Tesla, TSLA & the Investment World: the Perpetual Investors' Roundtable

[Nocturnal]

I think now is a good time to cash out gains on Tesla stock, and wait for a buying opportunity to get back in. Lock in today's (unjustifiably) low capital gains tax rate and then buy back in to TSLA at something like today's price.

As much as the capital gains rate benefits me (as a guy sitting on major TSLA gains), to be truly honest I don't think it makes sense for regular income from hard work to be taxed at 37% while passive profits from the stock market are taxed at 20%. I know there's an economic theory argument for making capital gains rates lower than regular income rates, but it's weak and I personally think the lower capital gains rate is a result of self-dealing by the rich people that run this country to get a special lower tax rate for themselves.

Not sure I agree with the risk of selling TSLA right now, but that does have me thinking about selling some other taxable gains. Almost the opposite of tax loss harvesting.

Yeah I just don't buy it.

Again were ELSE would they put the money?

I assume people are selling to lock in this tax on their gains, and will then rebuy into something different or similar. All the cash will come back soon IMO.

 

[JRP3]

Thread derailed.....out for a walk...again

You must be getting in great shape.

 

[StealthP3D]

I think now is a good time to cash out gains on Tesla stock, and wait for a buying opportunity to get back in. Lock in today's (unjustifiably) low capital gains tax rate and then buy back in to TSLA at something like today's price.

That kind of erroneous thinking is very common with beginning investors. Selling now can't guarantee you will "lock in" a low capital gains rate because it's possible for the rate change to be designed to be retro-active in order to avoid crashing the market.

What selling now WILL guarantee is that your capital gains cannot continue to compound tax-free. Don't under-estimate the advantage that provides to your real after-tax returns (regardless of how high the capital gains rate is eventually adjusted).

 

[BornToFly]

This is false.

This April 15, Don’t Fall for the Right’s Favorite Lie About Taxes

You've probably encountered propaganda using extremely misleading statistics to claim that the U.S. tax system is soaking the rich. It's not.

theintercept.com

I was talking Federal income taxes. Obviously the government has found a million additional ways to separate us from our earnings.

 

