>...Haven't we more or less concluded that a million piecemeal rooftop installations of solar are about the worst way to do it?
The data shows that you are correct. Utility grid solar provides low cost power and consumer rooftop solar does not and will not. The rooftop solar price is usually hidden because no power source has been as subsidized as rooftop solar. Besides direct subsidies, wealthier home owners have often been paid the retail rate for the electricity they sell to the grid which causes higher electricity bills for those who can't afford to put panels on their roof - sort of a reverse Robinhood scheme.
As the statista.com report says:
>...Rooftop solar photovoltaic installations on residential buildings and nuclear power have the highest unsubsidized levelized costs of energy generation in the United States. If not for federal and state subsidies, rooftop solar PV would come with a price tag between 117 and 282 U.S. dollars per megawatt hour.
Looks like that report is a year old, but I doubt the installation costs have really gone down much since then. (Panel prices come down, but labor costs, etc. don't.)
>At its worst, 1999 to 2009, SP500 total annual return was only -0.2%, per dqdyj.
That might not be adjusting for inflation. According to the calculator on moneychimp, with adjusting for inflation, the cagr for the S&P 500 over that time period was -3.42%. (i.e. $1.00 shrank to 71 cents if invested in S&P 500 Jan 1, 2000 to Dec 31, 2009.
>...and it shows that the government is willing to pull out all the stops if the market is down just -0.2%.
I imagine the potential collapse of the financial markets, was maybe a more important cause of monetary and fiscal policy around that time.
We don’t need to adjust for inflation since we are comparing nominal returns across the board.
What other investment options were there from 1999 to 2009 that had a similar risk profile (implicit backstop by government), but also unbounded upside (unlike fixed income options)?
> I imagine the potential collapse of the financial markets, was maybe a more important cause of monetary and fiscal policy around that time.
Because the businesses are so big ABs interconnected now. If a mom and pop family business goes out of business, that’s a few people who need to scramble, they’re not politically influential enough for a bailout.
If multiple SP500 companies are at risk, then I am going to bet Congress is going to shift into high gear to find a solution.
>We don’t need to adjust for inflation since we are comparing nominal returns across the board.
Well there are things like TIPS, so comparing real returns across the board might be more helpful. Some of the returns from S&P investing will be in the form of dividends, so ideally the amount of taxable gains would also be included to get a better comparison.
I agree that even with the history of long slumps that stocks are still one of the best investments out there.
>If multiple SP500 companies are at risk, then I am going to bet Congress is going to shift into high gear to find a solution.
I think we might be in agreement that bailouts come down to systemic risk and political pull. Silicon Valley bank fails and people got all their money bank even if the accounts were far above the FDIC limits. Other banks fail at about the same time and account holders get only up to the FDIC limit. Maybe there was systemic risk there, but it feels like political pull was at least involved.
When the dot com bubble burst, many large companies failed but there was no concentrated action by Congress or the Fed to bail them out. Hence the lost decade for S&P 500 investors.
>They said Japan would collapse with their spending
Who exactly is "They"? What did they mean when they said it would "collapse"?
>Not only has that claim been proven false it has been the opposite.
The general claim is that Japanese economy has stagnated with low growth for decades and I don't think that has been proven false. For example, in the last year or two, the Japanese stock market has finally reached the values it had in the late 1980s. I am sure some Japanese economic indicators have done ok, but for example, one indicator of how well people are generally doing is to compare the GDP per capita over a period of time. In Japan, the GDP Per Capita in 1960 was about $500. In 1990 the GDP Per Capita was about $25,800 and in 2023 it was about $33,900. (In comparison, the USA GDP Per Capita in 1990 was about $23,900 and in 2023, it was about $81,700.)
Saying that Krugman was vindicated is quite a stretch. As the economist Noah Smith wrote:
>...In 2021, Krugman tweeted: "I like it and plan to steal it. This report does look like what you'd expect if recent inflation was about transitory disruptions, not stagflation redux".
As Smith pointed out:
>...But in late 2021, inflation spread to become very broad-based. Services inflation was always significant, and took over from goods inflation as the main contributor in 2022.
>The notion that this was just some transient supply-chain disruptions that was only affecting specific products was absolutely central to Team Transitory’s claims in the summer of 2021. And that was incorrect.
>...Team Transitory also called the end of the inflation at least a year and a half too soon.
On October 13, 2021 Krugman tweeted "Three month core inflation. Why isn't everyone calling this a victory for team transitory"
>...So they didn’t entirely whiff here. They just greatly overstated their case. And their complacency in 2021 probably fed into the Fed’s decision to delay the start of rate hikes until 2022, which in retrospect looks like a serious mistake.
