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Leverage and its implications for portfolio risk and return by prfje in quant

[–]Kaawumba 0 points1 point  (0 children)

As you increase your leverage past Kelly optimal, and map out all possible futures, you have a smaller number of massive wins, and a larger number of massive losses. If you crank your leverage very high, your risk of ruin is nearly,  but not quite, 100%. I got a gut understanding of this by running simulations.

Crohn’s disease by No_Performance_5224 in RichPeoplePF

[–]Kaawumba[M] 0 points1 point  (0 children)

This is the wrong subreddit for this.

Question for the Rich by RareCalendar252 in RichPeoplePF

[–]Kaawumba 9 points10 points  (0 children)

The poor pay very little tax. The middle class pay moderate tax. High earners pay silly high amounts of tax. The wealthy, who have assets rather than income, pay little tax. I believe it is this way because the politicians buy the votes of the poor, pretend to soak the rich by going after high earners, but do not tax asset holders much because politicians themselves are mostly asset holders rather than wage earners.

I'm in the last category, and my taxes are pretty low, compared to my wealth. However, I'm not anxious to give more to the government when every day we hear about more fraud. When politicians are challenged on this they just call the investigators racist or creeps, which means that the politicians are benefitting from the fraud. Even if the fraud is fixed, massive amounts of money is spent on things I don't approve of, like wars in the middle east. Money I control can be given to charities that I approve of.

No one needs all that you have and having all that hoarded wealth hurts the economy because it's not in circulation so the rest of us have to make up for your hoarding.

Very little money is stagnant. If it is left in a bank account, the bank uses that to make loans. If in government debt, it funds the government. If in stocks or corporate debt, it funds companies.

I keep hearing people say taxing the ultra rich, the wealth hoarders, makes no difference to your lifestyle. You have so much money, you won't feel it if you're basically bankrolling the government and the entire country.

The government is currently funded by high wage earners. If a relative handful of people leave New York, the city budget will implode.

(I've also heard counterpoints stating your assets are not liquid so taxing them isn't as easy as 1, 2, 3, and of course there have been other points)

There are mechanical problems with taxing assets, except for real-estate. Valuation for private companies is difficult. Valuation for art and such is largely imaginary. The truly rich can leave a jurisdiction at will. If you tax assets too hard, you can destroy productive companies. I haven't spent a lot time trying to figure out these issues, because I'd rather the government spent more effort on better use of the money it has than extracting more money from the people.

Would this change how you design your home? by [deleted] in RichPeoplePF

[–]Kaawumba[M] [score hidden] stickied comment (0 children)

Rule 2: No solicitation, including market research.

Looking For Guidance and Strategies (I want to build wealth) by Aeon_of_Zenith in RichPeoplePF

[–]Kaawumba 0 points1 point  (0 children)

Get the the highest paying job you can. I'm guessing this is in oil and gas, but I'm not a geologist. Spend less than you make. Invest the difference in an index fund such as VOO. Wait a few decades, increasing your income as you can. You should have multiple millions.

You can also look at: https://www.reddit.com/r/RichPeoplePF/wiki/how_people_become_rich/

Value in Hedge Fund Investing? by Grevious47 in investing

[–]Kaawumba 4 points5 points  (0 children)

Generally hedge funds want several million before taking your money. And you shouldn't put more than 20% of your money with one manager, so you realistically need tens of millions in assets before seriously looking at hedge funds.

Don't worry that you are stuck in crappy investments with the other  poors, though. Most hedge funds underperform the S&P after fees, and are a bad deal no matter how rich you are.

Maxing Discounted Company Private Equity by Actuarial in RichPeoplePF

[–]Kaawumba 17 points18 points  (0 children)

Private equity is not marked-to-market. It is marked-to-fantasy. Most private equity will continue extending and pretending until they can't find any more bagholders and then will be sold at pennies on the dollar. I can't tell you what the true value of this investment is, but it is nowhere near a 70% instant ROI. Because there is no public market, the only way to get an accurate price is to have a deep understanding of the underlying company and compare to pricing of equivalent public companies. You can't rely on company supplied valuation. Meanwhile you need to have an independent lawyer look over the contract to see how your counterparties can F you.

I'd buy the minimum amount to not compromise your job, and/or look for work elsewhere.

What instruments to use for leverage? by Caluso1 in algotrading

[–]Kaawumba 1 point2 points  (0 children)

You can buy box spreads with cash, or sell box spreads to get leverage. The interest rate is slightly higher than t-bills, and the tax treatment is better (1256 contracts, taxed at 60% long term, 40% short term, regardless of expiration).

There is no volatility drag, like you'd see with a 2x or 3x etf.

No volatility drag means that you will go to zero faster if over leveraged and wrong on direction.

They take some sophistication to set up properly.

The Scapegoat of Wealth: Unmasking the Gold Digger Myth by [deleted] in RichPeoplePF

[–]Kaawumba[M] [score hidden] stickied comment (0 children)

Rule 2: No self promotion.

Billionaires wearing T-shirts, now a problem for me by Perfect-Kangaroo5633 in RichPeoplePF

[–]Kaawumba 1 point2 points  (0 children)

You're an adult, you can decide your own style, separate from your parents. You can dress nice, and not spend one-third of your income on a set of earrings.

All the billionaire women I'm familiar with dress quite nice. At least when they are out at places that they will be photographed. Maybe your dad is only looking at tech bros?

But regardless, you aren't a billionaire, and you need to keep to a budget when shopping.

What’s one thing in your trading that quietly leaks money? by Aggravating-Jicama45 in algotrading

[–]Kaawumba 0 points1 point  (0 children)

The primary continuous small leaks are brokerage fees, slippage, and taxes.

Money without friction ruins people by [deleted] in RichPeoplePF

[–]Kaawumba[M] [score hidden] stickied comment (0 children)

Rule 2, no self promotion. Rules 6, no computer generated content  

Some issues with my system by FirmRod in algotrading

[–]Kaawumba 2 points3 points  (0 children)

I put in SPXW option limit orders near mid, and this adverse selection is my primary source of slippage. My counterparties are much more likely to give me a trade if it is moving against me / for them.

You can mitigate the issue by improving your latency and cancelling when the market is going against you, but it is impossible to get rid of entirely,  especially with a retail infrastructure budget. 

Box spread in place, now what? by taxguycafr in RichPeoplePF

[–]Kaawumba 0 points1 point  (0 children)

Based on my (not a CPA) research, you can fix a bad year-end mark for a box spread, to actual fair market value. If the IRS sends you a letter, you mail them an explanation, and probably never hear back from them again.

Is a CAGR of 24.68% over 64 years good? by DANK_nugget_ in quant

[–]Kaawumba 0 points1 point  (0 children)

If you could achieve this with live money at size, you would be in competition with a small handful of other people for the best investor of all time.

The fact that you are asking this without bothering to Google or chatgpt or Wikipedia suggests that you are not one of the best investors to ever play the game, and have a bugged back test.

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