”

Jeffrey Gundlach: A big thinker whose ambitions go beyond bonds (photo credit: Ethan Pines)

With Gross’ banishment the battle was over, but the spoils of the greatest market share shakeup in the history of the $45 trillion bond business is just getting under way. There may be as much as $100 billion in PIMCO assets in play, and DoubleLine is vying for them against larger rivals BlackRock, Dodge & Cox, Loomis Sayles and even index fund giant Vanguard. All are strong competitors, but none has lead managers like Gundlach, who combine bold market predictions with impressive long-term performance.

Gundlach’s superstar status can be viewed as both a blessing and a curse for DoubleLine. Like Gross–who has helped transform stodgy bond investing from a financial backwater to a lucrative playground for young M.B.A.s and Ph.D.s–Gundlach is well known for his arrogance, eccentricities and volatility. Institutional investors loathe the type of drama that unfolded at PIMCO–also, unfortunately, the hallmark of Gundlach’s style.

“You can’t please everybody, and I’m not gonna try,” insists Gundlach, as Pandora’s Sinatra Radio streams over his home’s sound system. “They point to our key man risk, and we say, ‘Everyone knows that it is key man reward.’ ” The lesson of Bill Gross is: Don’t put your money with a star manager who is owned by a parent company that controls him.”

The importance of being in control is something that Gundlach learned the hard way. For most of his 24-year tenure at Los Angeles’ Trust Company of the West (TCW), leading up to 2009, Gundlach was pegged as a star, a brash and brilliant money manager with a knack for calling markets. His specialty is mortgage-backed securities. The mutual fund he managed through 2009 beat 98% of all mutual funds in its category for a decade. Even more impressive was that he correctly foresaw the coming collapse of the housing market in 2007 and managed to hold on to more of his pre-crisis gains than any of his peers. In 2005, at age 46, he was made chief investment officer of mighty TCW, and by 2009 he was overseeing some $70 billion of its $110 billion in assets under management. In 2009 alone Gundlach’s annual compensation totaled no less than $40 million.

But despite his immense contribution to TCW’s success, at the end of the day Gundlach was still just a hired hand with no equity or control of his own destiny. He wanted more. He wanted to be named chief executive of TCW, but perhaps because of his abrasive style, the firm’s French owners, Société Générale and its billionaire founder, Robert Day, didn’t think he was fit for the job.

DoubleLine’s global developed credit chief Bonnie Baha and Luz Padilla (seated), who heads the firm’s emerging markets team (photo credit: Ethan Pines for Forbes)

“Look, it is clear that Jeffrey doesn’t suffer fools gladly, and he doesn’t tolerate people not thinking before opening their mouths,” says Bonnie Baha, a 19-year TCW veteran who has witnessed Gundlach’s biting tongue but is currently DoubleLine’s global developed credit chief.

Gundlach’s unhappiness prompted him to consider alternatives. He was courted by competitors, including Western Asset Management and PIMCO, which according to court documents considered him a potential successor to Gross. Then on Friday, Dec. 4, 2009, just after the market closed in New York, TCW fired Gundlach preemptively and had its outside counsel chase him out of its downtown L.A. office tower. In an effort to prevent institutional investors from taking their money and leaving with him, TCW simultaneously acquired cross-town bond manager Metropolitan West. In what former TCW employees describe as a surreal scene, Gundlach team members showed up the following Monday morning to find Met West traders sitting at their desks.

Despite promises of huge pay raises by TCW, 40 Gundlach loyalists defected, and within a month Gundlach had formed DoubleLine Capital. He found backers in Howard Marks and Bruce Karsh of Oaktree Capital Management, who had a similar acrimonious divorce from TCW 14 years earlier. (Distressed bond specialist Oaktree shares an office tower with DoubleLine and still owns 20% of the firm.) TCW had been gutted of its best fixed-income talent, and some $30 billion in assets eventually fled the firm.

But the drama was only beginning. Ugly lawsuits and counter lawsuits were filed. Gundlach was sued for more than $300 million and accused of everything from stealing hard drives to maintaining stashes of porno and pot. Distraught, Gundlach called a meeting of the 45 TCW coworkers he had lured away with a handshake promise of equity. His new firm had no assets and faced an immense potential liability, but he pledged that if the firm was forced out of business, he would find them all jobs. Gundlach counter sued for more than $500 million in fees he said he was owed.