[AudubonB]

~~~MODERATOR WARNING:
Any further posts on the topic of taxation that have even a taint of partisanship, explicit or implicit, will be removed and its poster put on probation.
Write what you wish but before you hit “Return/Send”, look it over carefully. Very, very carefully.~~~

 

[BornToFly]

The solution is simple. If politicians get too greedy, and aren't happy with 20%, you don't sell anything and live off Margin loans, so the crooked bastards get nothing instead.

Edit: Not partisan. Just financial advise.

 

[capster]

So ... is this worrying anyone? Like I guess a lot of you, I have a lot of unrealized capital gains in my portfolio. The problem with selling stock is that you have to pay taxes on it, which means your re-investment amount has now been slashed. So if you don't need to sell stock, you might not want to. In addition, inflation is a very real worry this time around, so being invested in the stock market isn't a bad idea. But if this passes (below), stock prices will come down. What to do, what to do...

---

President Biden is set to announce tax increases on the wealthy as soon as next week to pay for an increase in funding for childcare and education. The proposal, called the "American Families Plan," would reverse some of former President Trump's tax cuts from 2017, while the capital gains tax for Americans making over $1M per year could nearly double to 39.6%. Coupled with an added 3.8% tax linked to the Affordable Care Act, that's a potential 43.4% levy. The new package would also include an increase in the top income tax rate, building on a recent infrastructure proposal to raise the corporate tax rate to 28%. Biden's proposals on capital gains would only affect the federal rate. Wealthy individuals who live in California and New York, which tax capital gains as regular income at 13.3% and 11.85% (plus 3.88% in NYC), would see total capital gains duties of nearly 60%. From a strategy standpoint, increases to the capital gains tax will likely present a secular headwind to multiples going forward. Over the last 40 years, capital gains taxes have been moving in a downward trend while multiples have been moving higher. With the opposite expected to occur now, we will likely see this trend reverse.

View attachment 656318

Definitely on my radar.

Lots of folks fleeing the high tax states for many months in anticipation of the bill for the pandemic largesse coming due. Larry Ellison just bought a place in Florida. A friend mentioned that a famous chef they admire relocated from California to Seattle (Washington is 0%, but has a 7% capital gains tax working its way through the system which may or may not survive court challenges).

I worry less about the headline top rate proposals as those are playing to the stands and likely to change. It’s the professional class that will be gouged as usual and as that is where the money is.

What to do? Hold and consider yourself fortunate that you’re holding Tesla. Wait and watch. Borrow if necessary to manage things. Be willing to pay the taxes you wind up owing with grace as there is value there.

Not wildly different from my existing plan except for one big thing. I did move to a low capital gains state and I’m not ecstatic about my choice of locations after all. I was thinking I might realize a chunk of gains here and then buy a different place—maybe even back in California. Doubt I’ll take that path.

Now I’m leaning more towards looking in places in a year or two with modest capital gains and taking smaller chunks over time. That said, not selling anything till 2024 at the earliest and maybe learning to sell covered calls at that time. I plan to keep the lion’s share of my chairs at least to 2030.

 

[dgodfrey]

I also tend to believe that any increase will be on short term capital gains which now are taxed the same as regular income. We may see long term capital gains taxes increase as well, just doubt by the same level. Also remember you need to have income of over $1M per year for this to hit you. It is also the amount that is over $1M that is taxed at this level.

This is an excellent point about the tax rates being progressive. Concerns over income falling into the next higher tax rate thinking all my income will now be taxed at the higher rate is a common misconception of how income taxes are structured.

For me, as someone late to the party, I am only really counting on my TSLA to provide me piece of mind that I won't go hungry in retirement. My fun is to just watch the price go up and end goal somehow giving it to my children. Inheritance and taxes is probably going to be on my mind years from now.

I do agree, things like this, that are merely headlines do rile up the market. It's like my avatar, Humphrey the Bear. Arms full of fish and getting so stupidly excited about fish being thrown in the lake he let's go of the fish in hand.

The benefit of leaving your portfolio to your heirs is that the cost basis recalibrate's at time of death to the current SP. Maybe @The Accountant can confirm but I believe your kids can then cash them out before the body is cold with 0 capital gains.

 

[thx1139]

This is an excellent point about the tax rates being progressive. Concerns over income falling into the next higher tax rate thinking all my income will now be taxed at the higher rate is a common misconception of how income taxes are structured.

The benefit of leaving your portfolio to your heirs is that the cost basis recalibrate's at time of death to the current SP. Maybe @The Accountant can confirm but I believe your kids can then cash them out before the body is cold with 0 capital gains.

Step up basis and very few people realize that this huge benefit for the rich exists.

 

[dl003]

