And for the next 11 months, it worked!
October 16, 2024 12:17 PM Subscribe
A 30-year-old carpenter from Vancouver approaches the Royal Bank of Canada and says, “I want to buy a house. Can I take a loan against my portfolio?” A representative from RBC’s Private Bank raises an eyebrow as he reviews a portfolio consisting of millions in Tesla call options, before shaking his hand, saying, “Of course!” and setting him up with a financial advisor. A few months later, this carpenter is calling his RBC-appointed financial advisor, instructing him to buy C$75 million in weekly Tesla call options. Of course the advisor complies: it’s the client’s money, after all! And those call options represent trading fees. Then Tesla tanked, and DeVocht took a C$20 million personal loan from his own LLC to try to “recoup the losses” by trading his personal account, which went about as well as you’d expect. from How a Canadian carpenter became an options trader, made $300 million, and then went bust [Sherwood]
Past performance is not an indicator of future results.
posted by 1970s Antihero at 12:33 PM on October 16 [3 favorites]
posted by 1970s Antihero at 12:33 PM on October 16 [3 favorites]
Losing that much money would haunt me for the rest of my life.
posted by any portmanteau in a storm at 12:35 PM on October 16 [7 favorites]
posted by any portmanteau in a storm at 12:35 PM on October 16 [7 favorites]
(my TSLA position was doing good too in late 2021 with the Hertz announcement and peak Elon pumping, I saw it all collapse in late 2022 but I did do some strategic LEAPS call jiggering to cheaply recapture any recovery before mid-2024 . . . I missed my $250+ exit in June 2023 on those but was able to get out with some trading profit last December . . . clearly TSLA's $300 price level in 2022 was being supported by a temporary happy condition of selling BEVs when gas on the West Coast was $6 and demand was overwhelming what Fremont could supply . . . once Austin got rolling I guess Tesla's capacity could cover their incoming order book so Model 3 & Y prices had to come back down to earth . . . but I did think the return of the $7500 tax credit would boost TSLA a lot more than it has so far . . . clearly with a 60+ P/E today's market cap is predicated on serious growth out to 5M/yr or so, which to me seems doable but Elog has yet to clearly articulate to investors how and when we're getting there)
posted by torokunai at 12:36 PM on October 16 [3 favorites]
posted by torokunai at 12:36 PM on October 16 [3 favorites]
I noted this story in passing the other day and was curious to know more. This account seems to confirm my suspicion, i.e. that the carpenter assumed lightning would just keep striking the same spot over and over again, to his benefit.
posted by senor biggles at 12:36 PM on October 16 [3 favorites]
posted by senor biggles at 12:36 PM on October 16 [3 favorites]
Also, once you’ve made $300M, why not stop? It’s not like you couldn’t park that in stable vehicles and live off it for the rest of your life in extreme comfort? Is it just another gambling addiction?
posted by GenjiandProust at 12:56 PM on October 16 [38 favorites]
posted by GenjiandProust at 12:56 PM on October 16 [38 favorites]
I think everyone who has $100 million and says, "I want more" is greedy.
posted by MisantropicPainforest at 12:57 PM on October 16 [15 favorites]
posted by MisantropicPainforest at 12:57 PM on October 16 [15 favorites]
Options, man, they're a deathtrap for the unwary. And even the wary, often enough. Friends don't let friends trade options, unless you're selling them to meme stock lunatics.
The last few months have been utterly hilarious as the meme stock crowd discovered options and promptly got wrecked, repeatedly, by them.
...because, of course, they'd do deeply out-of-the-money options based on their delusional stock valuations, and then were surprised to find GME did not, in fact, go to $250 but instead fell to $22.
posted by aramaic at 1:03 PM on October 16 [6 favorites]
The last few months have been utterly hilarious as the meme stock crowd discovered options and promptly got wrecked, repeatedly, by them.
...because, of course, they'd do deeply out-of-the-money options based on their delusional stock valuations, and then were surprised to find GME did not, in fact, go to $250 but instead fell to $22.
posted by aramaic at 1:03 PM on October 16 [6 favorites]
Even when he hit 26 Million. There are stable places to park that for 4% a year.
That's a million a year. Enough for anybody to my mind. Greed and stupidity take over I guess.
posted by vacapinta at 1:05 PM on October 16 [21 favorites]
That's a million a year. Enough for anybody to my mind. Greed and stupidity take over I guess.
posted by vacapinta at 1:05 PM on October 16 [21 favorites]
I just like the phrase "to reduce his exposure to taxes". So neat. One time I saw someone carry a bottle of wine under their jacket and it actually reduced their exposure to prices.
posted by Ashenmote at 1:17 PM on October 16 [53 favorites]
posted by Ashenmote at 1:17 PM on October 16 [53 favorites]
I don't know anything about Canadian law, but in the U.S., make sure that your financial advisor is a fiduciary, who is legally required to act in your best interest.
And by the way, the current administration is attempting to increase the number of financial advisors who are required to act as fiduciaries. Not everyone supports the idea.
posted by Mr.Know-it-some at 1:32 PM on October 16 [13 favorites]
And by the way, the current administration is attempting to increase the number of financial advisors who are required to act as fiduciaries. Not everyone supports the idea.
posted by Mr.Know-it-some at 1:32 PM on October 16 [13 favorites]
Ashenmote: They were advising him on how to avoid taxes (legal), not evade (illegal). Your analogy isn't valid unless the store had a sign that said "Products under jacket are not required to be paid for." The problem isn't tax professionals who explain how to minimize loopholes, it's the legislators who enact them.
posted by Mr.Know-it-some at 1:37 PM on October 16 [9 favorites]
posted by Mr.Know-it-some at 1:37 PM on October 16 [9 favorites]
Yes, it's more like avoiding exposure to prices by refusing to tip your below-minimum-wage waitstaff, in that it's totally legal and some assholes think they're clever for doing it.
posted by biogeo at 1:41 PM on October 16 [21 favorites]
posted by biogeo at 1:41 PM on October 16 [21 favorites]
I noted this story in passing the other day and was curious to know more. This account seems to confirm my suspicion, i.e. that the carpenter assumed lightning would just keep striking the same spot over and over again, to his benefit.
Also he was a retail investor buying a single stock. I know Tesla isn't exactly a meme stock, but it seems like the kind of thing people might get really obsessed over.
posted by RonButNotStupid at 1:48 PM on October 16 [3 favorites]
Also he was a retail investor buying a single stock. I know Tesla isn't exactly a meme stock, but it seems like the kind of thing people might get really obsessed over.
posted by RonButNotStupid at 1:48 PM on October 16 [3 favorites]
Also, once you’ve made $300M, why not stop?
Have you seen rents and food costs in Vancouver lately?
posted by They sucked his brains out! at 1:50 PM on October 16 [20 favorites]
Have you seen rents and food costs in Vancouver lately?
posted by They sucked his brains out! at 1:50 PM on October 16 [20 favorites]
That is perfectly true, Mr.Know-it-some, and I ignored it because I didn't feel like I was trying anything as ambitious as an analogy. But yes, it looks a lot like one and fails at being that.
posted by Ashenmote at 2:27 PM on October 16 [2 favorites]
posted by Ashenmote at 2:27 PM on October 16 [2 favorites]
A couple years ago I remembered I had a few shares of Tesla I had bought pre-Elon. I paid off a bunch of debt with that.
I kept just 1, so I can symbolically vote against him.
Never play with options using your nest egg.
posted by funkaspuck at 2:31 PM on October 16 [7 favorites]
I kept just 1, so I can symbolically vote against him.
Never play with options using your nest egg.
posted by funkaspuck at 2:31 PM on October 16 [7 favorites]
The last few months have been utterly hilarious as the meme stock crowd discovered options and promptly got wrecked, repeatedly, by them.
I thought retail investors discovering options-as-gambling was basically the root of the wallstreetbets/meme stock culture. Particularly after Robinhood caught on, as they set a low bar for access to options trading compared to more traditional brokerages.
posted by atoxyl at 3:32 PM on October 16 [2 favorites]
I thought retail investors discovering options-as-gambling was basically the root of the wallstreetbets/meme stock culture. Particularly after Robinhood caught on, as they set a low bar for access to options trading compared to more traditional brokerages.
posted by atoxyl at 3:32 PM on October 16 [2 favorites]
I think everyone who has $100 million and says, "I want more" is greedy.
Your post reminded me of the time I was working for a dude in a gated community. He pointed to a neighbor in the distance and said to me, "If you are ever unfortunate enough to talk to that one, he'll tell you he's worth three hundred million. I'm worth three hundred million and I never tell anybody."
On my final night working for him (it was a contract), he took me to dinner at his favorite restaurant, where he was known by all the staff. At the end of the meal, the server asked if we'd like complimentary desserts. He responded, "No, just a small discount on the bill."
I left a separate tip under my plate.
posted by dobbs at 3:41 PM on October 16 [26 favorites]
Your post reminded me of the time I was working for a dude in a gated community. He pointed to a neighbor in the distance and said to me, "If you are ever unfortunate enough to talk to that one, he'll tell you he's worth three hundred million. I'm worth three hundred million and I never tell anybody."
On my final night working for him (it was a contract), he took me to dinner at his favorite restaurant, where he was known by all the staff. At the end of the meal, the server asked if we'd like complimentary desserts. He responded, "No, just a small discount on the bill."
I left a separate tip under my plate.
posted by dobbs at 3:41 PM on October 16 [26 favorites]
... Particularly after Robinhood caught on...
That's my impression: once people got stock trading on their phones, they went a bit nuts. It's like crypto but somehow more recent. Sports betting on your phone is the current hotness. It's all the same thing, more-or-less.
Tesla was clearly never worth every other car company put together. The current 60x earnings price is almost as stupid as dancers in robot suits. It sucks that Tesla is in ordinary mutual funds, so I almost certainly own some. I haven't figured out how much because I would want to hedge against it, which would make me load up Robinhood, which would probably drive me to ruin.
posted by netowl at 4:16 PM on October 16 [6 favorites]
That's my impression: once people got stock trading on their phones, they went a bit nuts. It's like crypto but somehow more recent. Sports betting on your phone is the current hotness. It's all the same thing, more-or-less.
Tesla was clearly never worth every other car company put together. The current 60x earnings price is almost as stupid as dancers in robot suits. It sucks that Tesla is in ordinary mutual funds, so I almost certainly own some. I haven't figured out how much because I would want to hedge against it, which would make me load up Robinhood, which would probably drive me to ruin.
posted by netowl at 4:16 PM on October 16 [6 favorites]
This was discussed on the Slate Money Podcast. Apparently there was a point where he told his advisors that he just wanted to restructure everything so he could live off interest but the bank was making a lot of money off of his activities so this didn't happen for some reason (hence the law suit). The podcast also mentions that there was an addictive element to his trading and an extreme focus on tax avoidance which led to bad decisions. Maybe this is covered in TFA which I haven't read.
posted by Depressed Obese Nightmare Man at 4:19 PM on October 16 [5 favorites]
posted by Depressed Obese Nightmare Man at 4:19 PM on October 16 [5 favorites]
Unlike most of us, however, he was pretty good at trading stocks, turning C$88,000 into C$415 million ($306 million) between 2019 and 2022.
And then he lost it all.
He wasn't good at trading stocks. He got lucky. There is no difference between him and a guy hitting the lottery, except that the guy hitting the lottery generally doesn't turn around and put it all back into scratch-offs.
There's an allegation in the complaint that the brokerage knew he wanted to cash out and live on passive income, but his behavior is so inconsistent with that that I am skeptical the claim will be borne out in discovery.
I don't think options trading should be available to the average investor. The replacement of every socially useful way of making money with some form of gambling is doing endless damage to society. I struggle to feel sympathy for this guy (I'm sure he thought he was a genius and had no further need for society when he had $300m, because these guys always do), but I understand that the problem is broader than him.
posted by praemunire at 5:21 PM on October 16 [12 favorites]
And then he lost it all.
He wasn't good at trading stocks. He got lucky. There is no difference between him and a guy hitting the lottery, except that the guy hitting the lottery generally doesn't turn around and put it all back into scratch-offs.
There's an allegation in the complaint that the brokerage knew he wanted to cash out and live on passive income, but his behavior is so inconsistent with that that I am skeptical the claim will be borne out in discovery.
I don't think options trading should be available to the average investor. The replacement of every socially useful way of making money with some form of gambling is doing endless damage to society. I struggle to feel sympathy for this guy (I'm sure he thought he was a genius and had no further need for society when he had $300m, because these guys always do), but I understand that the problem is broader than him.
posted by praemunire at 5:21 PM on October 16 [12 favorites]
I think everyone who has $100 million and says, "I want more" is greedy.
hell, I'd knock that back to $1 million.
posted by philip-random at 5:41 PM on October 16 [2 favorites]
hell, I'd knock that back to $1 million.
posted by philip-random at 5:41 PM on October 16 [2 favorites]
Also, once you’ve made $300M, why not stop?
Once you've reached 300M playing pinball, why not stop?
Because the ball hasn't fallen into the collector yet.
Recall the line from Wall Street. "Think of it as a game." No. Don't. If you're trading back and forth, it IS a game. The same psychology kicks in.
4 years at a hedge fund taught me that.
posted by ocschwar at 5:48 PM on October 16 [6 favorites]
>The current 60x earnings price is almost as stupid as dancers in robot suits
5M/yr x $40K ASP x 15% net x 30 P/E / 3.5B shares = ~$250
that was my thesis in 2021-22 but it's been abandoned now since the Mexico factory is on hold and the 4 other factories are topped out now for some reason
posted by torokunai at 5:50 PM on October 16 [1 favorite]
5M/yr x $40K ASP x 15% net x 30 P/E / 3.5B shares = ~$250
that was my thesis in 2021-22 but it's been abandoned now since the Mexico factory is on hold and the 4 other factories are topped out now for some reason
posted by torokunai at 5:50 PM on October 16 [1 favorite]
I don't think options trading should be available to the average investor.
I blame Robinhood and their gamified interface. Which is ironic, given that many meme-stock fools hate the company for "turning off the buy button" during the GME spike (of course, they all still use Robinhood, because duh, they're fools).
Nobody should be given access to option trading until they've, I dunno, passed a math test or a simulated set of trades, or else put $100K up as collateral. Something. Anything to put a speed bump in front of options.
posted by aramaic at 5:52 PM on October 16 [6 favorites]
I blame Robinhood and their gamified interface. Which is ironic, given that many meme-stock fools hate the company for "turning off the buy button" during the GME spike (of course, they all still use Robinhood, because duh, they're fools).
Nobody should be given access to option trading until they've, I dunno, passed a math test or a simulated set of trades, or else put $100K up as collateral. Something. Anything to put a speed bump in front of options.
posted by aramaic at 5:52 PM on October 16 [6 favorites]
An options contract is an insurance policy against adverse market conditions.
You're SUPPOSED to lose every penny you spend buying options, and be happy because the scenario you're insuring against didn't happen. People who do not understand this have no business being in the options market.
(The original purpose of a hedge fund was to set up a shell corporation that would then buy a pre-designed portfolio of options so the shareholders would have an insurance policy against a more complicated scenario. Hedge funds were supposed to go broke when the options they bought expired, and again, the owners were supposed to be happy with this.)
posted by ocschwar at 5:57 PM on October 16 [14 favorites]
You're SUPPOSED to lose every penny you spend buying options, and be happy because the scenario you're insuring against didn't happen. People who do not understand this have no business being in the options market.
(The original purpose of a hedge fund was to set up a shell corporation that would then buy a pre-designed portfolio of options so the shareholders would have an insurance policy against a more complicated scenario. Hedge funds were supposed to go broke when the options they bought expired, and again, the owners were supposed to be happy with this.)
posted by ocschwar at 5:57 PM on October 16 [14 favorites]
The replacement of every socially useful way of making money with some form of gambling is doing endless damage to society.
I think so too: wise capital investment is the cornerstone of a thriving society, but bets are a net zero waste of time. I think the solution isn't to ban it, just tax the fuck out if it. I still don't understand how the government gets 10% of a hot dog sale, but nothing from a stock sale. They get 1% of your house value per year, but nothing from your stock value. Every time someone bets (on Wall Street or crypto, or sports), just take a cut. Clearly they know how, but they just choose to tax ordinary people doing productive things instead of rich people doing worthless nonsense.
posted by netowl at 5:59 PM on October 16 [16 favorites]
I think so too: wise capital investment is the cornerstone of a thriving society, but bets are a net zero waste of time. I think the solution isn't to ban it, just tax the fuck out if it. I still don't understand how the government gets 10% of a hot dog sale, but nothing from a stock sale. They get 1% of your house value per year, but nothing from your stock value. Every time someone bets (on Wall Street or crypto, or sports), just take a cut. Clearly they know how, but they just choose to tax ordinary people doing productive things instead of rich people doing worthless nonsense.
posted by netowl at 5:59 PM on October 16 [16 favorites]
An options contract is an insurance policy against adverse market conditions.
Not any more; at least, not for retail investors. For them it's just degenerate gambling. Just a more complicated scratch-off card.
posted by aramaic at 6:05 PM on October 16 [2 favorites]
Not any more; at least, not for retail investors. For them it's just degenerate gambling. Just a more complicated scratch-off card.
posted by aramaic at 6:05 PM on October 16 [2 favorites]
since the Mexico factory is on hold and the 4 other factories are topped out now for some reason
Because you boy is so busy doing rallies for Trump and fucking up the Republican GOTV game that he is not following through with the “pump” portion of his pump and dump scheme.
posted by Back At It Again At Krispy Kreme at 6:10 PM on October 16 [3 favorites]
Because you boy is so busy doing rallies for Trump and fucking up the Republican GOTV game that he is not following through with the “pump” portion of his pump and dump scheme.
posted by Back At It Again At Krispy Kreme at 6:10 PM on October 16 [3 favorites]
Back in 2022 he was saying the ecwonomy was so bwad
(I think he was doing this as an excuse to cut people and also to bad-talk the economy coming into the midterm election)
We've added 6M jobs since mid-2022. Some recession.
posted by torokunai at 6:48 PM on October 16 [2 favorites]
(I think he was doing this as an excuse to cut people and also to bad-talk the economy coming into the midterm election)
We've added 6M jobs since mid-2022. Some recession.
posted by torokunai at 6:48 PM on October 16 [2 favorites]
the government gets 10% of a hot dog sale, but nothing from a stock sale
that’s certainly not true as a blanket statement
posted by atoxyl at 8:15 PM on October 16 [2 favorites]
that’s certainly not true as a blanket statement
posted by atoxyl at 8:15 PM on October 16 [2 favorites]
Also, once you’ve made $300M, why not stop?
I think everyone who has $100 million and says, "I want more" is greedy.
Even when he hit 26 Million.
hell, I'd knock that back to $1 million.
Self-selection at work - well of course this guy behaved irrationally by continuing to gamble more at $300M. Because people who behave rationally would have cashed out at $1M and stopped, and would never have reached $300 mil to begin with.
I've been in multiple situations where a stock was up 50%, and I've done every conceivable thing lol.
One time I bought at $20, it went up to $30, and I sold everything... then it went up to $40 and I sheepishly bought it all back, and I was thinking, I should have held.
Another time I bought at $35 and it went up to $50 and I didn't sell and it went back down to $35 so I bought some more... and I was thinking, I should have sold.
The latest one was the largest market cap bank stock in the country which went up from $92 to $140 in 2 years, I sold half of it and cashed out $50,000 profit immediately on which I'll pay $11,500 tax... so yeah I actually sold.
I'm not buying speculative or capital gains stocks (I'm not a gambler), I'm just shuffling money between a diversified basket of different mature blue chip dividend paying stocks that usually return a grossed up dividend yield of about 6% per year, and I'm personally expecting a capital growth of 0%. As in, I'm expecting no increase in the stock price outside of inflation, I'm treating them as an "inflation hedged super term deposit", versus my floating cash balances returning 4.5% right now and projected to drop to about 2% in a few years. I'm consistently surprised at how volatile prices are, for companies which by their nature shouldn't be.
