Calling all patriotic millionaires

[Phil]

That's an incredibly silly analogy. When you sign up for a credit card, you agree to pay for what you buy with it.

 

What's going on here is that millionaire A is saying "I'm willing to give up my perks, therefore you should take these perks away from millionaire B, too."

 

If you want a credit card analogy, that's like someone saying "I know the minimum payment is only 10%, but I'm willing to pay at least 20% every month -- I think you should raise everyone else's minimum, too."

 

I think a better analogy is that you have borrowed the money from Citi, and they just raised the rate from 15% to 30%.

[awm]

Seems to me a good comparison is a pair of roommates paying the rent.

 

They can both afford to pay their half of the rent, but one of them decides he'd rather keep his money and get evicted. The other roommate thinks they should both pay.

 

It doesn't follow that the one who's willing to pay should just pay his half and stop complaining about the other guy (since if they only pay half the rent, they will get evicted anyway). It doesn't follow that the one who's willing to pay should be willing to just pay the full amount (even if he has the money). And while we might argue that the guy who doesn't want to pay has the right to "keep his own money" and "make his own decision" the fact is that he's basically screwing his roommate over and acting pretty irresponsibly. It doesn't seem unreasonable for the responsible roommate to call the other guy out publicly in the hope of shaming him into doing the right thing.

[helene_t]

Can they? Is it right that US citizens with abroad residency have to pay US taxes like anybody in US inland?

No, it's about residency, it's not about citizenship.

 

Lynn should have phrased it "by living in the US" as opposed to "by maintaining US citizenship".

[mycroft]

I don't know, I think "patriotic" is one thing; phrasing it as "This cut was a test to see if it were sustainable. It wasn't. We should return things to the way they were in, say, 1970, when millionaires still were pretty common, and pretty well off - and so was the country. It's not like we want to return to the 1950s, where the top-bracket tax really was almost punitive."

[kenberg]

I don't know, I think "patriotic" is one thing; phrasing it as "This cut was a test to see if it were sustainable. It wasn't. We should return things to the way they were in, say, 1970, when millionaires still were pretty common, and pretty well off - and so was the country. It's not like we want to return to the 1950s, where the top-bracket tax really was almost punitive."

 

 

Yes, I agree, but I would add that the rest of us can do something as well. Right now there seems to be a stand-off between those who think no one should have to pay much of anything in taxes and those whose only idea, totally inadequate, is to get the rich to pay more. National economics is not the same as personal economics but there probably is some conceptual relationship. At the personal level, I don't spend money I don't have. I rarely did. Yes I had a mortgage, and I had student loans, but that's about it (I'm not counting credit cards that are paid in full every month, that's just a variant on playing cash). So I think I, and many others, can understand the unsustainability of the path we are on. With that understanding comes acceptance that we must act. And acting now would be a hell of a lot better than later. We can confront this and deal with it, if we have leadership that we trust to spread out the responsibility among us all.

 

I saw in a headline that Congress is now has lower ratings than Nixon had at the end of his presidency. That's the bad news. The worse news is that they have totally earned this contempt. The good news is, well, there isn't any.

[Elianna]

My understanding is that a US citizen residing abroad has to file income tax returns in the US, but whether they have to pay tax is a different and more complex issue. Generally, according to my understanding, they don't have to pay tax on income that is subject to tax in their place of residence, at least not if that tax is greater than or equal to the US tax....if it is lower, I think, but do not know for sure, that they pay the difference.

 

I suppose the philosophical justification is that the US affords services and protection to US citizens no matter where they live....and no matter whether a particular citizen actually avails himself or herself of them.

 

This somewhat matches with my understanding, too.

 

I can definitely corroborate the statement that U.S. citizens living abroad must file income tax returns, but am not sure about what they have to pay. I do know that it gets VERY complicated if any of their income is coming from the U.S. (like they work for an American company abroad, have income from investments in the U.S. or interest from American savings accounts.) but don't know exactly how it works.

[phil_20686]

There are two ways to redistribute income, one is between people, ie take from group A and give to group B. The other is to take from A at some point, and give back to A later when they earn less.

 

It seems like at the moment young people don't earn nearly enough to live a stable family life, but a lot of people over 50, after their children leave home, are entering the highest earning stage of their career. Thus there seems to be a mismatch across the lifetime. Im not sure if this was always the case or not?

