You can tell a lot about somebody by the way they manage their money. So the latest financial-disclosure details from Barack and Michelle Obama provide fresh insights into the character of the world’s leading power couple.
The Obamas don’t act like fat-cats either: Their investments are mostly plain-vanilla assets that Wall Street money managers might find naively simplistic. Yet the Obamas’ portfolio does reveal a certain worldview and an outlook for the future. Here are five takeaways from the Obamas’ disclosure forms:
In the long run, the Obamas have faith in the U.S. economy. Roughly 15 percent of the Obamas’ money is invested in S&P 500 stock index funds, which in general rise or fall along with the U.S. economy. This money is in retirement funds, so the Obamas aren’t planning to tap it for a couple of decades at least, but by putting a large portion of their overall nest egg in U.S. stocks, the Obamas are betting that the U.S. economy will remain dominant for years to come. These funds appear to be the only direct stock investments the Obamas have.
Ben Bernanke hasn’t gotten through to the Obamas yet. The Federal Reserve chairman has overseen policies designed to push interest rates to record lows and draw more investors into the market for stocks and other risky assets. But by and large, the Obamas haven’t taken the bait. Their largest class of holdings is Treasury notes, which account for more than half of their net worth. At the moment, these relatively short-term securities are paying interest rates lower than inflation, which means the Obamas, like millions of hyperconservative investors, are essentially losing money on these holdings over time.
They’ve got plenty of cash on hand. The Obamas have at least $250,000 in checking accounts, leaving the president a handy fund for covering those occasional posh dinners he hosts for Congressional Republicans. In Washington, however, that’s not a lot of money. Most lobbyists can easily out-posh the president.
They’re ready for college. The Obamas have at least $200,000 set aside in college funds for their two daughters, Malia and Sasha, who are 14 and 11. Assuming neither child qualifies for financial aid, the Obamas will still have to come up with a couple hundred thousand more to fund eight years of room and board at top schools. They could opt for public schools that offer a better bargain, but that may not be an appealing option for two Harvard grads.
Overall, the Obamas seem to be lazy investors. For one thing, they’re still carrying a mortgage with a 5.25 percent interest rate, when they could have refinanced for a couple of points lower (although these days, perhaps even the president can’t qualify for a new loan). And virtually all of the Obamas’ investments are passive assets that require no regular monitoring whatsoever. Of course, there will be plenty of time for the Obamas to bulk up their wealth after 2016.
Rick Newman’s latest book is Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.
- Banking & Budgeting