This is why I'll never have $300M but then I (probably) won't lose it all either...
posted by xdvesper at 8:54 PM on October 16 [5 favorites]
I think everyone who has $100 million and says, "I want more" is greedy.
Even when he hit 26 Million.
hell, I'd knock that back to $1 million.
Self-selection at work - well of course this guy behaved irrationally by continuing to gamble more at $300M. Because people who behave rationally would have cashed out at $1M and stopped, and would never have reached $300 mil to begin with.
I've been in multiple situations where a stock was up 50%, and I've done every conceivable thing lol.
One time I bought at $20, it went up to $30, and I sold everything... then it went up to $40 and I sheepishly bought it all back, and I was thinking, I should have held.
Another time I bought at $35 and it went up to $50 and I didn't sell and it went back down to $35 so I bought some more... and I was thinking, I should have sold.
The latest one was the largest market cap bank stock in the country which went up from $92 to $140 in 2 years, I sold half of it and cashed out $50,000 profit immediately on which I'll pay $11,500 tax... so yeah I actually sold.
I'm not buying speculative or capital gains stocks (I'm not a gambler), I'm just shuffling money between a diversified basket of different mature blue chip dividend paying stocks that usually return a grossed up dividend yield of about 6% per year, and I'm personally expecting a capital growth of 0%. As in, I'm expecting no increase in the stock price outside of inflation, I'm treating them as an "inflation hedged super term deposit", versus my floating cash balances returning 4.5% right now and projected to drop to about 2% in a few years. I'm consistently surprised at how volatile prices are, for companies which by their nature shouldn't be.
This is why I'll never have $300M but then I (probably) won't lose it all either...
posted by xdvesper at 8:54 PM on October 16 [5 favorites]
One time I bought at $20, it went up to $30, and I sold everything... then it went up to $40 and I sheepishly bought it all back, and I was thinking, I should have held.
Another time I bought at $35 and it went up to $50 and I didn't sell and it went back down to $35 so I bought some more... and I was thinking, I should have sold.
The latest one was the largest market cap bank stock in the country which went up from $92 to $140 in 2 years, I sold half of it and cashed out $50,000 profit immediately on which I'll pay $11,500 tax... so yeah I actually sold.
I'm not buying speculative or capital gains stocks (I'm not a gambler)
...you're gambling.
posted by praemunire at 10:20 PM on October 16 [13 favorites]
Another time I bought at $35 and it went up to $50 and I didn't sell and it went back down to $35 so I bought some more... and I was thinking, I should have sold.
The latest one was the largest market cap bank stock in the country which went up from $92 to $140 in 2 years, I sold half of it and cashed out $50,000 profit immediately on which I'll pay $11,500 tax... so yeah I actually sold.
I'm not buying speculative or capital gains stocks (I'm not a gambler)
...you're gambling.
posted by praemunire at 10:20 PM on October 16 [13 favorites]
Praemunire - I'm engaging in risk mitigation activities, which can look like gambling to an uninformed outsider, but is in reality reducing the risk my portfolio is exposed to. Eg the comments above about the true role of options trading which is to reduce risk when undertaken by companies, not increase it the way uninformed traders do. Then everyone thinks, oh options trading is risky and crazy.
Looking at the fundamentals of those companies, I wouldn't want to be holding them at that high price, but there is a lot of inertia to continue holding when the thought process should be - if I had $100k to invest would I buy in now at the 50% gain all time high - the answer would likely be no so you should think about selling.
(And like the options example - the point isn't to make money, it's to protect yourself from potentially worse outcomes)
posted by xdvesper at 10:41 PM on October 16 [1 favorite]
Looking at the fundamentals of those companies, I wouldn't want to be holding them at that high price, but there is a lot of inertia to continue holding when the thought process should be - if I had $100k to invest would I buy in now at the 50% gain all time high - the answer would likely be no so you should think about selling.
(And like the options example - the point isn't to make money, it's to protect yourself from potentially worse outcomes)
posted by xdvesper at 10:41 PM on October 16 [1 favorite]
I'm not a gambler, said every gambler ever since time immemorial.
posted by Pendragon at 1:12 AM on October 17 [6 favorites]
posted by Pendragon at 1:12 AM on October 17 [6 favorites]
There'll be time enough for counting when Elon's done.
posted by flabdablet at 5:13 AM on October 17 [4 favorites]
posted by flabdablet at 5:13 AM on October 17 [4 favorites]
I'm engaging in risk mitigation activities, which can look like gambling to an uninformed outsider, but is in reality reducing the risk my portfolio is exposed to.
You're gambling. If you want to mitigate risk, just buy an index fund. That's why they exist.
posted by RonButNotStupid at 5:21 AM on October 17 [5 favorites]
You're gambling. If you want to mitigate risk, just buy an index fund. That's why they exist.
posted by RonButNotStupid at 5:21 AM on October 17 [5 favorites]
I'm engaging in risk mitigation activities, which can look like gambling to an uninformed outsider,
Even insurance per se comes close enough to gambling that Anabaptist churches forbid it.
posted by ocschwar at 6:21 AM on October 17 [5 favorites]
I still don't understand how the government gets 10% of a hot dog sale, but nothing from a stock sale
Wait, what? You definitely get taxed on stock sales, at least in the U.S., if the assets are held in a regular brokerage account (versus a retirement account). How much you get taxed depends on your overall household income. You can read more about it. Even if the assets are in a trust, either the trust or the trust's beneficiary/beneficiaries will have to pay taxes on the sale of stocks and mutual funds.