 

The result we seem to have is a lot of young people heavily in debt, and a lot of 50-70 year olds whose outflows are decreasing as their children leave home/education, and their mortgage is paid off.

 

I would like to see a study of earnings distributions across ones lifetime now, and in the past, but I have a strong sense that it is becoming more and more skewed towards the back end - this makes sense as labor becomes ever more highly skilled experience carries a larger and larger premium. It just doesn't seem to make sense socially.

[PassedOut]

At the personal level, I don't spend money I don't have. I rarely did. Yes I had a mortgage, and I had student loans, but that's about it (I'm not counting credit cards that are paid in full every month, that's just a variant on playing cash). So I think I, and many others, can understand the unsustainability of the path we are on. With that understanding comes acceptance that we must act. And acting now would be a hell of a lot better than later. We can confront this and deal with it, if we have leadership that we trust to spread out the responsibility among us all.

My attitude toward credit is very similar. For personal expenses, we use credit cards the same way. For business, we do use our credit, but very carefully.

 

When I was a boy, my grandfather took a shine to me and we discussed his financial philosophies on fishing trips. He never bought anything on credit -- not his car, not his house. His attitude was, "If I have the money, I'll buy it; if not, I'll save until I do." I did buy my first home on credit, and of course always used credit to buy rental properties. And he did allow that I might be doing the right things there, after listening to me and looking at the numbers I showed him. But I think his advice was good in general, and I'm been comfortable following it.

 

This brings back a lot of other memories of my grandfather. He held on to his share of companies like AT&T, GM, duPont, etc., all through the depression, completely against the advice of his friends. He had the last laugh on that. And he was one of my customers on my paper route, and every day we would meet at his home and discuss how the value of his portfolio had changed (I having made sure to read the latest quotes before I arrived). Not surprisingly, my grandfather was opposed to frequent trading.

 

Recently a broker told me, "Your grandfather's strategies don't work these days." I declined his suggestions. :)

[mycroft]

Broker, meet bridge player. You might have heard of him. If you haven't, you might have heard of his fund. You might not have enough readies with your trading style to buy any of it - currently it's trading at $110K/share.

 

Of course, frequent trading does pay off for brokers who make a commission on every trade...

[blackshoe]

Back in the 1980s, I knew a real estate investor in San Diego. He drove a high-end car and lived in a very expensive part of La Jolla so I guess he was doing something right. One of the stories he told was about a conversation he'd had with a Japanese American in Hawai'i. That guy owned about half of Honolulu. My friend asked him for his secret. He said "Buy low." My friend said "you mean, buy low, sell high?" Dude said "No. Buy low. Don't ever sell." :)

[cloa513]

The presentation from listening to the first 1:30 is really more how can we look more patriotic without doing anything significant. The higher tax will just be dodged and anyway the entire wealth of all the rich people and companies wouldn't pay for the interest bill of the united states. If they were patriotic millionaires, why don't take on the inept military-intelligence complex which let 9-11 happen and alkheida get away in Afganistan and all the other stuff-up and they spend 50% of the US budget for a mess of agencies who a deal of time messing around. For a start almalgamate the lot into one coherent agency. Stop pretending there is some lines between defence, civil, internal, external.....

[PassedOut]

Back in the 1980s, I knew a real estate investor in San Diego. He drove a high-end car and lived in a very expensive part of La Jolla so I guess he was doing something right. One of the stories he told was about a conversation he'd had with a Japanese American in Hawai'i. That guy owned about half of Honolulu. My friend asked him for his secret. He said "Buy low." My friend said "you mean, buy low, sell high?" Dude said "No. Buy low. Don't ever sell." :)

:)

[phil_20686]

Broker, meet bridge player. You might have heard of him. If you haven't, you might have heard of his fund. You might not have enough readies with your trading style to buy any of it - currently it's trading at $110K/share.

 

Of course, frequent trading does pay off for brokers who make a commission on every trade...

 

People really don't understand the stock market:

 

(1) High frequency trading makes lots of money. It effectively takes advantage of the fact that lots of companies trade with high correlations to each other, e.g. if a new report comes out saying there will be a new charge for internet providers, would would expect all the tech companies to take a hit. In practice, humans being what they are, the larger better known companies tend to move first. HFT takes advantage of that delay to trade the lesser known stocks. The downside of HFT is that it can exacerbate swings in the markets. - similar to many other market strategies, they are benefecial if only a relatively low % of the market is engaged in it, but a disaster if too many people play the game. (Also see index linked funds - they are only a good strategy provided they do not unduly influence the price of the underlying asset, if they do they create a bubble in the index).

