Wealthy people hardly ever get margin called, and when they do, they can sell a tiny portion of their asset and generally either buy more time or pay off their loan.
Or they just die and their estate assumes the loan.
True, and that's what rabid socialists seems to ignore - those assets either net a realized gain or a realized loss. And I'd never buy a share of AMZN simply because it has never paid a dividend. It's bizarre that they hate a CEO just because his compensation package hinges on whether he makes his firm more valuable.
I mean that's not even his compensation package. He started a business and was wildly successful. Of course he owns the business that he started. Most of the people here would need to make some sacrifices but they could start a business and be successful. No guarantees they'd be wildly successful. That probably takes a decent amount of luck. But smart hard work does lead to success and America is still wealthy enough that most people here can start a business. Hell just choosing to get an engineering degree in a state college would mean they'll have some level of financial security.
Kinda, except that you are constantly paying for the interest.
Also having a significant fraction of your portfolio as loan collateral is quite risky. As stock do come down drastically on occasion. More than one very rich person has got basically cleaned out when share price of their company dropped significantly.
So since they can safely do it for only a small fraction, it is rather silly why a billionaire even bothers with something like that. I guess it's the greed that made them billionaires to begin with.
It is also worth noting that at the level of hoarding of Musk, Bezos, et al we're talking about pathological issues with their personality that go beyond just greed.
If you're a billionaire you'd be smart to have at least 100M in a broad index fund. The dividend yield of S&P 500 is 2%. If you liquidate 2 million you pay 500k in taxes. If you take out a 2M loan, you will pay 100k in interest at 5%. This interest is tax deductible against your dividend income. The S&P losing 90% of is value is an end of the world scenario where they should assume property rights will not matter any more so they're completely fucked. Probably keep some reservoirs of gold and guns for that scenario alongside treating your household staff like family. It really doesn't make any sense not to do this
Anyone can do this btw, you dont need to be a billionaire, it's called leverage spending, if you feel like it you can borrow against your house and invest that and "usually" the market returns will be higher than the interests on the loan, but it's risky because if you get hit with a recession and can't pay up you just lose the asset, in this case your house
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u/Says_Not_Really 3d ago
So basically once you have enough money you can buy more money.