Eff You Money

[cubsfan]

^^^   Sounds like a catfight 

[james22]

19 hours ago, SharperDingaan said:

One of the hardest things to get over, is the source of the cash in your bank account. 

 

This changes once retired - I'm not looking to get over it.

 

It is very difficult for most who have successfully saved and invested to switch gears once retired and spend.

 

I'm looking to use whatever mental accounting tricks I can.

[bargainman]

On 12/26/2024 at 12:47 PM, Eldad said:

You may not know what I meant by “court packing”. Biden and most Democrat Senators, besides Sinema and Manchin, wanted to change the courts’ make up to 15 justices and add 6 Democrat team players back at the beginning of Biden’s term. Completely changing the rules and harming our “democratic norms”
 

That is not the same as Trump appointing 3 in a term because 3 others retired. 
 

“Trump is going to destroy our democratic norms and imprison his political enemies!!”

 

When everyone can see they are actually the ones that do those things.  That and the censorship is what caused a left leaning moderate like Musk to go full MAGA. 

 

I agree that adding 6 new justices would've been harsh but that didn't happen.  What did happen is that Mitch prevented Obama from rightfully appointing a justice on the pretense that the next president should have that right.  Then he rushed the 3rd appointment right when Trump's term was about to be up, hypocritically.  So he basically pulled 2 judges to the right.  Nevermind that at least 2 of the appointees, to the highest court in the land, perjured themselves when they claimed under oath that they wouldn't change Roe vs Wade.

 

I'm fully aware that the left has their issues, but somewhat amused that people see Trump, who lies and sensationalizes as a matter of operating procedure as some great counterbalance to that.  With regards to the courts cases against him, did you look at the court documents and the actual facts and proof?  Like the boxes and boxes of confidential data in his resort taken without permission?  People think it was a witch hunt but, if it was, it wasn't without proof and evidence, something his supporters don't seem to need, but is required in a court of law.  He's the first president who didn't concede and constantly called the election rigged.  That's dictator stuff.  He also led chants of "lock her up!", so yes, it's a concern that he'd jail political opponents.   Of all the political cycles I've seen he's taken the conversation to the lowest point, but hey at least he didn't start a war.

[Red Lion]

3 minutes ago, bargainman said:

What did happen is that Mitch prevented Obama from rightfully appointing a justice on the pretense that the next president should have that right.

 

So you don't think the senate should have confirmation hearings? Mitch didn't prevent Obama from appointing anyone, the senate failed to confirm Garland, that's it. Do you really think Schumer wouldn't have done the same thing if the shoe was on the other foot?

[Eldad]

18 minutes ago, bargainman said:

 

I agree that adding 6 new justices would've been harsh but that didn't happen.  What did happen is that Mitch prevented Obama from rightfully appointing a justice on the pretense that the next president should have that right.  Then he rushed the 3rd appointment right when Trump's term was about to be up, hypocritically.  So he basically pulled 2 judges to the right.  Nevermind that at least 2 of the appointees, to the highest court in the land, perjured themselves when they claimed under oath that they wouldn't change Roe vs Wade.

 

I'm fully aware that the left has their issues, but somewhat amused that people see Trump, who lies and sensationalizes as a matter of operating procedure as some great counterbalance to that.  With regards to the courts cases against him, did you look at the court documents and the actual facts and proof?  Like the boxes and boxes of confidential data in his resort taken without permission?  People think it was a witch hunt but, if it was, it wasn't without proof and evidence, something his supporters don't seem to need, but is required in a court of law.  He's the first president who didn't concede and constantly called the election rigged.  That's dictator stuff.  He also led chants of "lock her up!", so yes, it's a concern that he'd jail political opponents.   Of all the political cycles I've seen he's taken the conversation to the lowest point, but hey at least he didn't start a war.

Adding 6 justices didn’t happen because of 2 American patriots named Sinema and Manchin. That would have caused a civil war.
 

Actions speak louder than words. Trump says lock her up. Then first week in office says they will not pursue Hillary. Democrats say save democracy then try to jail political opponents. 

If you remember Biden had boxes of classified documents in his garage (as i am sure almost every President up to Trump did and got away with) The FBI said they would not charge him because “he was senile” and therefore could not stand trail. The FBI was right of course all while the MSM was telling everyone he was “sharp as a tack”. 
 