The whole ordeal lasted two years, including a six-week jury trial in Los Angeles County Superior Court. All the while Gundlach and his bond traders persevered. The group continued to outperform, and DoubleLine assets swelled. By late 2010, barely a year after the firm opened its doors, assets reached $7 billion, hitting break-even, according to Gundlach.

Ultimately in late 2011 the jury found that Gundlach & Co. stole TCW’s trade secrets, but no damages were awarded. Instead, the jury awarded Gundlach $67 million for compensation he was owed. Before the appeals could be filed, TCW and Gundlach settled.

By then DoubleLine funds were already a screaming success and fast on the way to $50 billion in assets. Meanwhile, Morningstar’s “fund manager of the decade,” Bill Gross, was suffering from subpar returns in his mighty PIMCO Total Return fund. In 2011 he bet wrong on rates, missing the rally in Treasury bonds. That left PIMCO’s Total Return fund 87th among its competitors, returning just 4.2% to investors, compared with 9.5% for Gundlach’s flagship Total Return fund.

On Dec. 4, 2012, exactly three years from the day he had been fired from TCW, Gundlach rented a restaurant in the lobby of TCW’s headquarters to throw a lavish party. Cristal champagne was flowing, and his now wealthy employees and partners were treated to filet mignon and tuna tartare. A banner that read “DoubleLine $50 billion” was hung over the bar for all of TCW’s remaining salary men to see as they filed out of the building.

A brilliant analytical thinker who is both meticulous with his facts and mercenary in making rational decisions, Gundlach cares deeply for the loyalists who followed him to DoubleLine but rarely shows any emotion. He almost never socializes with his 125 co-workers.

A native of suburban Buffalo, N.Y., Gundlach’s DNA practically preordained him for entrepreneurial success. His paternal grandfather, Emanuel, was the son of a German minister and became a stockbroker during the roaring 1920s. Gundlach claims his grandfather foresaw the 1929 crash and banked the sizable sum of $30,000 ($400,000 in today’s dollars) ahead of the Great Depression. He then became a bathtub chemist, concocting hair tonic from the roots of witch hazel shrub. His product, Wildroot Hair Cream, became a national brand by the 1950s.

“He would give us bottles when I was a kid,” says Gundlach. “It was called greasy kid’s stuff. You know, like the Fonz.”

Gundlach’s uncle Robert was a physicist and renowned inventor, coming up with a process that allowed Rochester, N.Y.’s Haloid Photographic Co. (later known as Xerox) to make the copy machine commercially viable.

Gundlach’s father was a chemist for coatings maker Pierce & Stevens, and his mother a teacher and homemaker from a working-class family. Though the extended Gundlach clan spent summers at his grandfather’s rural upstate New York retreat, Starlit, his branch of the family never enjoyed the affluence of his famous uncle Robert, who had dozens of Xerox patents. “My uncle was very parsimonious–never wanted to spend a dime,” laments Gundlach.

Thus Gundlach was raised squarely in the middle class and to this day is uncomfortable hobnobbing with moneyed society members. Gundlach recalls that his maternal grandparents had such a distrust for the upper crust that they lobbied for his older brother Brad to go to the University of Buffalo over Princeton. (He eventually chose Tiger orange and black.) To this day Gundlach continues to brag about his “hammer swinging” eldest brother, Drew, who never went to college and remodels houses in upstate New York. Gundlach spends his Fourth of July and Thanksgiving holidays at Drew’s home.

Gundlach was a top student in high school with a near perfect score on the math SAT. Financial aid allowed him to attend Dartmouth, where he graduated summa cum laude in 1981 with a degree in math and philosophy. He considered becoming a philosophy professor, but then after studying the works of Austrian-British philosopher Ludwig Wittgenstein, he gave up. “I stopped caring about philosophy,” he says, explaining, “Wittgenstein was a mathematical philosopher, and his whole thing is that philosophy is just words that don’t mean anything. It’s like a fly that goes into a fly bottle and can’t find its way out. What is the meaning of life? It sounds like a , but it doesn’t mean anything.”

So Gundlach dived deeper into mathematics and was accepted in the doctoral program at Yale.

“My thesis was the probabilistic implications of the nonexistence of infinity,” explains Gundlach. “There is no infinity. It’s an illusion; there is absolutely nothing empirical that suggests infinity exists and nothing that operates under the assumption of infinity that has any practical implications.”

