While the saying "cash on the sidelines" is patently wrong as all cash represents is a form of risk, asset and/or liquidity preference (and yes, for every buyer of stock there is a seller: repeat as many times as necessary until it clicks), we are confident the fact that the world's record number of billionaires, 2,325 in 2014 up from 2,170 a year ago, holding a record $7,291 trillion in assets or a little under half of the US GDP and more than the market cap of the companies in the Dow Jones Industrial Average, have a record $600 million in cash on average, up from $540 million the year before.
According to Wealth-X:
Billionaires also tend to have high cash balances. The apparent safety of cash, reinforced by the painful psychological experience of the 2008-2009 global financial crisis and the subsequent troubles within the European Monetary Union, likely reinforces the tendency to favor this cautious allocation strategy.
... billionaires hold 19% of their wealth in cash.... This amounts to US$600 million per individual – a sum that is higher than the GDP of Dominica and twenty times the threshold of US$30 million required to be considered an UHNW individual. This liquidity is vital as it enables them to invest in new business ventures that fall outside their current business holdings. Since last year, billionaires’ liquidity has increased by US$60 million per individual, on average. This increased liquidity signals that many billionaires are keeping their money on the sidelines and waiting for the optimal moment to make further investments.
That, or perhaps it simply signals that the world's billionaires are confident the market has topped and have taken a substantial amount of profits. Because while the mean billionaire net worth rose by just $4.4 to $3.1 billion, the average billionaire liquidity rose by a far greater 11% from $540 to $600.
What is most surprising, however, is that while the bulk of their net worth, or 46.9%, is invested in private holdings, typically the assets they themselves have created, with a little under 29% in public equities, the allocationto cash is about 4 times greater than that to real estate which amounted to a paltry 5.1% of billionaire net worth.
Those curious about the distribution, there are currently 571 billionaires in the United States, up from 515 in the year before, even as eight of the top 20 now are in Asia.
Most billionaires do not reach the US$1 billion threshold until their late forties: 93% of the world’s billionaires are older than 45 years.
The majority, ot 56% of billionaires, are self-made, while 20% are where they are thanks to a trust fund:
When it comes to extrapolation, billionaires too are prone to the Birinyi effect: the number of super rich is expected to rise from 2325 in 2014 to 3,873 by 2020.
For their sake, let's hope the guillotines don't roll out before that date. Something tells us the French aristocracy was all about straight-line extrapolation of their own wealth during the dinner parties of late-1788 Paris.
Finally, for the time challenged (such as all the people noted above) here is a quick video summary of the above: