Quarantinis (And A Glimpse Into Our Not-So-Distant Future)
"I actually agree with this", Donald Trump said over the weekend, referencing a video from Business Insider which showed the fortunes of the richest people on the planet rising during the worst public health crisis in a century, even as tens of millions of Americans lost jobs and small businesses closed their doors forever.
"While 40 million Americans filed for unemployment during the coronavirus pandemic, billionaires saw their net worth increase by half a trillion dollars", the video claims.�
This is capatilistic end game,”efficiency”. The carnivores will eat one another to the end. Everything extinctes.
Zuckerberg is an easy (and constant) target, and you of course caveated the inclusion of Facebook’s societal value during the pandemic, but I feel compelled to call out his massive financial gain here as hyper-parasitic given what trends the most on his platform of late. It is overwhelmingly the part of the conversation that is increasing our particular national problem with coronavirus, not helping to mitigate and/or end it. Yes the connectivity people enjoy through Facebook and other platforms matters psychologically. Without question. It’s not all bad. But the bad is… well… really f’ing bad.
Yeah, my personal opinion is that Facebook has virtually no social utility compared to Google, Amazon, and Twitter. Twitter at least serves as a real-time news feed and Dorsey is obviously interested in making it a better place even if it’s an impossible task. I have no idea whether self-preservation was a factor in Facebook’s acquisition of Instagram and WhatsApp, but I think, over time, Facebook itself will become the least valuable property that Facebook owns.
Zuckerberg, for me at least, is particularly loathesome (admittedly, I have a general predisposition to despise unproductive wealth, so understand that what follows is negatively biased). He owns 750 acres on Kauai and sued native Hawaiians that owned land close to his estate in order to force them to sell their property.
He claims to have dropped the suits, but it appears it’s still an ongoing issue.
Having been lucky enough to have spent considerable time on Kauai, I can say that the last thing that island needs is Mark Zuckerberg buying excessive amounts of land and squeezing out even more native Hawaiians.
The rich are immune to social unrest right up until the exact moment that they’re not.
Perhaps nothing says inequality or portrays GOP concern for lower wage earners like the proposal to increase business deductions for meals.
Who could argue when they mean larger tips for the wait staff? Trickle down at its best.
Very thoughtful.
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A lot of this wealth disparity is tied to paper-wealth or appraised-wealth that generates relatively little net cash flow vs. the value and there is virtually no cost to let it sit (and watch it appreciate in a world of very low/declining interest rates, particularly if it’s a “growth” asset). And when these asset holders sell, they’re likely paying lower “capital gains” tax rate vs. regular income tax rates.
One solution to address this disparity would be a national annual nominal valuation tax on all non-cash/non-money market assets (sure, it would be complex to assign values to all private assets outside of perhaps real estate, but think of all the jobs this appraisal task would create) offset by any local taxes paid on such assets (so in effect, real estate would not be taxed twice on value).
If asset holders (including pension funds and 401Ks, as these assets are part of the wealth disparity) now had to pay an annual assessment of, say, 0.5% to 1.0% of valuation) I suspect the paper wealth gap would be narrowed substantially (and rapidly). Those assets paying their owners little (and for which current value is tied to growth) would likely experience both a decline in investor demand (and therefore value) as well as increased marginal selling to pay the annual tax (on unsold holdings). With this, I suspect the net worth of both Jeff Bezos and Elon Musk would come down a little from the stratosphere.
For stocks, dividends would grow in importance (from which the annual valuation tax would be paid) and stock buybacks would likely decline.
Remember to look at operating income, FCF normalized with replacement capex not total and then think about a different tax rate. AMZN has a lot of future growth embedded in the stock price. In a decade we will see where the mkt cap is. Might surprise in a strange way. Wouldn’t be the first time in history. I am amazed everyone seems to believe the past will be the future. A fait accompli.