Apparently Gundlach’s thesis not only didn’t please his Yale advisor but was diametrically opposed to the work of one of the most influential mathematicians since Aristotle, Austrian logician Kurt Gödel and his Incompleteness Theorem.

So in 1985 Gundlach, who had been playing drums in bands while at Dartmouth and Yale, donned a spiky bleached-blond haircut and moved to Los Angeles to become an alternative rock star. A series of bands he played in, including one called Radical Flat, had limited success, and Gundlach was forced to hold down a day job in the actuarial department of Transamerica. He decided to apply for a job in the investment business after he watched a Lifestyles of the Rich and Famous episode lauding the profession as the highest paying.

A blind solicitation letter ultimately landed Gundlach in the fixed-income
department of the Trust Company of the West. He devoured the math-heavy bond market primer Inside the Yield Book the week before starting, learned trading on the job and eventually came to be the most powerful mortgage-backed securities money manager in the company.

It’s late October, and Gundlach is delivering the keynote speech at ETF.com’s Inside Fixed Income conference in Newport Beach, Calif. before an audience of 175 investment professionals and advisors. It’s about a month after the Bill Gross resignation bombshell shook the bond market, so attendance is higher than expected and the audience hangs on his every word.

“People like my macro stuff,” he muses. “There is very little patience for long wonky bond presentations, but people are interested in different ways of interpreting the forces behind macroeconomic events and geopolitics.”

His 56-slide PowerPoint presentation is entitled This Time It’s Different–directly thumbing his nose at legendary investor Sir John Templeton’s famous warning that those are the four most dangerous words in investing.

But Gundlach means it. His first slide is a quote from Greek philosopher Heraclitus: “No man ever steps in the same river twice, for it’s not the same river, and he’s not the same man.”

Gundlach is referring to the bizarre current market environment and insists that analysts studying the economic and monetary policy axioms of the past are making a serious mistake.

“In the past the feds would raise rates to be preemptive against inflation. There is no inflation today, and you see finance ministers saying that one of the dark clouds hanging over the global economy is that inflation is not accelerating,” he says. “So raising interest rates against that mentality is very different, and taking an average of the past rate-raising cycles is not going to give you a good road map as to where things go this time around.”

Here is the new bond king’s view of the world today:

The Fed may raise the federal funds rate for the wrong reasons.

“They don’t really need the rates to be higher, but they seem to want to reload the gun so they aren’t stuck at zero without any tools.”

Deflationary forces will accelerate if the Fed raises rates.

“With a tightening, the dollar is going to not just be strong, but it will run up like a scalded dog. If that happens, then commodity prices are going down, we will import deflation and you will see an episode of deflationary scare.”

The long end of the Treasury curve will stay put and possibly go down further.

“There’s a 30% chance that importing deflation creates a panic into Treasurys creating a ‘melt-up,’ moving rates to German Bund levels today of around 1%.

It’s not okay to own risk assets when the Fed starts hiking rates.

“What is fascinating is, if you sell junk bonds and buy Treasurys, the minute the Fed hikes the first time, going back to 1980, in every case you did well.”

Don’t be surprised to see the yield curve flatten and possibly invert.

“Long rates have done nothing but fall. That tells me the market is saying to the Fed, ‘Go ahead, make my day.’ The curve is going to invert when and if fed funds hit 2.5 to 3%.”

Be long the dollar, especially in emerging market bonds.

“We have been all dollar [denominated in our foreign bond holdings] since 2011. For a while it didn’t really matter, but now it matters a lot. If you are nondollar you are really in trouble.”

Stay away from home builders, TIPs and mortgage REITs, and oil will fall further.

“I am convinced the Saudis want the price of a barrel of oil to go to $70. They don’t care if they run a short-term deficit if it slows down U.S. fracking and turns the screws on countries in their region that mean them harm.”

As we get closer to 2020 interest rates and inflation (and taxes) could really start rising.

“We are in the calm right now before the hurricane. I’m talking about the aging of the great powers, which is undeniable and can’t be quickly reversed. The retiree-to-worker ratios, the size of labor forces globally. China will have no one in the labor force. Italy’s losing 39% of labor force in the next generation and a half. Japan has an implosion of working population and no immigration. Russia is facing one of the greatest demographic crisis in the history of the world, absent famine, war and disease. It’s pretty bad. Italy has no hope,” says Gundlach matter-of-factly.