 

(2) Day traders are important for a market, as they keep shares liquid. If there is no one willing to sell you cannot buy, and if only a low volume of shares are being traded you have no idea on the consensus estimate on their stock. I.e. pricing only works if there is a large volume of shares being traded daily.

 

(3) In the first instance, all trading is a zero sum game. If I am making a profit on a trade, the opposite parties must be taking a loss. The economic benefit of the stock market comes from giving the companies access to capital. Firstly through shares issues, but more importantly, because when a company goes to a bank a quick way for a bank to do due diligence is to look at the stock price. If the company is expected to be a profitable company for the next x years it shows up on the stock price. It is much much easier for listed companies to get access to bank loans for this reason.

[hrothgar]

People really don't understand the stock market:

 

(1) High frequency trading makes lots of money. It effectively takes advantage of the fact that lots of companies trade with high correlations to each other, e.g. if a new report comes out saying there will be a new charge for internet providers, would would expect all the tech companies to take a hit. In practice, humans being what they are, the larger better known companies tend to move first. HFT takes advantage of that delay to trade the lesser known stocks. The downside of HFT is that it can exacerbate swings in the markets. - similar to many other market strategies, they are benefecial if only a relatively low % of the market is engaged in it, but a disaster if too many people play the game. (Also see index linked funds - they are only a good strategy provided they do not unduly influence the price of the underlying asset, if they do they create a bubble in the index).

 

In actuality, an awful lot of high frequency trading consists of

 

1. Watching as low frequency trading orders get placed

2. Executing the precise same trades in advance of the low frequency buy / sell and arbitraging out the differences in advance of the low frequency orders

 

In all seriousness, these days if you don't have privileged information trying to make money off individuals stocks is a very risky proposition.

The "big boys" really have much too advantageous a position...

 

Personally, my investment strategy is based completely off a portfolio of Exchange Traded Funds which I rebalance four times a year.

[phil_20686]

In actuality, an awful lot of high frequency trading consists of

 

1. Watching as low frequency trading orders get placed

2. Executing the precise same trades in advance of the low frequency buy / sell and arbitraging out the differences in advance of the low frequency orders

 

In all seriousness, these days if you don't have privileged information trying to make money off individuals stocks is a very risky proposition.

The "big boys" really have much too advantageous a position...

 

Personally, my investment strategy is based completely off a portfolio of Exchange Traded Funds which I rebalance four times a year.

 

"Making money" is easy, just buy and hold. Pretty much any random selection of 40 randomly chosen stocks, if held for several years, will give returns above bonds. If you were talking about short term, or market beating returns. Then yes. I agree :)

 

The primary reason to hold bonds is to avoid having to liquidate your position at a disadvantageous time. For people as young as me they really make no sense to hold until I am thinking of a house deposit.

 

Investing with a ten year horizon is really very different to investing on a 3 month to a year horizon of fund managers. They know come year end their total returns are getting measured. Its really a very brave fund manager who can be in 30-40% cash for an extended time. Among several pieces of very useful advice my father gave me, is when there is nothing that seems attractive dont buy. Recessions come along with a disturbing regularity once a decade or so, so if it feels high, it probably is, and there is no loss on sitting on cash for a few years, and waiting for the crash, if there is nothing tempting. It is however, much easier said than done. Sitting in cash while the bubble goes higher is nerve racking. Sitting in cash after it has declined, as say, now, is also nerve racking, as you have to decide an entry point. I am not a patient man, and it always seems tempting just to pile in and then forget about it for a few years.

 

Also, on etf's I dont understand my counterparty risk. Especially for derivative based ones. I intend to buy an ETF FTSE tracker, but one that actually buys the underlying asset. Investing in something I don't understand is too scary for me. Investment trusts seem to give basically all the same advantages, at only a minor premium to cost.

[mwalimu02]

they may show their patriotism in ways we do not understand!

[Winstonm]

they may show their patriotism in ways we do not understand!

 

"Millionaires move in mysterious ways." Jobs, Steve: Chapter 20, verse 11.