ERICOPOLY

In a taxable account I don't like going with calls because once you exercise them you're back to a short term holding again and must wait yet another 12 months for long term status.

I just bought ATCO shares this week paired with $10 strike May puts for 30 cents in my portfolio margin account. I'd like Munger to explain how much money I can lose if the share temporarily dip down by 99%.

Munger's stories about Rick Guerin and margin call risk became dated after portfolio margin became possible. Now you can use puts and margin and create something akin to non-recourse margin borrowing.

Don't purchase the $380 puts because you're creating a constructive sale. You wrote $380... maybe you meant $180? Portfolio margin works differently than Reg-T margin in that you are given credit for the fact that the puts hedge away your risk. Reg-T does not do that. You can get margin called in situations under Reg-T that could not possibly get you a margin call if your account were configured for portfolio margin.

Just beware of constructive sale rules if you hedge too close to the market stock price.

If it were me, I would exercise and hedge your margin borrowing with a put (but only if the account is configured with 'portfolio' margin). Would you not have LESS risk by doing this if you go with a higher strike put than $180? You'll be borrowing $180 per share on margin, but how can you possibly lose it if you hedge out the borrowing with a put?

True. I dissect it because I don't like living with uncertainty.

And when married filing separately, I figure I can establish an investment account in my wife's sole name and gift her appreciated shares to sell and then file "married filing separately" in order to keep the gains off my tax return. No? Would that work?

So from what I can tell: Rules for Roth IRAs greater than $10m or $20m will not take effect until tax year 2029. If there is a forced distribution it will be 'qualified' so no tax on the distribution even if you are 20 years old. It only applies to "high income" so you can keep $5b in your Roth IRA as long as you don't make more than $250k as married filing separately or $400k otherwise. I won't be forced to divest my Dhandho-Holdings because they've dropped the prohibition surrounding private placement investments I won't be forced to divest my PDH because they've dropped the 10% owner prohibition for Roth IRAs In other words, these rules won't apply to me because I don't make $250k. It doesn't matter if I make tens of billions in my ROTH IRA. That only becomes an issue if your day job pays you more than $250k if you are married filing separately or $400k otherwise. Am I misunderstanding any of this? Eric

Am reading about the newest incarnation of the Build Back Better Act: In addition, the BBB also extends wash sale rules to related parties. If a taxpayer incurs a loss but a related party purchases a substantially similar asset within 30 days, the original taxpayer will not be able to claim the loss. Furthermore, the disallowed loss that is normally added to the basis of the newly acquired stock will not be added (as it is in the hands of a related party and not the original taxpayer). https://www.bakertilly.com/insights/build-back-better-bill-individual-tax-provisions Question: How the f*ck am I supposed to know if my sister is buying shares of a security that I am claiming a tax loss on? This is sinister.

There ARE global supply chain issues due to covid. And that IS inflationary. I can't think of anything else that changed to kick off the inflation. There were trillions given away under Trump and trillions under Biden. But those outright check giveaways are over.

It was odd that Trump reduced it because I recall the Republicans being against double-taxation for dividends.

Yeah. Meanwhile they want me to yank my money out of Dhandho Holdings which has been smoked by pretty much any mutual fund you can find. If you can find a worse performance I'm all ears. And they continue to punish me with an additional 10% penalty to pull my money out of the Roth IRA early even though it's worth millions and they don't want Roth IRAs worth millions. Just tell me where the insanity ends.

But I'm a speculator. My father is the one who had the Value Line binders out and all that in his study and his success has been reasonable. Although he never sells anything... just holds and holds. He has been holding Magellan since Peter Lynch managed it. He bought MSFT because I worked there and still has it (glad I didn't work for Blackberry). I convinced him to buy JPM and Berkshire and Markel. He never sells -- you just can't get him to do it. I'm very careful about what I tell him about for that reason. My grandmother had small positions from reinvested dividend and her big positions were that way because she simply didn't want to pay capital gains taxes. Australia brought in a capital gains tax in the 1980s and everyone's share purchased beforehand were grandfathered in. Soon before she passed she liquidated in order to tidy up her affairs -- she was selling decades old positions in Westpac and BHP without taxes. Now why can't the United States grandfather our tax rules instead of changing the game on us all the time? Australia rocks.

