Proposed Buffett Rule and How It Would Apply to Some Lottery Winners Who Invest

Bah, that was in reply to NightStalker.

That's not true, some investments that would be good investments become bad investments with high enough taxes.  It's only a good investment if you expect it to return more than 100 percent of your money.  So say that with no taxes, you expect an investment to return 101% of what you put in, per year with a standard deviation of 2.5%.  The Kelly Criterion (for optimal growth) will tell you to invest (1% of your bankroll divided by 2.5 squared) With a high enough tax rate, this investment is a bad one, because the risk is too high given for the small expected return to be worth it.

If you have to pay capital gains during years where you are ahead, but not years where you are behind, then your expected return plummets and the Standard Deviation rises, therefore making the optimal investment much smaller.  It may make it small enough that you ought to just overlook it and not make the investment.

Obviously you can look after the fact and say that an investment would have made money regardless of capital gains, but it's too bad people don't invest AFTER they know for a fact it went up.  Assuming that people will keep their behavior the same regardless of the tax rate is just ludcirous, and is quite foolish.

Although I think the unequal rate is "unfair", as well.  It'd be better to simply not tax income at all.

40 years ago, they were screaming about a coming Ice Age, on the cover of Time Magazine.

The've mostly stopped calling it "Global Warming" because the massive snowstorms that happen every year were dampening the credibility of that brand name.

That doesn't prove or disprove anything, except that they were wrong 40 years ago.  The Koch brothers funded a study to disprove global warming/climate change, and couldn't.  They ended up reconfirming what has been said.  Now, don't get me wrong, these hyper-environmentalists are just nutjobs hell bent on controlling the economy through "environmental protection".

Global temperatures have risen, though.  That doesn't mean all the snow stopped.  We may have seen bad snow storms, but we've also seen record heat in certain parts of the world.  The point is, the average has moved up, so has the average CO2. It's still questionable whether human use of fossil fuels is a giant, or very small, impact.  (Leaning towards very small, b/c our cutting down of trees is probably way more significant, not to mention that most of the CO2 comes from volcanoes.)

A single volcanic eruption can easily unto a decade worth of CO₂ & CH₄ reduction, but if I win tonight's jackpot I'll plant a tree or two somewhere.

I'm not sure I'd clasify a 1% expected return and any chance at all of capital loss to be a good investment. Heck you could put the money into treasuries, get a better return, and have essentially no risk on your capital. The scenario you propose wouldn't even keep up with the historic rate of inflation. I suppose I'll agree that a marginal investment might not be worth it due to taxes but do we want to incentivise marginal investing through the tax code?

Not necessarily.  IMO, we shouldn't encourage or discourage any behavior with the tax code, or any other legislation.  Most investments don't have a much higher EV than a few percent.  Most people just want to ignore the potential of loss, and/or don't do the math necessary to determine a proper amount to invest.  Every investment has risk, even treasury bonds.

An expected value of 101-105% per year, is probably the norm for most good investments, because you have to figure, then CAN lose money.  If you can't understand that, then you're the one whose using fuzzy math.  (Which admitadly, any sort of math for this would have to be based on opinions, as you'd have to approximate the EV.)

This can be seen much more mathemetically when you count cards in Blackjack, but the same principles can be applied to investments.  And if you're figuring that your EV is higher than a couple percent, I can almost garuntee you're wrong and will probably end up losing money in the long run.  That's because EV is an approximation (since we can't run the math like in a game of BJ) of how much all of the possibilities of gain and loss added together, as a percent of the total investment.

Also, like I said, a good investment turned into a bad one (b/c of Risk) as a result of Taxation.

I would consider an EV of 1 percent to be good, espeically if it has a low Standard Deviation.  I could take an even money bet that has a 1% advantage, and turn myself into a millionaire, with little Risk of Ruin.

You should never assume that you, or anybody else, knows which investments are better, and which types of investments we should encourage people to take.

I tried to get away from this subject and back into the original discussion but you guys are forcing my hand. Human activity dwarfs volcanic activity in terms of co2. But I can't link any sources due to new member policy. Humans produce more co2 in 3 days than all volcanic activity produces in one year. Combine that with deforestation and Ozone depletion and we have a very big problem. If you want google "co2 released by volcanoes compared to humans." all the sources you need. But i'm sure you guys will scream lefty conspiracy lol. Sorry guys but the libs have this one right.

You may very well be right.  I don't really know much about it, all I know is that IF it is a problem, like most scientists say, I still don't want government involvement, because that would slow down progress.

Well, I won't scream. You seem to be right.

I'll just point out that for all our greenhouse gas production, it didn't do any good to the 600+ people who have frozen to death so far this year, in Europe. Lots of good the average global temperature rise did for them.

I'm well aware government ineptitude when it comes to many things, but in this case there has to be an authority to implement a plan. Whether they screw that up too is anyones guess. The thing is, who else is has the authority regulate emissions? Who else has the authority to protect forest's? Who else has the resourses to fund alternative technologies? no 1. Leaving environmental responsibility and solutions in the hands of the private sector is foolish. The private sector's only goal is to make money not protect humankind from potential disaster. Humans by nature, want instant gratifacation. Most aren't thinking about the affects they're particular business is having on the environment and what that could mean for future generations.

And just like the freak nor easter we had here in Oct or the 65 degree day we had in dec. Freak whether systems and patterns will always occur but the simple fact is the surface temp of the planet as a whole has been rising. The past 2 years are the warmest on record. co2 is an insulator and you just admitted I'm right about humans producing great quantities of it and these amounts are increasing. By the time this problem gets to the point of no argument, it will be too late for us to do anything about it. Unless NASA comes up with some miracle chemicle to spray into the atmosphere to fix everything.

http://www.uwgb.edu/dutchs/PSEUDOSC/FairTax.HTM

An excerpt;

We have 181,000 returns with over a million dollars in AGI for a total of 535 billion dollars. That's an average of just under $3 million each. So millionaires earn about 100 times as much as people in the $30,000 range but pay 300 times as much tax, or three times higher taxes in proportion to their income.