5 ms·

The magic of compound interest: buying an original Magna Carta for $27 and selling it for $21 million 80 years later is equivalent to achieving 18.5% compound i

The magic of compound interest: buying an original Magna Carta for $27 and selling it for $21 million 80 years later is equivalent to achieving 18.5% compound interest. Roughly the same rate and duration as Warren Buffett's investing career, with a smaller starting value.

syncsynchalt 1y ago
Unfortunately gains are only real if they're realized — and Harvard will never sell their copy.
- mmooss 1y ago
  They could use it as collateral for debt.
  - peapicker 1y ago
    Then again, Harvard has a 53 billion dollar endowment so it probably wouldn't be necessary.
    - isubkhankulov 1y ago
      A good chunk of that is illiquid because it is capital invested in funds that may or may not be priced/valued accurately. And Harvard has $7-8B in outstanding debt. If there’s a severe recession or crisis, it’s not clear that Harvard will sail smoothly through it without some turbulence. Though i’m not implying they would sell some these priceless assets.
- LordGrignard 1y ago
  with how trump vs Harvard its going, don't put away your millions yet. you might be able to buy it!
- arrowsmith 1y ago
  Hence why taxing "unrealised capital gains", as was floated during a recent election, is preposterous.
  - nerdsniper 1y ago
    Indeed. However, it might make sense to change the definition of "realized". For example, if you use invested capital as collateral for a loan, we could require that it be valued at its basis cost. If you want to use the current market value of the stocks for loan collateral, then the IRS could recognize that the loan institution "realizes" that the stocks have appreciated in value and that the holder of the stocks agrees on the valuation. Multiple parties realized that the stock has a higher value today than its basis cost and expect it to presumably hold at least roughly that value for the duration of the loan. Using the market value as collateral is in fact one way of realizing the gains: the investor is using the loan to convert their gains on invested capital into something usable. The capital gains tax would only be triggered when the investor utilizes a price other than their basis cost for their financial instruments. This would probably not affect very many people: 99% of people don't use their retirement stocks as collateral on loans. It would fix the "Jeff Bezos et al. never pay taxes because they just keep getting bigger and bigger loans to pay off their loans" nonsense. I don't think anyone in D.C. is currently proposing this, but I think it's a nifty idea. Even if the tax revenue generated is modest, it would boost the average citizens confidence that the system is working and not rigged/broken. And that is probably something worth pursuing these days given how dissatisfied voters have been for the past 9 years or so.
    - greyw 1y ago
      Getting a margin loan with your stocks as collateral is a couple of clicks away in your brokerage. Actually weird of so few people make use of it.
      - zie 1y ago
        A home mortgage is a way better deal most of the time, which is what most people do. Better tax treatment, not callable, etc.
vitus 1y ago
The $21 million figure was based on a 2007 sale, which would have been closer to holding it for 59 years -- almost 26% interest compounded annually. If that rate of growth held for another 18 years, we'd be looking at $60 million today.

syncsynchalt 1y ago

Unfortunately gains are only real if they're realized — and Harvard will never sell their copy.

mmooss 1y ago
They could use it as collateral for debt.
- peapicker 1y ago
  Then again, Harvard has a 53 billion dollar endowment so it probably wouldn't be necessary.
  - isubkhankulov 1y ago
    A good chunk of that is illiquid because it is capital invested in funds that may or may not be priced/valued accurately. And Harvard has $7-8B in outstanding debt. If there’s a severe recession or crisis, it’s not clear that Harvard will sail smoothly through it without some turbulence. Though i’m not implying they would sell some these priceless assets.
LordGrignard 1y ago
with how trump vs Harvard its going, don't put away your millions yet. you might be able to buy it!
arrowsmith 1y ago
Hence why taxing "unrealised capital gains", as was floated during a recent election, is preposterous.
- nerdsniper 1y ago
  Indeed. However, it might make sense to change the definition of "realized". For example, if you use invested capital as collateral for a loan, we could require that it be valued at its basis cost. If you want to use the current market value of the stocks for loan collateral, then the IRS could recognize that the loan institution "realizes" that the stocks have appreciated in value and that the holder of the stocks agrees on the valuation. Multiple parties realized that the stock has a higher value today than its basis cost and expect it to presumably hold at least roughly that value for the duration of the loan. Using the market value as collateral is in fact one way of realizing the gains: the investor is using the loan to convert their gains on invested capital into something usable. The capital gains tax would only be triggered when the investor utilizes a price other than their basis cost for their financial instruments. This would probably not affect very many people: 99% of people don't use their retirement stocks as collateral on loans. It would fix the "Jeff Bezos et al. never pay taxes because they just keep getting bigger and bigger loans to pay off their loans" nonsense. I don't think anyone in D.C. is currently proposing this, but I think it's a nifty idea. Even if the tax revenue generated is modest, it would boost the average citizens confidence that the system is working and not rigged/broken. And that is probably something worth pursuing these days given how dissatisfied voters have been for the past 9 years or so.
  - greyw 1y ago
    Getting a margin loan with your stocks as collateral is a couple of clicks away in your brokerage. Actually weird of so few people make use of it.
    - zie 1y ago
      A home mortgage is a way better deal most of the time, which is what most people do. Better tax treatment, not callable, etc.

vitus 1y ago

The $21 million figure was based on a 2007 sale, which would have been closer to holding it for 59 years -- almost 26% interest compounded annually. If that rate of growth held for another 18 years, we'd be looking at $60 million today.