My grandmother told me that she inherited shares of Nokia from her father. I was thinking to myself "oh my god! she's loaded!". When she noticed my reaction she explained that Nokia was a manufacturer of galoshes so she sold it.

My paternal grandmother lived in Australia when she passed at 94. She had been there since 1950. My grandfather passed in 2001 at 94. They had married in England and moved to Australia in 1950 from England. My grandfather had an inheritance that he invested in Sydney real estate in 1949. He made 3 purchases of real estate in Sydney: There was the family home on two lots in Lindfield, a suburb of Sydney, and also the beach home in Palm Beach on 2 lots (again, Sydney). I visited both of those properties from 1973 until my grandmother passed in 2011. But then there was a 3rd property: he purchased a greenbelt that is now Beechworth Rd in Pymble (now a very wealthy Sydney suburb). He thought that greenbelt would be locked up for a long time but Sydney expanded very rapidly and he was able to develop it. And the rest of that land is what is now the Avondale Golf Club (which explains their membership, I just remember the posh spread of food). So, holy shit he invested well. Then my grandmother was a stock picker and she invested it herself with the help of a broker who'd point her to companies and she'd read the annual reports. Yes, my grandmother was a retail investor who would be looking up stock quotes and reading annual reports to while away the time while I played on the floor and fought with my sister. So, I spoke with her about real estate and bubbles and how the home prices cannot go up faster than inflation and all that rubbish. She set me straight, explaining it was set by supply and wages. So that's that. She was a whiz. Had all the numbers in her head. Would have been a great friend of Buffett's, he would have been impressed.

All this talk of 18% rate in 1981. Well, that was the 30 yr fixed rate. So I tried to find what the shorter term mortgage rates were. I cannot. Were there any? Is it so that ARMs were first introduced in 1982? And what were the rates on those? https://en.wikipedia.org/wiki/Garn–St._Germain_Depository_Institutions_Act#:~:text=The Garn–St Germain Depository,provide adjustable-rate mortgage loans.

It would be only an 18% increase in my total payment including taxes and insurance. That's 5 years from now after a doubling of the interest rate. 18% rise over 5 years is not a shock large enough to collapse my buying power, but it will put a drag on the rate of market increases..

Or, maybe 5% is too extreme. But there's another component that I haven't mentioned: those of us today with fresh mortgages at low interest rates will have it paid down by 11% in 5 years' time. So after knocking 11% off the P+I on the next mortgage if we move to a similarly priced property in 5 years, the next home at twice the interest rate will only be an increase of 26% in P+I. And the total payment increase including taxes and insurance will be less than that.

As for today: Rates going from 3% to 6% over 5 years would slow the market I think, perhaps stagnate it for a couple of years, and I think building would decline. But I don't think prices would go down. Reasoning: It would raise my P+I payment by 42% if my mortgage interest rate double. But my total payment increase (including taxes and insurance) would be more like 33%. My mortgage is about 55% of my property's value. 1. 33% increase isn't all that bad over 5 years. It's bad, but it's not catastrophic. If you are talking about 5% annual wage inflation it's a yawn.

So I'm with my parents this weekend. Their 1st mortgage in 1970 was 9%. Their 2nd mortgage was 10 or 11% (seller financing). 1970 was tough for sellers because rates had recently climbed from substantially lower 1960s levels and my parents could negotiate a 2nd mortgage from the seller into the deal.

On the topic of banks lending to just about anyone. A person with no assets (aside from down payment) and a salaried income can get a 30 yr fixed rate mortgage even if they are 75 years old. But not me...

I remain the exception.

Homebuilders won't keep building if people cannot afford what they build, so we would remain undersupplied. So there's that too to consider.

Chase. My wife works a salaried job and the reason the loan wasn't larger is because of that very issue (I don't have an income). So we could not qualify for more.