I find many things about Trump to be terrible, but he has an appeal with low propensity voters and previous non voters that allows him to beat Democrats. The current Democrat party is too corrupt to have power IMO. 
 

 

 

[TwoCitiesCapital]

On 12/26/2024 at 2:35 PM, Blugolds said:

 

I've never understood the "we cant have their side pack the court, so we'll pack it with our side". 

 

If you wanted true balance, wouldn't you want equal representation on the court? Both left and right represented, men, women, minorities, whites...wouldnt that be optimal? 

 

Yup - but neither Republicans nor Democrats want balance. They want control and power. 

 

On 12/26/2024 at 7:33 PM, Gregmal said:

It’s stunning people still deny the significance of Musk buying Twitter. As a result of such, the deliberate censoring and collusion between big tech, MSM, and US government was unveiled. 

 

Perhaps - but it was my understanding that Elon is still censoring Twitter. Now its just individuals he doesn't like and people on the left that he disagrees with. After buying Twitter, he hired an independent audit committee to investigate to ensure balance and then fired them when their reports was "you're doing the same things as the prior owners". 

 

So much for "free" speech. He who holds the bullhorn will be heard. 

[cubsfan]

Elon is definitely "censoring" Twitter - if you intend to defame someone or get too pornographic.

As Free Speech should be.

 

Otherwise - it's definitely the Town Square of opinions.

[Gregmal]

Before Elon, it was basically everyone vs Fox News in terms of left vs right in msm. As we saw in 2020, they  left and big government were easily able to control news flow to distort the widespread perception.
 

Elon, a formal liberal hero, buys Twitter and then unleashes the internal trove of documents showing the scheme and most importantly blatant and widespread collusion between big tech, big government, and “the news”. That had more impact than anything else. What he does now doesn’t really matter, because the scheme has been blown up and no one trusts msm or government “agencies” anymore. 

Edited December 28, 2024 by Gregmal

[SharperDingaan]

23 hours ago, ICUMD said:

 

@SharperDingaan points well taken.

 

Are you aware of any 'safe' or 'recommended' amounts of tax deductible debt to be used in proportion to invested capital?  

 

Also any recommended reading or books devoted to borrowing money for investment purposes?

 

I do use leverage to invest for the past 7 yrs or so.

Haven't found any good references as yet regarding this strategy though.

 

Thank u.

 

The basic approach is to 1) calculate your after-tax return on bonds, equities (dividends), equities (cap gains), etc., 2) multiply each after-tax return by the weighting in the portfolio to get the 'long' position, 3) calculate the after-tax margin cost , 4) calculate the long/short (ie: 130/30) portfolio after-tax return, under different short % weightings (data table), 5) plot after-tax return against short %, 6) optimum short % is where the plot line peaks. 30% tax rate on tax deferred accounts (RRSP withdrawal tax), 0% on TFSA's, all else as per your local tax-code. In practice .... utterly useless.

 

The reality is that you have to 'feel' your way, everyone will be different, and your approach will change over time. We prefer to margin by vintage with the newest vintages carrying the highest margin; as it forces a focus on risk, and staying alive as/when you f*** **!  However, we ONLY borrow against T-Bills vs the vintages; hence we're not going to see a margin call if the vintages collapse 50% tomorrow.

 

At the portfolio level, we just try to offset our annual inflation drag against the boost from margin, and leave it at that. I.E; If the no-margin return was 10%, and we earned 13% on the margined portfolio, we have 3% of 'margin' to offset 3% of inflation.  If we really wanted margin, we'd just buy a rental property and mortgage against it.

 

Different strokes.

 

SD

 

Edited December 28, 2024 by SharperDingaan

[73 Reds]

7 minutes ago, SharperDingaan said:

 

The basic approach is to 1) calculate your after-tax return on bonds, equities (dividends), equities (cap gains), etc., 2) multiply each after-tax return by the weighting in the portfolio to get the 'long' position, 3) calculate the after-tax margin cost , 4) calculate the long/short (ie: 130/30) portfolio after-tax return, under different short % weightings (data table), 5) plot after-tax return against short %, 6) optimum short % is where the plot line peaks. 30% tax rate on tax deferred accounts (RRSP withdrawal tax), 0% on TFSA's, all else as per your local tax-code. In practice .... utterly useless.