“The Federal Reserve bought the bonds from the deficits of 2011, 2012 and 2013, and those will roll off increasingly over time. Come 2020 you are not just financing massive entitlements like Social Security and Medicare but also old debt. No one talks about that. It’s a big deal. China doesn’t have the demographics to buy that debt. Who’s going to buy it?”

The coming debt storm–which Gundlach says is too early to worry about tactically–will hit financial markets just as DoubleLine approaches its tenth anniversary in business.

Giant pension funds and endowments are typically plodding in the redeployment of assets because it often requires coordinating board meetings, soliciting bids from new firms, listening to presentations and gathering votes. But with tens of billions likely to shift out of PIMCO over the next few months, DoubleLine is buzzing with activity. The task at hand is proving to existing clients and to new ones that the drama days are over and DoubleLine is all grown up.

“I don’t think the controversies surrounding his TCW days are really relevant anymore in the analysis of DoubleLine,” says Michael Rosen, the chief investment officer at Angeles Investment Advisors, whose firm advises on $47 billion in pension and endowment money and who had resisted recommending DoubleLine to clients in the past. “That is ancient history at this point.”

Perhaps because of Gundlach and DoubleLine’s toxic inception the majority of its $60 billion in assets is held by individuals in the firm’s mutual funds, predominantly his mortgage-heavy DoubleLine Total Return Bond Fund, which has $38 billion under management and is up 8.93% annually since inception in 2010, and DoubleLine Core Fixed Income Fund, which is up 7.19% annually since inception. DoubleLine also has $4.5 billion in its Opportunistic Income, a hedge fund strategy, which uses leverage and deploys an amalgam of its manager’s best ideas.

So far Gundlach reports that it has gulped down $4 billion in new assets since Gross’ departure. However, competitors like BlackRock, Loomis Sayles and Vanguard are also seeing big inflows.

Somewhat unique to DoubleLine among big competitors is that it has no interest in the low-fee bond index fund money that BlackRock and Vanguard specialize in. He also insists he will close his funds to new investors before they get too large. “Our so-called flagship strategy Total Return will never go to $100 billion unless the bond market grows ten times in size,” he says. “We are not ambulance chasers.” Still Gundlach is clearly drooling at the prospect of feasting on PIMCO’s remains, because he doesn’t hesitate to gun at his competition.

What does he say about the reorganization of Bill Gross’ famous Total Return Fund? “Who’s managing it?” says Gundlach. “I don’t buy for a second that they will all work together and with no conflict. ”

Of PIMCO’s newly named Chief Investment Officer Daniel Ivascyn: “
He is their hottest performer in recent times. I hear he is reasonably good at explaining things, the fact that he read from a teleprompter and couldn’t answer any of the real questions notwithstanding. I’m sure he’s articulate.”

Gundlach even feels the need to neutralize two seemingly nonexistent threats, Bill Gross and Mohamed El-Erian, the former PIMCO co-chief investment officer executive, who remains on the payroll of PIMCO parent Allianz.

“People are too harsh on Gross’ performance. It’s not bad, it’s just average,” he says. “This past year it’s been bad, but for 5 years it’s been average.”

As for El-Erian, “Mohamed’s track record is hard to find, and when you find it, it’s bad.”

Gundlach protege, Jeffrey Sherman: Gumdlach says he is the rare quant manager with the “special sauce.” (photo credit: Ethan Pines for Forbes)

Meanwhile DoubleLine is bending over backward to show off the breadth and depth of its bench as Gundlach’s top portfolio managers make the rounds with salesmen. Key in this pursuit are veteran emerging markets manager Luz Padilla, global developed credit manager Bonnie Baha, mortgage-backed manager Vitaliy Liberman and a young portfolio manager named Jeffrey Sherman.

Sherman, 37, rides shotgun to Gundlach at DoubleLine’s monthly fixed-income asset allocation meeting, attended by all key portfolio managers. Gundlach sits at the head of the table, but Sherman organizes large parts of the 70-plus slides Gundlach presents at these important meetings covering macro themes and sector allocations for the firm’s multi-asset strategies. Sherman is emerging as the front-runner to eventually succeed Gundlach.

With his shoulder-length brown hair parted in the middle and his hipster beard, Sherman gives off a laid-back California surfer vibe, yet he impresses visitors with his ability to demystify complicated economic concepts as well as articulate big-picture strategies.