What did get vindicated was mainstream economics as taught in our textbooks. As Smith wrote:
>...Mainstream macro’s first victory was in predicting that the inflation would happen in the first place. In February 2021, Olivier Blanchard used a very simple “output gap” model to predict that Biden’s Covid relief bill would raise demand by enough to show up in the inflation numbers. His prediction came true. He didn’t get everything right — he thought wages would rise more than consumer prices, and he neglected the lagged effects of Trump’s Covid relief packages and Fed lending programs. But his standard simple mainstream model got the basic prediction right when most people made the opposite prediction, and this deserves recognition.
>More importantly, mainstream macro appears to have gotten policy right.
Compared with Type 2, with Type 1 diabetes there are other risks that could occur:
>...While medications such as GLP-1 receptor agonists (Ozempic, Wegovy) and SGLT-2 inhibitors (Jardiance, Farxiga) demonstrated powerful benefits, they quickly were determined to pose too much of a liability for pharmaceutical companies or regulators due to concerns about safety. Specifically, GLP-1s can increase the risk of hypoglycemia (low blood sugar) and SGLT-2s can raise the risk of a serious, life-threatening complication called diabetic ketoacidosis (DKA).
Yes, people get angry about this, but no one has provided any statistics showing this is actually a common loophole.
The basic idea in the reddit post is that there were lenders giving multi-decade loans at a tiny interest rate (only payable upon death with also sharing a % share of the gains).
Maybe there are lenders who have lots of capital and also don't understand the time value of money, but no one has actually provided the names of these lenders, etc.
According to this: https://finance.yahoo.com/news/jeff-bezos-sell-5-billion-185.... Bezos has sold around $13.4 billion in stock in 2024. If he could easily avoid millions (maybe billions) of dollars of capital gains tax by this one simple trick, why didn't he?
I'm very much on your side of the argument but it's common practice. It's not like you can walk into a bank tomorrow and ask for that sort of thing, but for a HNW customer who makes use of lots of private banking services it's routine.
I'm not Bezos or part of his family office so I can't say for sure. My guess would be a mixture of capital demands elsewhere (Blue Origin?) and a desire to diversify. Start-up founders necessarily keep all their eggs in one basket; people building a multi-generational fortune don't.
Is it still that common? I'm not super duper high net worth so maybe I'm missing out on the good deals, but my bank offers these loans interest of SOFR+2-4% depending on your net worth. When the SOFR rate is <1% like during COVID, it's a pretty good deal. When the SOFR rate is more like 5% (which I think is more typical?), it's not such a good deal.
>When the SOFR rate is <1% like during COVID, it's a pretty good deal.
It is very common to make loans based on using stocks, etc. as collateral. But that isn't what people claim happens with the "buy, borrow, die" loophole. The claim is that these loans have incredibly low interest rates (much lower somehow than the IRS Applicable Federal Rate) and the interest is only payable upon death - which might be decades away. That is how the borrower can supposedly avoid capital gains taxes.
Maybe there are rich lenders who don't understand the time value of money, but doing a quick search, I have not found one stat on how many lifetime loans like this are actually being done.
I don't know that I've seen a lot of details, but I didn't realize the rates were supposed to be less than benchmark rates. Either way, the expectation is that the appreciation of the capital exceeds the interest. (Not that anyone should rely on that expectation, but clearly, people do)
And that the lender is offering the loan to capture an ultra high net worth investor; so even if you lose money on the interest, you gain on advisory services and fees; plus first bite at holding the accounts of the heirs. Requiring good collateral and high account minimums make the risk for the lender low --- if broad market value drops significantly, the account should still have more collateral to pledge to get back to 1:1. Also, if market value drops significantly, selling shares becomes easier for the investor, as there may be some shares with capital losses, and paying down the loan becomes more attractive.
> I don't know that I've seen a lot of details, but I didn't realize the rates were supposed to be less than benchmark rates.
I know someone who got a mortgage rate way, WAY below prevailing rates (like around 1%, gotten back when normies like us got rates around ~3%), because 1. he is a very high net worth individual and 2. he owns a business that does a lot of business with the bank. So, he gets extra special treatment because he's rich and the bank appreciates his business and expects the relationship to lead to even more business.
It's not a huge stretch to imagine that Jeff Bezos's bank would happily loan him money at some token 0.01% interest rate or some similar sweet deal.