 

The reality is that you have to 'feel' your way, everyone will be different, and your approach will change over time. We prefer to margin by vintage, with the newest vintages carrying the highest margin; as it forces a focus on risk, and staying alive as/when you f*** **!  However, we borrow against T-Bills vs the vintages; hence we're not going to see a margin call if the vintages collapse 50% tomorrow.

 

At the portfolio level, we just try to offset our annual inflation drag against the boost from margin, and leave it at that. I.E; If the no-margin return was 10%, and we earned 13% on the margined portfolio, we have 3% of 'margin' to offset 3% of inflation.  If we really wanted margin, we'd just buy a rental property and mortgage against it.

 

Different strokes.

 

SD

 

Not sure I follow.  There are no margin calls in real estate.  The value of the property is irrelevant if you pay your mortgage,  The only certainty with margin is you incur more debt.  Unless there is a very specific reason why you want to pay interest for the "privilege" of taking on added risk, the concept of margin seems like a generally bad idea.  Even so, why would anyone use margin to buy anything other than their very best ideas?  And on that  note, why own anything other than your very best ideas?

[Haryana]

1 hour ago, cubsfan said:

Elon is definitely "censoring" Twitter - if you intend to defame someone or get too pornographic.

As Free Speech should be.

 

Otherwise - it's definitely the Town Square of opinions.

 

Elon Musk: 

"Take a big step back and F*** YOURSELF in the face." 

 

 

[SharperDingaan]

50 minutes ago, 73 Reds said:

Not sure I follow.  There are no margin calls in real estate.  The value of the property is irrelevant if you pay your mortgage,  The only certainty with margin is you incur more debt.  Unless there is a very specific reason why you want to pay interest for the "privilege" of taking on added risk, the concept of margin seems like a generally bad idea.  Even so, why would anyone use margin to buy anything other than their very best ideas?  And on that  note, why own anything other than your very best ideas?

 

Real Estate just looks different; property foreclosure is a form of margin call. 

Buy a blue-chip, and maybe you'll tolerate up to 50% margin as the share price could also go down. Buy a house and maybe you'll tolerate a mortgage at 80% of value as you don't expect difficulty keeping up on the payments. However, the more margin you have in the investment/portfolio, the higher your ROE will be ... so if you can tolerate the risk that comes with margin, it's worth considering. 

 

In this case; borrow against T-Bills to leverage up the entire portfolio, and match inflation.

Invest the borrow in higher quantities of the current vintage (today's best ideas).

Opportunistic sales throughout the year to recover costs and repay margin. 

Repeat on new vintages next year.

 

SD

 

 

 

 

 

 

Edited December 28, 2024 by SharperDingaan

[cubsfan]

42 minutes ago, Haryana said:

 

Elon Musk: 

"Take a big step back and F*** YOURSELF in the face." 

 

 

 

It's good to see the H1-B issue up for robust debate, even among the MAGA crowd. 

That's the way it should be.

 

Thank the open Town Square of X.

Edited December 28, 2024 by cubsfan

[cubsfan]

4 hours ago, bargainman said:

With regards to the courts cases against him, did you look at the court documents and the actual facts and proof?  Like the boxes and boxes of confidential data in his resort taken without permission?  People think it was a witch hunt but, if it was, it wasn't without proof and evidence, something his supporters don't seem to need, but is required in a court of law.  

 

Damn - you left out the best part!

 

Biden took documents 30 years ago and kept them. They were laying next to his Corvette in a garage. He was never authorized to take those documents as a senator.

Then he shares the confidential documents with his biographer Mark Zwonitzer - confidential documents!  Zwonitzer then destroys all documents/interviews related to the materials as soon as he learns of the documents investigation against Biden.

 

Meanwhile, Trump has them for 2 years - secure in Mar Lago - and there is a dispute over when to turn them over, etc.  So an FBI Swat team with 30 armed agents show up. Typical Kangaroo Court stuff. Trump was authorized.

