“I have something he will never have . . . enough.”

— Joseph Heller to Kurt Vonnegut, while at the party of a hedge fund manager

 

 

January 24, 2025— In my role as a financial analyst, investor, and author, I’ve had the opportunity to speak with several billionaires over the years, mostly of the investor type.

Living in West Palm Beach, the winter months put me at the mercy of not just “snowbirds” who live in Florida. It also puts me right at the edge of Palm Beach’s “Season” of parties, fundraisers, and galas.

My wife, a West Palm native, has not only met more billionaires than I have, but she’s also worked with a few eccentric ones, either directly or at Gala events.

And in my interactions with some of the ultra-wealthy part-time neighbors, I’m often reminded of the saying: “Money can’t buy class.”

Partly, that’s the Palm Beach look. Loafers without socks. Pastel clothing. It’s a bit different from my usual Brooks Brothers dress code.

Last week, I had the chance to attend a Palm Beach gala. A ticket topped $1,200. Like so many Palm Beach events, it’s largely tax-deductible. Most give more in a mini-contest to have their names top the leaderboard of generous donors.

Galas offer a chance to socialize with one’s fellow elites, of course. But it’s also a chance to be seen in the society pages. And support worthy causes. Even if the events are often driven by a few high-net-worth individuals who also want to be seen as active philanthropists.

This specific gala raised money for the local science center, and focused on the rise of AI, a tool that, no doubt, many of the uber-wealthy are looking at as an investment opportunity.

This AI robot can mimic any image you pull up on a computer, but can’t create its own unique work…yet.

So what’s on the minds of billionaires at these events? What do the leaders of today’s modern Gilded Age have to say?

“The wine selection left a lot to offer.”

So said a nameless billionaire (net worth, over $55 billion), who lives just a few doors down from President Trump’s Mar-a-Lago.

I’m told from event staffers that increasing the wine selection would have cost an extra $40 per head, or about $40,000. For an event designed to raise money.

And that’s about as far as you’ll get when you’re an outsider. Sure, some billionaire investors may talk up their book. But most performed in-line with the stock market in the last year, at best. Since many of the ultra-wealth had their wealth in hedge funds, many underperformed.

But it’s enough to get you thinking…

 

The Concept Today’s Billionaires Have Overlooked

$23 million dollars.

At 4.625% interest, the current rate on a 10-year, U.S. Treasury bond, that’s how much $500 million would earn in interest each year.

It’s probably more money than I’ll make in my lifetime. And for most, it would mean a lavish lifestyle.

But for most of today’s billionaires, living off that much each year wouldn’t be enough.

I started running similar math last week while attending the gala. I’m assuming that some of the folks in the room with a net worth of more than $5 billion decided to sock away just 10% of their net worth into bonds.

What truly boggles the mind isn’t how many billionaires there are in the world, or how many more there are as asset prices have soared.

What amazes me is that so many of them manage to lose it all. The Forbes 400 is pretty stable at the top, but the bottom half has a lot of, well, volatility. It’s not unusual for 30-40 names to drop off each year.

Why does that happen? That gets into a key investment concept that often gets ignored: Risk management.

At the Grey Swan Investment Fraternity, we use a few simple tools to manage risk. First, we look to avoid making a bad investment in the first place.

While all investments carry risks, markets can be risky overall. Today’s billionaires are partying while markets are at their highest valuations since the tech and housing bubbles. For those heavily invested in just a few stocks, a bear market can be devastating.

That leads to a second way to manage risk: Take a free ride when you can. It’s prudent to take some profits on recent winners, particularly the big-cap tech names.

Once a position has doubled, selling half your stake gives you back your original capital. If the stock keeps rising, you’re still in the game. But now you have the safety of cash, which can be invested somewhere else.

For instance, in December, Grey Swan members took a free ride on one of the positions in our model portfolio. And we expect more as markets continue to party like it’s a new Gilded Age.

Knowing how you’ll manage your risks and sticking to it is the hard part of investing. Especially when the market shows you big winners. But taking profits off the table ensures you keep the bulk of your gains, rather than make increasingly risky bets and lose it all.

Good investing involves diversification to reduce risk. And one way to diversify is to find where the current market values are and rotate there.

With bond yields still near 15-year highs, they offer a slight margin of safety. And commodities have started to show some signs of strength that could likely take years to play out.

And if bitcoin’s four-year price cycles continue, 2025 could be a great year, but also see a price peak somewhere around the autumn.

Our Grey Swan Investment Fraternity members have more details on those and other opportunities we see as 2025 unfolds. And we think it’s possible to handily beat the billionaires at their own game when it comes to returns.

Regards,

Andrew Packer,
Grey Swan

P.S. This chart is making its way around. We picked it up this morning from our friends at Global Markets Investor.

Addison tells me we’re making fast progress on a unique opportunity to pair up with Glint for paid-up Grey Swan Investment Fraternity Members. Stay tuned…

P.P.S. Addison also forwarded the following excerpt from reader correspondence in the Fraternity inbox. “It’s an example of the intense engagement we’ve been getting since Trump won the election. The members are fired up this  week!”

Here’s the excerpt. Read at your peril:

I appreciate your skepticism toward anything invoking “the collective,” as society does indeed reveal a mixed track record. However, I’d like to explore that skepticism from a broader perspective:

Human history is the story of violent competition, punctuated by brief, constructive periods of collaboration and creativity. One might argue there’s no objective right or wrong—violent competition has endured precisely because it’s effective. “Might makes right” is the fundamental organizing principle of human society, consistently ensuring that the many serve the few. The Pareto Principle restates this dictum: a small elite (20%) benefits disproportionately from the efforts of the subjugated majority (80%).

Yet, the Enlightenment challenged this principle with a revolutionary concept: individual human lives possess intrinsic value and, therefore, deserve rights. These “rights”—equality, liberty, autonomy—are not inherent truths but social constructs, agreements that facilitate human relations. The brilliance of America’s founding was in marketing these constructs as self-evident truths, paired with the lure of fertile land and opportunity. That marketing attracted the ambitious, the hopeful, and the ingenious, building a nation by unleashing the most important economic and political asset: human effort and ingenuity.

Today, we are, as we have so many times in our American experiment in democracy, reverting to violent competition. Billionaires like Musk, Trump, Ramaswamy, Murdoch, and their coterie of political and economic prostitutes (rhetoric borrowed straight from the Trump playbook) – that is, opportunists – have reignited imperialism and tribalism to consolidate their advantage, brilliantly scapegoating the weak and powerless (immigrants, poor, minorities, women, etc.) to mobilize the disenfranchised masses. The cycle persists: the many labor “willingly” for the few.

If there is no right or wrong, no “collective” or “individual” worth defending, then aligning with the advantaged 20% is the only rational strategy. But if we believe we are connected—if we believe there is a greater good, and though you may think this silly and naive—we must ask: Can we, will we, break this cycle of violent competition?

Take some time this weekend to consider your own response to our look this week at the new Gilded Age.

As always, all reader feedback, from the mundane to the absurd, is welcome. Send your comments to addison@greyswanfraternity.com. We read all emails. Thanks in advance for your contribution.