It's not under AFR, it's just generally less than inflation.
And the loan terms aren't payable at death on any of the loans, they just let you refi every year when you want another $100M for that year's incidentals.
There are many web pages claiming this, but I haven't seen actual statistics on this loophole. To be clear, many, many, people borrow against the value of an asset - from the middle class up to the ultra wealthy and they can defer capital gains in that way. The claim with buy, borrow, die is that you can borrow for decades and not have to pay back the loan until death. Some claim that the rich just keep rolling over loans on to new loans to avoid paying interest/principal for decades. The reddit posting discussing this has been edited since it was first discussed on hacker news, but now it emphasizes that the bank and the ultra wealthy person come to some sort of agreement to share in the gains of the asset upon death. Considering the length of the agreement it seems it would difficult to come up with an agreement that would be fair to both sides in that agreement.
I saw that on reddit, /u/Taxing responded to a different post by the author of the reddit posting and was skeptical of how common this approach is:
>...I too went to law school, earned my LL.M. from NYU and have been practicing in this area for decades with broad family office clients ranging from a few hundred million to many billions, and yes have clients with public companies, private companies, and taken companies between the two structures. I’ve worked at every level and now sit on the boards, manage the relationships, etc., which I enjoy more.
>...I struggle to think of a single family office interested in a lifelong arrangement with Goldman or other firm at that level, providing them strings of participation and control. Over time, circumstances change, and they are not your friend.
So, maybe, the "Buy, Borrow, Die" approach is common practice, but I have yet to see any actual stats on it.
The banks don't like to dump multiple billions at once into these schemes. It's more about trickling hundreds of millions a year out to cover all possible living expenses, and a lot of that going into assets like houses and ships that can get repoed if shit hits the fan.
He wanted $13B liquid to start Blue Origin, a pretty speculative venture that might end up with nothing. And wanted to still outright own Blue Origin unlike Musk's Twitter buy that was highly leveraged by the Saudis.
> In exchange for such favorable terms (i.e., small carrying cost, matures on death), the bank will receive a share of the collateral’s appreciation (essentially amounting to “stock appreciation rights"), and this obligation will be settled upon the borrower’s death.
The Paris Gun would seem to qualify as an attempt to bomb civilians in WW1.
>...When the guns were first employed, Parisians believed they had been bombed by a high-altitude Zeppelin, as the sound of neither an airplane nor a gun could be heard. They were the largest pieces of artillery used during the war by barrel length, and qualify under the (later) formal definition of large-calibre artillery.
>...The German objective was to build a psychological weapon to attack the morale of the Parisians, not to destroy the city itself.
>...The projectile flew significantly higher than projectiles from previous guns. Writer and journalist Adam Hochschild put it this way: "It took about three minutes for each giant shell to cover the distance to the city, climbing to an altitude of 40 km (25 mi) at the top of its trajectory. This was by far the highest point ever reached by a man-made object, so high that gunners, in calculating where the shells would land, had to take into account the rotation of the Earth. For the first time in warfare, deadly projectiles rained down on civilians from the stratosphere"
Certainly. After 45 years of observation of economists tanking national/regional/global economies, cheerlead neoliberal bullshit that contravenes the most basic principles outlined in an econ 101 textbook, and in general standing behind policy that creates shit outcomes for ~ 98% of the nation, the skepticism starts to set in in earnest. The lack of empiricism alone in the social sciences should be sufficient to dismiss them out of hand. The fact that one has been promoted to the notional captain's chair of the world economy beggars belief. And on a personal note I get off on watching folks get kicked in the worldview, so dude's screed is guaranteed to rattle all the right cages.
The data shows that you are correct. Utility grid solar provides low cost power and consumer rooftop solar does not and will not. The rooftop solar price is usually hidden because no power source has been as subsidized as rooftop solar. Besides direct subsidies, wealthier home owners have often been paid the retail rate for the electricity they sell to the grid which causes higher electricity bills for those who can't afford to put panels on their roof - sort of a reverse Robinhood scheme.
As the statista.com report says:
>...Rooftop solar photovoltaic installations on residential buildings and nuclear power have the highest unsubsidized levelized costs of energy generation in the United States. If not for federal and state subsidies, rooftop solar PV would come with a price tag between 117 and 282 U.S. dollars per megawatt hour.
https://www.statista.com/statistics/493797/estimated-leveliz...
Looks like that report is a year old, but I doubt the installation costs have really gone down much since then. (Panel prices come down, but labor costs, etc. don't.)
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