 

Then Biden figures out he's gonna get busted - so he turns in all the 30 year old restricted documents.

 

You can't make this stuff up!

[73 Reds]

1 hour ago, SharperDingaan said:

 

Real Estate just looks different; property foreclosure is a form of margin call. 

Buy a blue-chip, and maybe you'll tolerate up to 50% margin as the share price could also go down. Buy a house and maybe you'll tolerate a mortgage at 80% of value as you don't expect difficulty keeping up on the payments. However, the more margin you have in the investment/portfolio, the higher your ROE will be ... so if you can tolerate the risk that comes with margin, it's worth considering. 

 

In this case; borrow against T-Bills to leverage up the entire portfolio, and match inflation.

Invest the borrow in higher quantities of the current vintage (today's best ideas).

Opportunistic sales throughout the year to recover costs and repay margin. 

Repeat on new vintages next year.

 

SD

 

 

 

 

 

 

The distinction is foreclosure is a process that takes months, if not years and has nothing to do with depreciation of the underlying asset and is entirely within your control - you can sell the property, refinance the loan and/or come current with payments long before having the property taken from you. Margin calls happen instantly, are entirely outside of your control and require immediate or near immediate action, putting your account assets at risk and creating possible adverse tax consequences.   The borrow costs and risks never go away.  I view margin debt similar to the way I view credit card debt only there is more risk involved with margin debt.  I'd never assume ROE will always be positive and sufficiently positive to exceed the costs and risks of margin.   Margin debt simply makes whatever you buy that much more expensive.

Edited December 28, 2024 by 73 Reds
missed line

[ICUMD]

@SharperDingaan  thanks for sharing your thoughts.  Those are some pretty heafty calculations.

 

Likely, I run a higher risk portfolio.

But the model is easier to understand.

 

I use 30% leverage to purchase blue chip high yielding dividend equities that roughly match my cost of borrowing. Passive income generated by the portfolio easily covers the cost of borrowing.  Excess cash flow attempts to purchase new high yield equities at opportune times.

 

Focus is increasing passive cash flow over time.

 

Of course, need to periodically model a 50% correction to ensure margin of safety. Quality and valuation of underlying equities is paramount.

 

Not everyone's cup of tea for sure.

[benchmark]

6 hours ago, ICUMD said:

@SharperDingaan  thanks for sharing your thoughts.  Those are some pretty heafty calculations.

 

Likely, I run a higher risk portfolio.

But the model is easier to understand.

 

I use 30% leverage to purchase blue chip high yielding dividend equities that roughly match my cost of borrowing. Passive income generated by the portfolio easily covers the cost of borrowing.  Excess cash flow attempts to purchase new high yield equities at opportune times.

 

Focus is increasing passive cash flow over time.

 

Of course, need to periodically model a 50% correction to ensure margin of safety. Quality and valuation of underlying equities is paramount.

 

Not everyone's cup of tea for sure.

@ICUMD What brokerage are you using? the margin rate is pretty high -- I'm surprised that you can cover the margin cost with the dividend

[ICUMD]

@benchmark Scotiabank and UBS. Was definitely easier when rates were lower. Still possible however. Margin rates seem to be below 5.5%.

[SharperDingaan]

18 hours ago, 73 Reds said:

The distinction is foreclosure is a process that takes months, if not years and has nothing to do with depreciation of the underlying asset and is entirely within your control - you can sell the property, refinance the loan and/or come current with payments long before having the property taken from you. Margin calls happen instantly, are entirely outside of your control and require immediate or near immediate action, putting your account assets at risk and creating possible adverse tax consequences.   The borrow costs and risks never go away.  I view margin debt similar to the way I view credit card debt only there is more risk involved with margin debt.  I'd never assume ROE will always be positive and sufficiently positive to exceed the costs and risks of margin.   Margin debt simply makes whatever you buy that much more expensive.

 

Quite agree. We just make the point that all debt has to be repaid when it's due; it is the collection processes that vary, and in all cases, the investor controls his/her risk - whether collection be via a margin call or a foreclosure. That decision to take on too much margin/mortgage relative to the price volatility and market value of the supporting collateral, was entirely on the investor. Risk tolerance.

