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Here’s What the Super-Rich Do With Their Money During a Crisis

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If you want to know which way the prevailing economic winds are blowing, look to the super-rich. Market hawks noticed as far back as September that the super-rich had stopped spending on the usual trinkets, such as yachts, private jets, and expensive artworks – a development that has precluded every recession in recent history. The rich, given the enviable positions that they occupy at the upper echelons of society, are better placed than most to respond to an economic downturn.

Given that we are now staring down the barrel of a significant recession, it should come as no surprise that the global super-rich have begun piling their money into assets and markets that have traditionally served as safe havens in times of crisis, as well as some new ones that may become the port of choice in future crises. Let’s take a closer look at exactly what the super-rich do with their money in times of crisis. 

1. Luxury Bunkers

One of the most dramatic shifts that have occurred in recent years is the propensity of the super-rich to spend obscene amounts of cash on remote, impenetrable bunkers where they can ride out the apocalypse. According to research conducted by The Guardian, inquiries for ‘apocalypse-proof’ bunkers in hotspots such as New Zealand and the rural US have increased several hundred-fold since 2016.

It’s clear that the rich believe something big is on the horizon, or that it is already with us, given that Silicon Valley billionaires have already jetted off to their bunkers since the current crisis began. While some fortified luxury bunkers go for tens of millions of dollars, there are more modest ones in places like South Dakota where the rich are snapping up nuclear-proof, subterranean ‘apartments’ for several hundred thousand dollars apiece. 

2. Bonds

Government-backed bonds have historically been seen as one of the safest places to put your money in a crisis, and today is no exception. Since the current economic downturn began, hundreds of billions of dollars have flown into federal and municipal bonds, largely from wealthy investors. Bonds are a popular choice because even when the market sinks, they do not depreciate as much compared to other assets such as equities.

What’s more, the interest that investors can earn from bonds are often tax-free, meaning that a substantial revenue stream can be enjoyed if one was to buy enough bonds. Bonds issued by the US Federal Reserve are by far the most popular, but municipal bonds issued by local governments are also proving to be in-demand at the moment. 

Source: Pixabay

3. Cryptocurrencies

Ever since the bitcoin bubble first burst back in 2017, us common folk have largely ignored it. However, the wealthy have not. Despite dropping in value during the flash crash in February 2020, bitcoin has been enjoying a sustained rally in recent months, with Forbes recently predicting that another bitcoin boom is on the horizon.

Wealthy people have demonstrated a keen interest in bitcoin since it first came to the market, with billionaires such as Peter Thiel and Elon Musk being strong advocates. Of course, you don’t have to be a billionaire to trade and invest in bitcoin. As this guide to cryptocurrency trading explains, licensed crypto brokers in dozens of countries can get anyone started in the business of bitcoin and other altcoins. 

4. Bargain Stocks

There is a common misconception that the reason wealthy people are wealthy is that they are highly risk-averse. This could not be further from the truth. While it is true that rich people tend to pile into safe assets in times of crisis, they also have a tendency to make investment decisions that would give many of us cause for concern.

For example, when airline stocks were crashing at the beginning of 2020, billionaires such as Warren Buffet began snapping up millions of dollars worth of shares. This is because a crisis is often the best time to buy yourself a bargain. Those who are brave enough to buy when shares are low and dropping often does so in the belief that they will rise again once the crisis has passed. The rich may have plenty of cash to spare, but that doesn’t mean they don’t love a good bargain. 

Source: Pixabay

5. Real Estate

Even during the US subprime mortgage crisis in 2007, the super-rich were snapping up penthouses and mansions like never before. This is because, although real estate can severely depreciate in times of crisis, the long-term outlook for it is always solid. What’s more, the scale of depreciation for real estate is often much smaller than for other assets such as stocks and oil.

Given that the bulk of the ultra-luxury real estate market is now concentrated in a few densely populated urban areas that show little signs of cooling off in the years to come, such as New York, London, Paris, and Hong Kong, the wealthy are continuing to see real estate in these markets as a safe bet. 

6. Hoarding Cash

While the rich do have a strong tendency to move money around during times of crisis, they also have a strong tendency to not spend at all. According to a recent survey of ultra-wealthy UBS clients, more than half of the world’s 1% have been stockpiling cash for at least a year now.

The cash holding of the top 1% before the 2008 recession amounted to just $15 billion. Today, that amount has risen to more than $300 billion and counting. While other assets may show plenty of promise in times of turmoil, the rich know better than anyone else that cash is always king. 

 

This is what the rich do with their money in times of crisis. As current events continue to unfold, it will be interesting to see what else we learn about the habits of the ultra-rich. Stay tuned to find out. 

Mahesh is leading digital marketing initiatives at RecentlyHeard, a NewsFeed platform that covers news from all sectors. He develops, manages, and executes digital strategies to increase online visibility, better reach target audiences, and create engaging experience across channels. With 7+ years of experience, He is skilled in search engine optimization, content marketing, social media marketing, and advertising, and analytics.

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