Anyway, this is a sad cautionary tale about knowing what you're doing before investing, not investing in things you don't understand, and managing risk.
posted by limeonaire at 7:03 AM on October 17 [2 favorites]
Wait, what? You definitely get taxed on stock sales, at least in the U.S., if the assets are held in a regular brokerage account (versus a retirement account). How much you get taxed depends on your overall household income. You can read more about it. Even if the assets are in a trust, either the trust or the trust's beneficiary/beneficiaries will have to pay taxes on the sale of stocks and mutual funds.
Anyway, this is a sad cautionary tale about knowing what you're doing before investing, not investing in things you don't understand, and managing risk.
posted by limeonaire at 7:03 AM on October 17 [2 favorites]
I have a friend who is a financial advisor and he puts all his pension contributions into a low fee global tracker ETF ….
He says anyone buying and selling equities is gambling .
To quote Mr Buffet “no one likes to get rich slowly”
posted by skinnerneil at 8:57 AM on October 17 [3 favorites]
He says anyone buying and selling equities is gambling .
To quote Mr Buffet “no one likes to get rich slowly”
posted by skinnerneil at 8:57 AM on October 17 [3 favorites]
Wait, what? You definitely get taxed on stock sales, at least in the U.S.
to be fair if you’re in the lowest bracket and holding for a year or more the rate is 0%, but that is presumably designed precisely to encourage longer-term investment over short term gambling
posted by atoxyl at 9:31 AM on October 17 [1 favorite]
to be fair if you’re in the lowest bracket and holding for a year or more the rate is 0%, but that is presumably designed precisely to encourage longer-term investment over short term gambling
posted by atoxyl at 9:31 AM on October 17 [1 favorite]
Here's what I do
I start by recognizing that I don't work in finance, and have no clue what is going on in the stock market and have no business trying to manage that process (especially so if I as a day trader had to have a forced 20 minute delay between when the ticker changes and when I can see that change)
Net result is that anything I have in the market is in my pension contribution, and a goddamn team of professionals is managing that on my behalf.
So far it's worked out OK. I have more money in there than I started with. Might even be enough to retire on some day. Will never be rich but the goal is never to be flat broke either. Gambling my own nest egg is a pretty good way to end up in the latter position. Gambling is already a precarious position. When everyone else at the table is a card sharp, who knows more than you do, throwing your chips into the pot anyway is pretty downright dumb.
posted by caution live frogs at 10:27 AM on October 17 [2 favorites]
I start by recognizing that I don't work in finance, and have no clue what is going on in the stock market and have no business trying to manage that process (especially so if I as a day trader had to have a forced 20 minute delay between when the ticker changes and when I can see that change)
Net result is that anything I have in the market is in my pension contribution, and a goddamn team of professionals is managing that on my behalf.
So far it's worked out OK. I have more money in there than I started with. Might even be enough to retire on some day. Will never be rich but the goal is never to be flat broke either. Gambling my own nest egg is a pretty good way to end up in the latter position. Gambling is already a precarious position. When everyone else at the table is a card sharp, who knows more than you do, throwing your chips into the pot anyway is pretty downright dumb.
posted by caution live frogs at 10:27 AM on October 17 [2 favorites]
There is difference between a capital gains tax, which taxes the profit from sales of stocks or other assets, and a financial transactions tax, a (generally tiny) tax on the sale of a financial asset, regardless of whether it results in a profit or loss. Many countries have transaction taxes, but not the US or (I believe) Canada.
posted by Mr.Know-it-some at 10:56 AM on October 17 [3 favorites]
posted by Mr.Know-it-some at 10:56 AM on October 17 [3 favorites]
This article is really thin on details, but IMO it's very hard to believe. Tesla's stock was variable, but not that variable during this time period, and calls are a multiplier, but not that much of one. Also if he actually owned the stock, then he would still have a huge amount of potential income. It mentions puts (which are betting on the downside) which are more dangerous than calls, but the stock didn't 'tank' so unless he was 100% committed to puts, there is no way he could lose that much money.
Also, I don't feel like finding the historical call option data, but TSLA's biggest options are being sold with 35k a day in volume, so unless he spent 24 hours a day basically buying options, he was possibly making the options market for TSLA on some days with ~$300 million in TSLA options.
If it's even sort of true, then IMO he has a very strong case for RBC committing fraud, because if any financial advisor allows your portfolio to rise to $10m in call options, without moving money into stable investments that could net them decades of management fees, that's fraud.
If you want my opinion, he never actually had that much money ($400m or whatever), they are conflating the amount of the stock owned as part of calls, with the actual income potentially earned from the calls, which is a fraction. It'd still be in the millions, but nothing like $400m in actual value.