 

Every investor assumes, EVERY DAY; they he/she will make money by investing - i.e. a positive ROE. If your typical investment holding period extends over many years; a positive CAGR. Every good financial textbook demonstrates in great detail; that when used moderately, the return on a leveraged portfolio will exceed that of the identical unleveraged portfolio - and that the incremental leveraged return can be forecast. 

 

Of course; it means work! After-tax gains and dividends/interest on the additional purchases > after-tax cost of the interest. Always maintaining enough ongoing liquidity to cover ongoing withdrawals, a 50% draw down on these additional purchases, AND a doubling of the original investment at its lows. Yet always keeping enough in reserve (multiple mortgage free houses), so that if you're wrong - you still have other assets to live on. Risk management. 

 

You can go nuts with leverage, choose to use options vs debt; or simply just leverage very modestly. Risk tolerance.

Covering our annual loss to inflation is as far as we go.    

 

SD

 

[73 Reds]

That's just it - margin is the one form of debt where you lose control.  You and your account assets are subject to the weighing machine known as the stock market.  You lose control because you are subject to price not value and as well all know, the two may be very divergent at any given time.  Now, if you propose borrowing to invest vis-a-vis a HELOC, I have less of an issue with that.  Your payments and payment schedule is known and won't vary.  You can formulate a plan that won't need adjustment as the result of price fluctuations of your underlying account holdings.  Another point, I don't understand is why one would incur margin debt against t-bills.  You pay more margin interest than the yield generated by the t-bills.  If you're going to use margin, don't you want to leverage assets that you believe generate a higher yield/return than the cost of the margin interest?  In fact why own t-bills at all if you're going to use margin?  Why not sell as much of the t-bills as necessary to acquire the investments you purchase with margin debt?

Edited December 29, 2024 by 73 Reds
missed word

[Parsad]

On 12/28/2024 at 1:02 PM, cubsfan said:

 

Damn - you left out the best part!

 

Biden took documents 30 years ago and kept them. They were laying next to his Corvette in a garage. He was never authorized to take those documents as a senator.

Then he shares the confidential documents with his biographer Mark Zwonitzer - confidential documents!  Zwonitzer then destroys all documents/interviews related to the materials as soon as he learns of the documents investigation against Biden.

 

Meanwhile, Trump has them for 2 years - secure in Mar Lago - and there is a dispute over when to turn them over, etc.  So an FBI Swat team with 30 armed agents show up. Typical Kangaroo Court stuff. Trump was authorized.

 

Then Biden figures out he's gonna get busted - so he turns in all the 30 year old restricted documents.

 

You can't make this stuff up!

 

No you can't make this stuff up, but apparently you are!  Where were they secure at Mar-a-Lago...in the john?! 

 

Both are assholes...doesn't excuse the behavior of either of them.  Cheers!

[ICUMD]

4 hours ago, 73 Reds said:

You lose control because you are subject to price not value and as well all know, the two may be very divergent at any given time.  Now, if you propose borrowing to invest vis-a-vis a HELOC, I have less of an issue with that

That's the leveraged opportunity IMO.  When price undercuts value by a significant extent.  Agree margin calls can be problematic, but there is mitigation. Ex: buying quality, conservative borrowing, diversification, strict valuation entry points, monitoring cash flow, collateralizing property etc. 

[73 Reds]

10 hours ago, ICUMD said:

That's the leveraged opportunity IMO.  When price undercuts value by a significant extent.  Agree margin calls can be problematic, but there is mitigation. Ex: buying quality, conservative borrowing, diversification, strict valuation entry points, monitoring cash flow, collateralizing property etc. 

Why mitigate for the sake of paying more to assume more risk?  Some of what you refer to as "mitigation" is what most of us would do anyway.  But diversification for one, is not the key to exceptional performance.  Neither are strict entry points if the goal is to hold for the long term.  For reasons already stated margin is the worst form of debt. 

[SharperDingaan]

73 Reds - build yourself a simple model, then change the variables to see what happens ...

 

Assume: $1M bond portfolio; 250K of T-Bill earning 3.5% before tax, and 750K of Bonds earning 6.0% before tax. 42% tax on interest income, 3% inflation. The weighted after-tax return on this fixed income portfolio is 3.12% [.25*3.5*(1-.42) + .75*6.0*(1-.42)]. On this $1M portfolio, the after-tax, real return after inflation is 0.12% [3.12-3.00] - or about $1,200; that's it!

