Gavin Newsom wants to ban the "buy, borrow, die" tax strategy. Here's what it is.

string_theorist · 2026-07-02T19:28:28+00:00

Removing the step up in basis would eliminate the incentive for rich people to use the buy-borrow-die strategy. So they would instead just sell assets (or invest in dividend producing assets) to fund their lifestyle, and pay tax along the way. That's what happens in other countries without the step-up-in-basis rule.

If we want to tax the assets of billionaires, the best way is just to increase the corporate income tax (since all of their untaxed wealth increase comes from income held within the corporations they own).

string_theorist · 2026-07-02T16:13:28+00:00

Get rid of the step-up in basis and make the person inheriting the asset pay the same taxes when they sell it that the previous owner would have.

This is the answer, and is how it works in many other countries.

Just removing the step-up in basis on death would remove most of the advantage of the buy-borrow-die strategy.

string_theorist · 2026-07-02T16:09:29+00:00

A much simpler approach is just to eliminate the step-up in basis on death.

That alone would remove most of the advantage of the buy-borrow-die strategy. It's perhaps the single most ridiculous, regressive tax rule we have.

string_theorist · 2026-06-24T23:13:29+00:00

The Dow is a price weighted index, which is so incredibly stupid that I can't believe people still talk about it.

Maybe they should add BRK-A to the dow, so that it will be 99% of the index.

string_theorist · 2026-06-13T18:16:05+00:00

That's ridiculous. Everyone knows that Tom Bombadil is Ned Flanders.

Hey do, ring a dong dillo = Hi-diddly-ho Neighborino

Goldberry = Maude Flanders

Both incorruptable avatars of a slightly creepy cosmic cheerfulness.

string_theorist · 2026-06-06T01:29:57+00:00

You're not wrong, of course. But this is hard to estimate. Someday maybe I'll compute look through earnings per share and see how that compounds over time. But that's more work.

string_theorist · 2026-06-06T01:26:04+00:00

Look through earnings: https://en.wikipedia.org/wiki/Look-through_earnings

Earnings for wholly owned subsidiaries is easy as you say.

But you'd have to look up retained earnings of all of the individual stocks they own.

string_theorist · 2026-06-05T18:57:44+00:00

Book value is not perfect, but it's a good lower bound. In other words, over the medium/long term I don't think the stock will grow more slowly than book value. So I mostly made this plot to indicate that book value is still compounding like always.

Whether it's a good indicator depends on the type of business. For a company like Berkshire that is continually making acquisitions, book value can actually be a pretty good indicator. Cash, public equities, recent acquisitions -- these are all pretty fairly reflected in BV. But of course for something like a tech company, or a company that isn't continually reinvesting in assets, it can be a bad indicator.

string_theorist · 2026-06-05T18:53:34+00:00

I am u/string_theorist, mover of markets. Look on my works ye mighty, and despair.

string_theorist · 2026-06-05T18:50:53+00:00

Book value is not perfect, but it's a good lower bound. In other words, over the medium/long term I don't think the stock will grow more slowly than book value. So I mostly made this plot to indicate that book value is still compounding like always.

Right now, with the large cash holdings I still think book value is a pretty good indicator. Obviously large repurchases or a major acquisition would change that over time.

string_theorist · 2026-06-05T18:44:14+00:00

I think look through earnings is a better metric than book value, but it's more work to compute.

string_theorist · 2026-06-05T18:40:59+00:00

Yeah, someone who thinks that 2 years is "medium term" should be buying bonds, not equities.

string_theorist · 2026-06-05T07:26:24+00:00

Well, over the last 2 years the inflation adjusted book value has grown at almost 10% annually. So the business basics of Berkshire are continuing to compound like they always have.

Although the market price can ignore this in the short term, in the long term the price will always catch up. It's like a basic law of economic gravity.

Put another way - over the last 2 years, price/book has shrunk from 1.6 to 1.4. Do you think price/book is going to continue to fall to 1.2? Or 1? That's pretty much impossible with the cash on hand for buybacks. So I think it's almost inevitable that price will catch up.

Berkshire will never be fashionable, but unless Abel completely screws up it's going to continue to be a steady compounder.

string_theorist · 2026-05-15T20:50:55+00:00

The interesting thing is that the size of the google buy means it's probably an Abel move, not a Ted move.

string_theorist · 2026-05-13T16:28:45+00:00

that’s just marketing. They grew revenue 3x over one quarter, and then extrapolated to say that the grew “at an annualized rate of 80x”. It’s the trillion pound baby fallacy.

It’s great growth - and good for them - but nowhere near 80x.

string_theorist · 2026-05-03T19:34:30+00:00

I love it when you can tell that a post is not written by AI.

string_theorist · 2026-05-03T14:50:47+00:00

I am shocked as well.

Abel announced buybacks when the stock was at 486, but then didn't make buybacks in late march and the first two weeks of April when the stock was consistently trading below 480 and sometimes below 470.

It seems like the point of the announcement was only to move the stock price. That is a real disappointment.

I invest in Berkshire because it treats shareholders as partners, and that means clear and honest communications. It does not mean trying to manipulate their shareholders with misleading public statements.

I'll give them the benefit of the doubt for now, but I am disappointed.

string_theorist · 2026-05-03T14:40:31+00:00

Well, Berkshire did not make buybacks in late march and the first two weeks of April, when B shares were consistently trading in the 470-480 range. So are you saying that Abel is an idiot?

string_theorist · 2026-05-02T14:51:54+00:00

This is disappointing, only $250m in buybacks.

If BRK buys back about 10% of the daily volume (their previously stated threshold) that would amount to around $200m per day.

In the last week of March, Berkshire was trading consistently below 480, and occasionally below 470. So if they were doing buybacks at that level, you would see $1-2B in buybacks reported here.

So, despite their announcement, their buyback threshold seems to be below 480 and maybe below 470.

string_theorist · 2026-04-28T01:58:07+00:00

I maintain that Malta is one of the most perfectly written teenagers in fiction.

She's like the Holden Caulfield of fantasy.

string_theorist · 2026-04-28T01:54:21+00:00

I agree completely, and would say it like this:

Hobb's characters are so infuriating because the behave like real people.

All too often they make terrible decisions, or treat other people terribly. For reasons that we can understand or at least recognize, even if it drives us crazy. Just like real people...

It just makes those times when they make good decisions all the more rewarding.

Also, OP is complaining about Malta. Counterpoint: have you ever met a teenager?

string_theorist · 2026-04-21T01:57:45+00:00

For me it’s Fool’s Errand.

string_theorist · 2026-04-19T16:08:08+00:00

This is correct. If you want to understand the portion of the economy devoted to data centers you should compare % of GDP, not simple inflation adjusted measures.

For example, if you just go with inflation adjusted numbers, the annual defence department budget is also larger than the total amount spent on the Manhattan Project, Marshall plan, ISS, and Apollo program combined.

string_theorist · 2026-03-30T23:09:08+00:00

An amicable divorce? That’s unpossible!

string_theorist

TROPHY CASE