This story also crosses multiple years worth of capital gains, (Feb 2020-Oct 2022) so he would have understood the impact of short-term stock ownership in terms of capital gains tax since he would have paid 2020 taxes & 2021 taxes on gains.
posted by The_Vegetables at 1:50 PM on October 17 [4 favorites]
Also, I don't feel like finding the historical call option data, but TSLA's biggest options are being sold with 35k a day in volume, so unless he spent 24 hours a day basically buying options, he was possibly making the options market for TSLA on some days with ~$300 million in TSLA options.
If it's even sort of true, then IMO he has a very strong case for RBC committing fraud, because if any financial advisor allows your portfolio to rise to $10m in call options, without moving money into stable investments that could net them decades of management fees, that's fraud.
If you want my opinion, he never actually had that much money ($400m or whatever), they are conflating the amount of the stock owned as part of calls, with the actual income potentially earned from the calls, which is a fraction. It'd still be in the millions, but nothing like $400m in actual value.
This story also crosses multiple years worth of capital gains, (Feb 2020-Oct 2022) so he would have understood the impact of short-term stock ownership in terms of capital gains tax since he would have paid 2020 taxes & 2021 taxes on gains.
posted by The_Vegetables at 1:50 PM on October 17 [4 favorites]
>but nothing like $400m in actual value.
If he got 3 10X LEAPS gains cashed 2019 - 2020 and re-bought in, that would be a $40K starting wad worth $400M on Nov 5, 2021 (assuming he was sitting on the 4th 10X that day).
posted by torokunai at 2:24 PM on October 17 [1 favorite]
If he got 3 10X LEAPS gains cashed 2019 - 2020 and re-bought in, that would be a $40K starting wad worth $400M on Nov 5, 2021 (assuming he was sitting on the 4th 10X that day).
posted by torokunai at 2:24 PM on October 17 [1 favorite]
On a much smaller scale, RBC Direct Investing completely fucked me over. I was working a horrible full time job cleaning / maintaining a meat production plant when I started trading stocks part time out of my TFSA. I basically knew what I was doing because I used to enjoy paper trading (no Options) an Investopedia account, regularly taking it from 100,000 to about double that amount, before I would lose interest.
I soon left the horrible job and decided I would get my commercial pilot or helicopter license, and toward that end I took a job as a ramp attendant at the airport, where many of the rampies were studying to be commercial pilots. These were swing shifts, and rather than bicycling up a steep hill 14 km home for the three hour break between shifts, I would just day trade in the airport VIP lounge. Usually I'd make over a grand a day, or enough that it got to where only making $300 or $400 trading was basically breaking even, at least in mind -- not counting the $200 / day I made at my job.
My last day at the airport I opened my RBC Direct Investing app while just heading back to work and saw that I was up well over $8000. I was stunned for a moment, and there just happened to be a WestJet safety inspector auditing the job site and she watched as I opened my phone and stepped over the yellow line while a 737 engine was spooling down. Not dangerous, but definitely a safety infraction. I showed my boss the Big Green Number and quit to trade full time, which is definitely not recommended when using your TFSA.
I'd wake up every morning before the markets opened and look for stocks that had some volatility and jump in if it felt right. Things were working out swimmingly, enough so that I bought two pairs or nearly identical $1000 sunglasses - used from an online luxury clothing broker - and a beautiful red BMW motorcycle.
A couple months later I had a lot of money locked into a few trades when RBC Direct Investing pulled the Big Red Doom Switch and froze all trading while I could only watch as my relatively modest net worth nearly evaporated before my eyes.
When trading opened again after a couple hours I still had a few thousand dollars left in my account and by making a ridiculous number of fast trades your hero managed to get his account back up to about 15K but I couldn't do it any more.
RBC Direct Investing was not sympathetic in the least and in a sense I suppose I repaid their lack of concern eventually when, due to the pandemic, I could no longer maintain my credit card payments or my Line of Credit.
Fuck RBC.
posted by little eiffel at 4:04 PM on October 17 [4 favorites]
I soon left the horrible job and decided I would get my commercial pilot or helicopter license, and toward that end I took a job as a ramp attendant at the airport, where many of the rampies were studying to be commercial pilots. These were swing shifts, and rather than bicycling up a steep hill 14 km home for the three hour break between shifts, I would just day trade in the airport VIP lounge. Usually I'd make over a grand a day, or enough that it got to where only making $300 or $400 trading was basically breaking even, at least in mind -- not counting the $200 / day I made at my job.
My last day at the airport I opened my RBC Direct Investing app while just heading back to work and saw that I was up well over $8000. I was stunned for a moment, and there just happened to be a WestJet safety inspector auditing the job site and she watched as I opened my phone and stepped over the yellow line while a 737 engine was spooling down. Not dangerous, but definitely a safety infraction. I showed my boss the Big Green Number and quit to trade full time, which is definitely not recommended when using your TFSA.
I'd wake up every morning before the markets opened and look for stocks that had some volatility and jump in if it felt right. Things were working out swimmingly, enough so that I bought two pairs or nearly identical $1000 sunglasses - used from an online luxury clothing broker - and a beautiful red BMW motorcycle.