“What we are trying to do in these asset allocation programs is look at the entire portfolio. We are not allocating to each sector and asking each manager to outperform each month, we are thinking about how the whole portfolio works,” says Sherman, mentioning that government bond chief Gregory Whiteley, for example, is currently being asked to underweight his sector and hold long-duration bonds. “We are paid not on assets that each one of us is managing but on the collective success of the firm. That is very deeply entrenched in our process and very different from other firms.”

Like Gundlach, Sherman has humble roots. Neither of his parents attended college: His father worked in the oilfields of Bakersfield, Calif., and his mother is a bookkeeper. Also like Gundlach, a scholarship helped pay for his applied mathematics degree at University of the Pacific, where he also taught statistics. Upon graduating in 1999, Sherman saw the wave of quants heading to Wall Street and wound up pursuing an M.S. in financial engineering from Claremont Graduate University. A summer internship led him to the risk analytics department of TCW, and ultimately he defected to DoubleLine.

“Sherman is extremely analytic, which I am always attracted to,” says Gundlach. “But he also understands psychology. There are a lot of people who are quants, and they think you can explain the world with an econometric model. You just get the coefficients right and you can explain everything about the future. Sherman understands all of the coefficients and can derive all the equations just like I used to do, but he understands that it won’t predict where the market is going to be in a month. He is also good at explaining, which, of course, is the secret sauce of this business.”

In addition to Sherman’s key role in DoubleLine’s multi-asset strategies, Gundlach has put him in charge of new product development. This is critical to long-term growth because DoubleLine is still largely perceived as a mortgage bond specialist.

Besides two new NYSE-listed closed-end funds, DoubleLine has developed a commodities strategy, gathered $164 million in an enhanced S&P 500 stock index fund created in partnership with Nobel laureate Robert Shiller and started a small-cap stock fund. It’s also developing an infrastructure loan fund and a commercial-mortgage-backed-securities fund.

“I am really interested in doing distressed funds when the credit cycle turns, but you have to wait,” says Gundlach in anticipation of the debt woes on the horizon. “That’s one reason why we have been expanding our capabilities in bank loans, high yield, emerging markets debt and CMBS.”

Original backer Oaktree Capital, which has never wavered in its Gundlach bet, has already taken out more than $90 million in distributions on its original $20 million investment ( Oaktree also invested $20 million in DoubleLine’s hedge fund) through September 2014, and its 20% stake is estimated to be worth close to $400 million. Says Howard Marks, Oaktree chairman: “Jeffrey thinks beyond being a bond manager, and I don’t know if you noticed, he is a pretty confident guy.”

Gundlach is so self-assured that he has even taken to painting in the style of the masters in his art collection. Piet Mondrian–the inspiration for DoubleLine’s red, blue and black logo–is his favorite. Says Gundlach, “I knocked [Mondrian] off. Very hard to do. Surprisingly hard. Hard to make the lines crisp. Mine are more crisp than his, but that’s because I used tape.” Gundlach pauses, reflecting on his work. “It’s an interesting thing: There is this moment when you are not sure if you are done or not.”

The Most Expensive Billionaire Homes In The World

Introduction
by Erin Carlyle

Jana Partners founder Barry Rosenstein recently purchased an East Hampton estate for $147 million, setting a new record for the most expensive home ever purchased in the United States. But compared to other homes owned by FORBES billionaires around the world, that price tag was a relative bargain.

Case in point: less than two weeks ago, Reuters broke the news that a penthouse at prestigious One Hyde Park in London’s tony Knightsbridge neighborhood had sold for $237 million, setting a new world record for the priciest apartment sale ever. Although the buyer remains unknown, the purchaser is an Eastern European, reports Reuters. Given the cash involved, the new owner is also very likely a FORBES billionaire. (In 2011, Ukraine’s richest man, billionaire Rinat Ahkmetov, paid $221 million for a penthouse in the same development. At the time, that was the most expensive apartment sale ever.)

Throughout the global economic crisis and recovery, the super-wealthy have been putting their money into the comparative safe haven of real estate. “After years on the outskirts of asset allocation, property is starting to move into the prime investment arena traditionally occupied by stocks and bonds,” says the Candy GPS (Global Prime Sector) Report, produced by Deutsche Asset & Wealth Management with research from Savills. As demand for real estate pushes property values up the world over, the price tags of homes already owned by the super rich also increase. Last year when we combed through property records to identify some of the most expensive homes owned by members of the FORBES Billionaires List, many estates fell well below the $100 million mark. This year, when we repeated the same exercise, only six of the top 20 most expensive homes owned by billionaires were priced less than $100 million–and several are valued at more than twice that figure.

