00:00There has been a wealth creation boom over the past decade.
00:03Almost 500 million SpaceX shares have swapped hands on the first trading day of the world's
00:08biggest IPO.
00:09The share of total wealth held by the richest Americans is now at the highest level since
00:14World War II.
00:15It's created an undeniable inequality crisis that has politicians calling for the wealthy
00:19to contribute more.
00:20When I ran for mayor, I said I was going to tax the rich.
00:25Well, today, we're taxing the rich.
00:27Meanwhile, there has been a quiet boom in one corner of Wall Street that is rapidly
00:32stripping away taxes for the wealthy.
00:37It can feel like tax avoidance is as American as apple pie.
00:41The rich have always endeavored to lower the tax bill.
00:45Take the example of one-time presidential candidate Donald Trump.
00:49She complains that Donald Trump took advantage of the tax cut.
00:52All your friends take the same advantage that I do.
00:54And I do.
00:54The trend is called tax alpha, which is the pursuit of lowering one's tax bill while generating
01:00more profit along the way.
01:01There's more than $1 trillion invested across a multitude of tax-optimized approaches right
01:08now.
01:08Wealth advisors are pitching it as a critical defense tool to get ahead of any rising tax
01:14bill from the IRS.
01:15It's the perfect mix of improving technology and zero-fee trading that has enabled this
01:21market to grow so much.
01:23There are many startups getting in on the tax optimization trend and also established players
01:28like BlackRock and Vanguard.
01:30And one big pioneer in this trend is the systematic hedge fund, AQR Capital Management.
01:36I have been waiting for this for my entire career.
01:39You can't do things that are just about taxes.
01:41But once you're doing it, you should run money different for your taxable investors.
01:46And that is shockingly new.
01:48There's a long menu of these tax optimized strategies ranging from direct indexing to 351 conversions
01:56into ETFs.
01:57Right now, one of the main and hottest strategies is tax to wear a long short, which has been
02:03estimated to run around $100 billion.
02:07The strategy starts with heaps of borrowed money.
02:10It adds layers of positions betting on and against companies you'll find in a standard
02:15index fund like the S&P 500.
02:16So if the market goes up, your shorts lose money.
02:19And if the market goes down, your longs lose money.
02:22The strategy is tailored to manufacture a pot of losses that can offset the tax owed on
02:26capital gains.
02:31David Hauser is a serial entrepreneur who has sold off his own companies and now has
02:35invested in others.
02:37I personally get a lot of fun and joy out of tax alpha because it is sort of a game
02:42to
02:42understand what are the underlying rules?
02:44How do they work?
02:45How do they matter?
02:46For me, it makes a lot of sense to use a long short strategy and be able to harvest
02:51more of those losses up front and be able to put them into high tax bracket years now
02:55and hopefully have lower tax bracket years later in life.
03:01The U.S.
03:02government has been slow to respond to these modern investment tactics.
03:06These strategies might comply by the letter of the law, but was it the intended spirit?
03:12The IRS allows for capital losses to be written off when investments genuinely lose money.
03:19These strategies are being set up with the explicit goal of generating losses in corners
03:24of your portfolio.
03:25The IRS never anticipated computers executing hundreds of trades a day just to generate paper
03:32losses.
03:33The U.S.
03:34Treasury Department is poised to increase scrutiny of at least one of these tactics.
03:39For now, it means less government revenue as the federal deficit expands.
03:44I totally understand all of the critiques about this strategy.
03:49But what's really important to understand is the government has set up these rules and playing
03:52within the rules is exactly what we're supposed to do.
03:55I think that's the important differentiation.
03:58The conversation can quickly lead into a debate around the inequality crisis, which is approaching historic levels.
04:07The long-term result of this is a two-tiered system.
04:10You'll have the average person who's drawing their regular salary and paying standard taxes.
04:15Then, you'll have a separate class of investors whose portfolios are trying to reduce their tax bill every single day.
04:24The result of this is you will have a permanent advantage baked into the system for the very rich.
04:31obsolete которое you choose material is the time to change in the future.
04:31oей
04:31Amen.
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