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Comment on Borrowing money against their stuff to get more stuff to borrow money...

This is the process, extremely simplified:

It’s 1970. You inherit $10M from your rich dad who worked hard.
Buy $10M index fund stock.
Borrow $10M against stock.
Live tax free off that $10M loan for 30 years ( you can do that because you started in 1970 when it was cheap to buy a house).
Your stock is now worth $58M (avg 6% per year for 30 years)
Your kids inherit the stock at its current value and immediately sell $10M worth to pay off original loan. They pay no capital gains tax because the stock barely moved in the time between when they took ownership and selling it. All of the value growth since original purchase in 1970 is now tax free. The kids now start with $48M.
Repeat

Obviously, there is more to it than this. For example, this does not account for interest in the loan, or diversification of investments, or ability to hire accountants to maximize on the process.

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merc@sh.itjust.works ⁨2⁩ ⁨days⁩ ago

Your kids inherit the stock at its current value and immediately sell $10M worth to pay off original loan

And the bank says “um, what about the rest?” In the 1970s and early 80s the inflation rate was, at times, above 10%, so your loan’s interest rate would have been above that. But say on average the loan’s interest rate was 5% per year over 30 years… the bank isn’t going to be content for just the original $10M.

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- WoodScientist@lemmy.world ⁨2⁩ ⁨days⁩ ago
  All that matters is that your portfolio grows faster than the interest rate.
  
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  - merc@sh.itjust.works ⁨2⁩ ⁨days⁩ ago
    That’s what success looks like. But, you don’t know if you’re going to be successful when you take out the loan. If there’s a market downturn you’re on the hook for the loan and your portfolio has crashed. If you sold a few stocks instead of taking out a loan, you’re insulated from that possibility.
    
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Lemming6969@lemmy.world ⁨2⁩ ⁨days⁩ ago
You think they’re giving out low rate 30-50 year rolling personal loans in the tens or hundreds of millions of dollars range? This I find hard to believe. The premise makes sense, but I don’t think these loans usually exist.

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- JcbAzPx@lemmy.world ⁨2⁩ ⁨days⁩ ago
  You might find it hard to believe, but nevertheless it is true. These are considered to be extremely safe loans, so they give out sweetheart rates to get them.
  
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