The title of the most outrageously expensive property in the world still belongs to Mukesh Ambani’s Antilia in Mumbai, India. The 27-story, 400,000-square-foot skyscraper home–which is named after a mythical island in the Atlantic–includes six stories of underground parking, three helicopter pads, and reportedly requires a staff of 600 to keep it running. Construction costs for Antilia have been reported at a range of $1 billion to $2 billion. To put that into perspective, 7 World Trade Center, the 52-story tower that stands just north of Ground Zero in Manhattan with 1.7 million square feet of office space, cost a reported $2 billion to build.

In second place is Lily Safra’s Villa Leopolda, in Villefranche-sur-mer, France. The estate is reportedly one of several waterside homes that King Leopold II of Belgium built for his many mistresses. Set on 20 acres, the massive home was valued at 500 million euros ($750 million at the time), when Russian billionaire Mikhail Prokhorov tried to buy it in 2008. Prokhorov eventually backed out of deal, losing his 50 million euro deposit.

The third-most expensive billionaire home–and the most expensive in the United States–has to be Fair Field, Ira Rennert’s Sagaponack, N.Y., enclave. Although Rennert built the property and it has never traded hands, the local assessor’s office peg its value at about $248.5 million in its latest (2014) tentative tax assessment. Since no Hamptons estate has ever sold for so much (Rosenstein’s recent $147 million buy set both the Hamptons and U.S. record), it’s hard to know if the home would really ever fetch such a sum. In the meantime, the property taxes on Rennert’s 29-bedroom, 39-bath estate have got to be monstrous. (Larry Ellison’s 23-acre Japanese-style estate in Woodside, Calif. enjoys the opposite situation: the home reportedly cost $200 million to build, but was assessed at just over $73.2 million in 2013. Nice property tax break.)

As 2014 continues, the list of outrageously-priced homes owned by billionaires is stacking up. Although the market cooled off a bit in in 2013, with no properties trading hands above the $100 million mark (2011 and 2012 both saw $100 million transactions), 2014 has kicked off with a bang. London set a new record, and three homes have sold for more than $100 million so far this year in the U.S. alone.

Just weeks before Rosenstein (who is not on the FORBES Billionaires List) snapped up the East Hampton estate formerly belonging to investment manager Christopher Browne in a private deal, an unknown buyer purchased Connecticut’s Copper Beech Farm for $120 million from timber tycoon John Rudey–at the time the most expensive home sale ever in the United States. Set on 50 acres of Greenwich waterfront, the estate includes a 13,519-square-foot main house with 12 bedrooms, seven full baths and two half baths and a wood-paneled library. Also included: a solarium, a wine cellar, and a three-story-high, wood-paneled foyer. David Ogilvy, the agent who brokered the sale, tells FORBES the buyer plans to keep the home intact rather than tear it down (a common tactic among the rich). We’d bet money that individual is a billionaire.

At the end of March, the Los Angeles Times broke the news that Suzanne Saperstein had sold her expansive Holmby Hills estate, Fleur de Lys, for $102 million. That property, too, went to an unknown buyer. Although the property tax bill will be mailed to a law firm that shares an address with the Milken Institute, a Milken spokesperson told FORBES that neither Michael Milken nor his Institute are the buyer.

The latest sales continue the ongoing trend of billionaires and $100-million-plus property buys. In November 2012, Softbank billionaire Masayoshi Son, of Japan, snapped up a Woodside, Calif., estate for $117.5 million. Russian venture capitalist Yuri Milner purchasing $100 million on a property in Los Altos Hills (paying 100% more than its market value, according to tax assessors) in 2011. In 2007, billionaire fund manager Ron Baron paid $103 million for 52 undeveloped waterfront acres in New York’s East Hampton–and that was before construction costs. With properties like Dallas’ $135 million Crespi-Hicks Estate and the $90 million Carolwood Estate still on the market, more news is sure to come down the road.

1. Antilia, Mumbai, India

Owner: Mukesh Ambani, net worth $23.9 billion

Value: upward of $1 billion

The twenty-seven story, 400,000-square foot skyscraper residence, named after a mythical island in the Atlantic, has six underground levels of parking, three helicopter pads, a ‘health’ level, and reportedly requires about 600 staff to run it. It is the world’s most expensive home far and away with construction costs topping $1 billion.