 

Margin against the portfolio, invest in your best idea, and earn an after-tax, real return of 3.12%; how much margin do you need? 

Assume $X of margin at a cost of 8.5% before tax, and $X of investment in a BTC-ETF that will earn 50% before tax. Same $1M of portfolio, 26% tax on the BTC-ETF gains, solve for $X using goal seek. 'X' is $93,623, and the weighted after-tax return on this fixed income portfolio is now 6.12% [.094*50*(1-.26) + .25*3.5*(1-.42) + .75*6.0*(1-.42)  - .094*8.5*(1-.42)]. On this leveraged $1M portfolio, the after-tax, real return after inflation is now 3.12% [6.12-3.00] - you have recovered the  loss to inflation.

 

Everyone's 'best idea' will be different; many view BTC/BTC-ETF as a cash equivalent, and would suggest that at current levels a 50% one-year return is conservative . $93,623 on $1,000,000 of fixed income collateral is < 10% margin, $93,623 on $250,000 of T-Bills is 37%, or < 50% of the available T-Bill margin. Not a lot of risk for the NET additional after-tax $30,000 recovering the loss to inflation.

 

It isn't for everyone; but so long as you have the risk tolerance and expertise, it is foolish to ignore. It could also be programmed into an algorithm, or even a robotic DAO (Decentralised Autonomous Organisation) ... if you truly wanted to be ambitious! 

 

SD

 

 

 

 

 

Edited December 30, 2024 by SharperDingaan

[73 Reds]

1 hour ago, SharperDingaan said:

73 Reds - build yourself a simple model, then change the variables to see what happens ...

 

Assume: $1M bond portfolio; 250K of T-Bill earning 3.5% before tax, and 750K of Bonds earning 6.0% before tax. 42% tax on interest income, 3% inflation. The weighted after-tax return on this fixed income portfolio is 3.12% [.25*3.5*(1-.42) + .75*6.0*(1-.42)]. On this $1M portfolio, the after-tax, real return after inflation is 0.12% [3.12-3.00] - or about $1,200; that's it!

 

Margin against the portfolio, invest in your best idea, and earn an after-tax, real return of 3.12%; how much margin do you need? 

Assume $X of margin at a cost of 8.5% before tax, and $X of investment in a BTC-ETF that will earn 50% before tax. Same $1M of portfolio, 26% tax on the BTC-ETF gains, solve for $X using goal seek. 'X' is $93,623, and the weighted after-tax return on this fixed income portfolio is now 6.12% [.094*50*(1-.26) + .25*3.5*(1-.42) + .75*6.0*(1-.42)  - .094*8.5*(1-.42)]. On this leveraged $1M portfolio, the after-tax, real return after inflation is now 3.12% [6.12-3.00] - you have recovered the  loss to inflation.

 

Everyone's 'best idea' will be different; many view BTC/BTC-ETF as a cash equivalent, and would suggest that at current levels a 50% one-year return is conservative . $93,623 on $1,000,000 of fixed income collateral is < 10% margin, $93,623 on $250,000 of T-Bills is 37%, or < 50% of the available T-Bill margin. Not a lot of risk for the NET additional after-tax $30,000 recovering the loss to inflation.

 

It isn't for everyone; but so long as you have the risk tolerance and expertise, it is foolish to ignore. It could also be programmed into an algorithm, or even a robotic DAO (Decentralised Autonomous Organisation) ... if you truly wanted to be ambitious! 

 

SD

 

 

 

 

 

Problem is,  I can't get past your assumptions because t-bills or the like make no sense since I would view them as wasted assets (your earlier post posited margining t-bills). In any event I can generate a better return on a non-marginable fixed income portfolio without margin so why bother?  Granted, it requires some creativity and like you suggest, is not for everyone.  But my main point is that margin is the worst form of debt.  If you are going to borrow for the purpose of investment, there are far better alternatives.  Why would you want to assume more risk with margin?  Its like free money for the brokerage houses so what do you think that means for you?