As an option seller, I'm delighted by the ever decreasing IV on call options. It was 71% 2 days ago on the March 2022 1725 calls, it's now 68.3%.
As a TSLA holder, I'm perplexed as to how long big buyers are willing to wait to place their bet. Monster Monday incoming? It has to. NOBODY HAS BET ON A BEAT ON NEXT WEEK ER YET.

 

[H Mak]

I hear Consumer Reports have produced an article on the safety of guns. During his research, their reporter discovered that if, instead of pointing the gun away from yourself (recommended) it is pointed towards yourself, you die. The report was published posthumously.

 

[BornToFly]

Step up basis and very few people realize that this huge benefit for the rich exists.

How is this a benefit? You start off paying the same tax rate as everyone else (and therefore your fair share). As you start making more than average, you start paying a higher and higher percentage on that additional money. The more people you "beat" with your level of earnings, the more you are taxed, until you get to a point where you only keep a minority (after all taxes considered) of every additional dollar you earn.

 

[Compton]

”If you realize that you have enough, you are truly rich.”

—Lao Tzui

 

[lascavarian]

Civilisation is expensive and worth every penny. How much of your hard-earned gains would you have if you lived in a society with no infrastructure, security, education, or healthcare? This ultra-individualism, the myth of the self-made man, is the real problematic thinking here.

I love this thinking. Decades ago I worked on a habitation project in a jungle. Nothing but hardwood trees of enormous stature. Just to get some crushed stone was an epic challenge. This changed forever my understanding of infrastructure which is so casually taken for granted in the wealthy nations.

Count your blessings. I have no problem with taxes.

 

[blckdmp]

As an option seller, I'm delighted by the ever decreasing IV on call options. It was 71% 2 days ago on the March 2022 1725 calls, it's now 68.3%.
As a TSLA holder, I'm perplexed as to how long big buyers are willing to wait to place their bet. Monster Monday incoming? It has to. NOBODY HAS BET ON A BEAT ON NEXT WEEK ER YET.

Nothing to see here. Just move along

 

[BornToFly]

I love this thinking. Decades ago I worked on a habitation project in a jungle. Nothing but hardwood trees of enormous stature. Just to get some crushed stone was an epic challenge. This changed forever my understanding of infrastructure which is so casually taken for granted in the wealthy nations.

Count your blessings. I have no problem with taxes.

I have no problem with taxes either, just don't tax me more than my neighbor, while telling everyone I'm not paying my fair share (so they resent me) as you take half my money.

 

[uujjj2]

I think now could possibly be good time to cash out gains on Tesla stock, and wait for a buying opportunity to get back in. Lock in today's (unjustifiably) low capital gains tax rate and then buy back in to TSLA at something like today's price. That assumes any changes to the tax rates aren't retroactive (possible but not guaranteed).

So I'm getting a lot of disagrees on this one. People saying I'm a newbie investor, or that doing something like this will give up future gains yada yada.

Look dudes, I ain't no newb at this investing thing. I've been here in Silicon Valley a long time. I've seen local companies' stocks go through multiple cycles. From 2016 all the way through mid 2020 I was one of those saying stay in, pushing back against the bears. But this time is different. Obviously, nobody can predict the market. Yeah, it's possible that stocks skyrocket the day after you sell. But my experience tells me right now we're gonna be in a bit of a flat spot for a while. I'm not being naive suggesting now might be (no guarantees) a good time to cash out some (not all of course) gains. Get your kitchen redone. Buy that shiny new car (electric please) you've been wanting. Take a vacation (after your shots of course).

I'm far from alone among the old dogs of Silicon Valley saying such things. Ya wanna know who else is thinking this? Elon Musk, who recently tweeted that he thinks the market cap to GDP ratio of the entire stock market is too high.

 

[insaneoctane]

Regarding the proposed increase in capital gains....Lots of claims like "where else are you going to put your money?" are offered, yet, obviously there are other choices. Real estate is a valid response. Increasing the capital gains tax absolutely changes that calculus. If one with equal means, access and knowledge were to compare yields in the general market vs real estate, the comparison before and after this hike would be very different. This means significant wealth might very well move to RE as it becomes an even more attractive choice. There were already tax advantages to RE before this rate hike. How this impacts the market is beyond my expertise, but I would bet it will not boost the market or tolerated ratios. Disclaimer: I personally know very little about investing in real estate, but I will likely be learning more in the years ahead so that I can intelligently trade my investment choices.

 

[JRP3]

Real estate is a valid response.

How does that avoid capital gains?

 

[Fred42]

This is an excellent point about the tax rates being progressive. Concerns over income falling into the next higher tax rate thinking all my income will now be taxed at the higher rate is a common misconception of how income taxes are structured.

The benefit of leaving your portfolio to your heirs is that the cost basis recalibrate's at time of death to the current SP. Maybe @The Accountant can confirm but I believe your kids can then cash them out before the body is cold with 0 capital gains.

But the estate has to pay the tax on the gain, which means there is less to distribute to heirs.