A couple months later I had a lot of money locked into a few trades when RBC Direct Investing pulled the Big Red Doom Switch and froze all trading while I could only watch as my relatively modest net worth nearly evaporated before my eyes.
When trading opened again after a couple hours I still had a few thousand dollars left in my account and by making a ridiculous number of fast trades your hero managed to get his account back up to about 15K but I couldn't do it any more.
RBC Direct Investing was not sympathetic in the least and in a sense I suppose I repaid their lack of concern eventually when, due to the pandemic, I could no longer maintain my credit card payments or my Line of Credit.
Fuck RBC.
posted by little eiffel at 4:04 PM on October 17 [4 favorites]
Even insurance per se comes close enough to gambling that Anabaptist churches forbid it.
Hah, I once said that I didn't buy insurance because it had a negative expected outcome, since the insurer charges the expected cost plus a profit markup. You're better off self insuring if you're able to manage the worst outcomes. You're just gambling that you hit the payout.
Or you could say that by not buying insurance, you're gambling that you avoid the negative outcome.
You can't win the argument since either way you're still gambling.
I largely replicate the index myself while avoiding stuff I don't like. Like I don't want Tesla, or fossil fuels, or BNPL schemes, for various reasons. Sure there are ESG managed funds and you'd have to scrutinize what they buy and their fees are high, so I just ended up not bothering with their fees and managing my own index.
There is so much auto correlation between firms in specific sectors (and even between sectors) that there isn't much risk reduction in buying all 6 banks instead of just the top 3.
posted by xdvesper at 6:51 PM on October 17 [1 favorite]
Hah, I once said that I didn't buy insurance because it had a negative expected outcome, since the insurer charges the expected cost plus a profit markup. You're better off self insuring if you're able to manage the worst outcomes. You're just gambling that you hit the payout.
Or you could say that by not buying insurance, you're gambling that you avoid the negative outcome.
You can't win the argument since either way you're still gambling.
I largely replicate the index myself while avoiding stuff I don't like. Like I don't want Tesla, or fossil fuels, or BNPL schemes, for various reasons. Sure there are ESG managed funds and you'd have to scrutinize what they buy and their fees are high, so I just ended up not bothering with their fees and managing my own index.
There is so much auto correlation between firms in specific sectors (and even between sectors) that there isn't much risk reduction in buying all 6 banks instead of just the top 3.
posted by xdvesper at 6:51 PM on October 17 [1 favorite]
If he got 3 10X LEAPS gains cashed 2019 - 2020 and re-bought in, that would be a $40K starting wad worth $400M on Nov 5, 2021 (assuming he was sitting on the 4th 10X that day).
That's fine. I believe in luck. But the southside of that transaction? The one where he actually cashes in on that and becomes not theoretically but actually about the 200-250th richest person in Canada. And if he had a bunch of options that were extremely in the money and able to be exercised, what advisor would advise someone to 'buy and hold'? Why? Options don't get tax advantages in the US for holding, maybe they do in Canada? And it's a basic equation to closely estimate the tax now vs in the future, but if the recommendation was to hold, that's also gambling, and a stupider bet.
And if that money had become real, and then the downside would be he would have to make over 7000 $40,000 transactions to lose it all.
And if the options hadn't been able to be exercised for whatever reason, he didn't really have $400m in any real sense. Lots of people (vesting would be one reason-but there are others) have stock that is theoretically worth a lot of money but can't be exercised and therefore the gains are just theoretical.
posted by The_Vegetables at 7:17 AM on October 18 [2 favorites]
That's fine. I believe in luck. But the southside of that transaction? The one where he actually cashes in on that and becomes not theoretically but actually about the 200-250th richest person in Canada. And if he had a bunch of options that were extremely in the money and able to be exercised, what advisor would advise someone to 'buy and hold'? Why? Options don't get tax advantages in the US for holding, maybe they do in Canada? And it's a basic equation to closely estimate the tax now vs in the future, but if the recommendation was to hold, that's also gambling, and a stupider bet.
And if that money had become real, and then the downside would be he would have to make over 7000 $40,000 transactions to lose it all.
And if the options hadn't been able to be exercised for whatever reason, he didn't really have $400m in any real sense. Lots of people (vesting would be one reason-but there are others) have stock that is theoretically worth a lot of money but can't be exercised and therefore the gains are just theoretical.
posted by The_Vegetables at 7:17 AM on October 18 [2 favorites]
You're just gambling that you hit the payout.
Most people don't look at it this way.
Or you could say that by not buying insurance, you're gambling that you avoid the negative outcome.
Yes.
posted by RonButNotStupid at 8:31 AM on October 18 [1 favorite]
Most people don't look at it this way.
Or you could say that by not buying insurance, you're gambling that you avoid the negative outcome.
Yes.
posted by RonButNotStupid at 8:31 AM on October 18 [1 favorite]
You don't buy regular insurance with the hopes of getting the benefit--or, if you do, there's a potential prison sentence attached.
posted by praemunire at 9:39 AM on October 18 [3 favorites]
posted by praemunire at 9:39 AM on October 18 [3 favorites]
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posted by torokunai at 12:22 PM on October 16 [5 favorites]