2. Villa Leopolda, Villefranche-sur-mer, France

Owner: Lily Safra, net worth $1.3 billion

Purchase Price: 500 million euro ($750 million at the time) in 2008

King Leopold II reportedly built a series of waterside homes for his many mistresses. This 20-acre estate was valued at 500 million euros in 2008, when Russian billionaire Mikhail Prokhorov attempted to buy it. He eventually pulled out of the deal, forfeiting a 50 million euro deposit.

3. Fair Field, Sagaponack, N.Y.

Owner: Ira Rennert, net worth $6 billion

Property value: about $248.5 million, according to 2014 tentative tax assessment

The industrial billionaire’s hulking 29-bedroom, 39-bath Hamptons compound has not one, but three swimming pools, plus its own power plant on premises.

7. Ellison Estate, Woodside, Calif.

Owner: Larry Ellison, net worth $51.4 billion

Value: estimated $200 million to construct

The Oracle founder, arguably the world’s most avid collector of real estate, built his 23-acre Japanese-style estate in 2004 with 10 buildings, a man made lake, a tea house, a bath house and a koi pond. The property is was assessed at $73.2 million in 2013.

10. Xanadu 2.0, Seattle, Wash.

Owner: Bill Gates, net worth $77.5 billion

Market Value: $120.5C million, 2014 tax assessment

The high-tech Lake Washington complex owned by the world’s second-richest man boasts a pool with an underwater music system, a 2,500- square foot gym and a library with domed reading room.

11. Copper Beech Farm, Greenwich, Conn.

Owner: Unknown

Sale Price: $120 million in April 2014

The property, originally listed for $190 million in May 2013, dropped to $140 million in September 2013 before selling in April 2014. Copper Beech Farm boasts a 13,519-square-foot main house with 12 bedrooms, seven full baths and two half baths and a wood-paneled library. Additional selling points: a solarium, a wine cellar, and a three-story-high, wood-paneled foyer. It was previously owned by timber tycoon John Rudey.

12. Mountain Home Road, Woodside, Calif.

Owner: Masayoshi Son, net worth $17.3 billion

Purchase Price: $117.5 million in 2012

The most expensive home sale on record includes a 9,000-square foot neoclassical house, a 1,117-square foot colonnaded pool house, a detached library, a “retreat” building, a swimming pool, a tennis court and formal gardens.

13. Further Lane de Menil, East Hampton, N.Y.

Owner: Ron Baron, net worth $1.9 billion

Purchase Price: $103 million in 2007

The investment guru snapped up more than 50 acres of undeveloped oceanfront Hamptons land during the market’s height with the intention of constructing his own home.

14. Fleur de Lys, Holmby Hills, Calif.

Owner: Unknown

Purchase Price: $102 million in March 2014

The 50,000-square-foot estate known as Fleur de Lys is the most expensive home ever sold in Los Angeles County. Suzanne Saperstein, ex-wife of Metro Networks founder David Saperstein, is the seller but the buyer remains unknown. However, tax bills for the property are mailed to a law firm at the same address as the Milken Institute.

15. Silicon Valley Mansion, Los Altos Hills, Calif.

Owner: Yuri Milner, net worth $1.7 billion

Purchase Price: $100 million in 2011

Bought as a secondary home, the Facebook investor broke records with the purchase of a French chateaux-inspired limestone abode that touts indoor and outdoor pools, a ballroom and second-floor living areas that gaze out on San Francisco Bay.

16. Maison de L'Amitie, Palm Beach, Fla. 16. Maison de L’Amitie, Palm Beach, Fla.

Owner: Dmitry Rybolovlev, net worth $8.8 billion

Purchase Price: $95 million in 2008

Originally listed for $125 million, the sprawling oceanfront 60,000-square foot compound, bought from real estate billionaire Donald Trump, includes diamond and gold fixtures and a garage with space for nearly 50 cars.

17. Promised Land, Montecito, Calif.

Owner: Oprah Winfrey, net worth $2.9 billion

Market Value: $90.3 million, according to 2014 tax assessment

Purchased in 2001 for nearly $52 million, the media queen’s 23,000-square-foot Georgian-style manse sits on more than 40 acres, boasting a tea house, more than 600 rose bushes and an upscale outhouse.

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