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This seems to only be interesting if you have a lot of money tied up in a company and would like to realize some of that money without losing control of the com

This seems to only be interesting if you have a lot of money tied up in a company and would like to realize some of that money without losing control of the company. Seems like a lot of risk otherwise. One bad year could have the house of cards crumbling.

ufmace 2y ago
Probably more like you own a large enough percentage of the company and have enough day-to-day control over it that actually trying to sell a significant amount of your stock could trigger other investors to panic, wondering if you have some secret information about how the company is about to fail rather than just wanting to buy another island or mega-yacht today.
yojo 2y ago
I will never have this kind of money. It is still interesting to me from the perspective of understanding whether there is validity to claims that the rich are/aren’t paying their fair share. Assuming the write-up is correct, it provides substantial evidence that the ultra-wealthy are capable of sheltering gains in ways that I am not. As to the risk issue, I see no reason why the “asset” couldn’t be a combination of multiple assets, or an asset like an index ETF that tracks a diversified bundle of things. E.g. a substantial portion of my net-worth is tied up in a Vanguard target retirement fund (one asset). Most financial advisors consider this fine from a risk perspective.
- twoodfin 2y ago
  It’s actually much easier for you to “shelter gains” in this way: You don’t have to worry about estate taxation. Anyone can borrow against assets (securities and otherwise) they own. Home equity loans are big business, and securities-backed loans aren’t obscure below $300M. Frankly, it’s the “but the ultra-rich get special low-interest loans” bit that’s the most unbelievable part of the write up. But it’s also the keystone: Without these magic loans, it’s just standard estate planning (which is all about tradeoffs of taxes vs. control) + a likely suboptimal investment strategy.
  - Terr_ 2y ago
    > It’s actually much easier for you to “shelter gains” in this way: You don’t have to worry about estate taxation. *shakes fist* "Damn you, Lucky Ducky!" https://www.gocomics.com/tomthedancingbug/2016/10/28 https://www.gocomics.com/tomthedancingbug/2016/10/28
  - chii 2y ago
    > “but the ultra-rich get special low-interest loans” If you are rich, and is not borrowing at high LVR, it means the lender has a reasonable belief that you can pay back the loan (and the collateral is also good). The lender _can_ give you a lower interest rate, due to the loan market being pretty competitive, because they take on less default risk compared to a non-rich person taking the same loan. it's not gonna be a massive difference, but for large sums, probably does make a difference worth doing.
Arn_Thor 2y ago
If you have this kind of money to throw around the risk is probably fairly described as “negligible”. What, is the housing market going to crash and not recover in the 35 years until you kick the bucket, in this hypothetical?

ufmace 2y ago

Probably more like you own a large enough percentage of the company and have enough day-to-day control over it that actually trying to sell a significant amount of your stock could trigger other investors to panic, wondering if you have some secret information about how the company is about to fail rather than just wanting to buy another island or mega-yacht today.

yojo 2y ago

I will never have this kind of money. It is still interesting to me from the perspective of understanding whether there is validity to claims that the rich are/aren’t paying their fair share. Assuming the write-up is correct, it provides substantial evidence that the ultra-wealthy are capable of sheltering gains in ways that I am not. As to the risk issue, I see no reason why the “asset” couldn’t be a combination of multiple assets, or an asset like an index ETF that tracks a diversified bundle of things. E.g. a substantial portion of my net-worth is tied up in a Vanguard target retirement fund (one asset). Most financial advisors consider this fine from a risk perspective.

twoodfin 2y ago
It’s actually much easier for you to “shelter gains” in this way: You don’t have to worry about estate taxation. Anyone can borrow against assets (securities and otherwise) they own. Home equity loans are big business, and securities-backed loans aren’t obscure below $300M. Frankly, it’s the “but the ultra-rich get special low-interest loans” bit that’s the most unbelievable part of the write up. But it’s also the keystone: Without these magic loans, it’s just standard estate planning (which is all about tradeoffs of taxes vs. control) + a likely suboptimal investment strategy.
- Terr_ 2y ago
  > It’s actually much easier for you to “shelter gains” in this way: You don’t have to worry about estate taxation. *shakes fist* "Damn you, Lucky Ducky!" https://www.gocomics.com/tomthedancingbug/2016/10/28 https://www.gocomics.com/tomthedancingbug/2016/10/28
- chii 2y ago
  > “but the ultra-rich get special low-interest loans” If you are rich, and is not borrowing at high LVR, it means the lender has a reasonable belief that you can pay back the loan (and the collateral is also good). The lender _can_ give you a lower interest rate, due to the loan market being pretty competitive, because they take on less default risk compared to a non-rich person taking the same loan. it's not gonna be a massive difference, but for large sums, probably does make a difference worth doing.

Arn_Thor 2y ago

If you have this kind of money to throw around the risk is probably fairly described as “negligible”. What, is the housing market going to crash and not recover in the 35 years until you kick the bucket, in this hypothetical?