00:48:16 · Molly O'Shea, Michel Del Buono
[00:48:16] S1: You can buy an oil well? [00:48:17] S0: Oh yeah. Yeah. There are many strategies. You can buy the output from oil, you can hedge it. There's all these very interesting strategies, but what all these real assets have in common, real estate, oil wells, patent portfolios, anything that has a cash flow generally has a depreciation tax credit against it. And so you can shield your tax to some degree from that, provided it's structured properly. And that's, I think, where, again, the difficulty is, is a lot of the standard funds out there don't do the structuring because most of their clients are not taxable. So if you structure things and here's the real problem. Let's say you personally invest in real estate but you're a podcaster, so real estate's not your principal occupation, so you can't necessarily leverage all those depreciation credits yourself because it's not your main occupation. The IRS limits how much you can do from passive activities. So you have to structure properly. You have to create a company effectively that inside the company uses all those tax credits and gives you something net of that. [00:49:19] S1: What is the most tax incentivized active thing to own?
00:49:19 · Molly O'Shea, Michel Del Buono
[00:49:19] S1: What is the most tax incentivized active thing to own? [00:49:24] S0: If structured properly, you can offset almost all of the income from the property, and then because of something called the step up in basis of death, when you sell that asset after you pass away, you don't owe tax on that either. So along the way, all the income you get from the asset doesn't pay tax because you got the depreciation credit. And then normally, if you sell it at the end, you pay a ton of tax. Right? But if you pass away and hand it to your heirs, they get a new basis, a new price for the asset that's gone up so they can sell it with no tax. So that that is but it's a very long term and illiquid strategy. You have to hold these things for a long time. In the liquid space, you know, it's all these tax loss harvesting strategies, levered tax loss, strategies, strategies that utilize swaps and other derivatives to generate ordinary income losses. There's so many strategies out there. Again, you got to understand the detail. You gotta understand the leverage, how you turn it up and down. So again, you gotta know what you're doing. You have to find the right advisor that can advise you on all these things. [00:50:25] S1: I know this is a totally personal question, but like what percentage for new wealth do you recommend on spending? I feel like people will want to just go Spending.
00:50:25 · Molly O'Shea, Michel Del Buono
[00:50:25] S1: I know this is a totally personal question, but like what percentage for new wealth do you recommend on spending? I feel like people will want to just go Spending. [00:50:36] S0: Yeah. Boy, that's an immensely personal one. Some people live very modest lifestyles and therefore any windfall they get can go into a very aggressive growth oriented portfolio, and they're thinking about long term wealth accumulation. Other people spend a lot, and so their portfolio has to be more liquid, less alternatives, and therefore most likely lower returns. And so these things feed on themselves. To the degree you can avoid spending, you're going to increase your end period value. I can't tell you. I mean, everyone's got their own preference, so I can't. [00:51:13] S1: Is there any way to manage someone who is just spending all their money away? [00:51:18] S0: They're manage. You mean manage their assets? [00:51:21] S1: Yeah. I mean, if they're spending like if they're dipping into everything and liquidating, if they can, like, is there any way to help them or do they you just you just have to like let them do it?
00:51:21 · Molly O'Shea, Michel Del Buono
[00:51:21] S1: Yeah. I mean, if they're spending like if they're dipping into everything and liquidating, if they can, like, is there any way to help them or do they you just you just have to like let them do it? [00:51:32] S0: I mean, it's their it's their money. My job, though, is to sort of just point out what the ultimate outcome is and make sure they're aware of it. And if they're aware of it, I'm sure you've heard of this book. I think it's called Die with Zero. Right. So some people want to live their life such that when they're done, they've spent everything. That's a personal decision. Where it's interesting is sometimes people spend very aggressively and are expecting to have a huge legacy. And so that's where my job is to point out that depending on that, you may or may not have that. So just so they're aware, my job is to inform, shine lights in corners so people know and they make a decision armed with data. [00:52:11] S1: Yeah. Right. So Sam Parr had a tweet that went pretty viral where he was trying to share. He had talked to many different levels of wealth and he was trying to share and educate people on the difference between someone with $10,000,000 in wealth, a $100,000,000 in wealth, and a billion dollars in wealth. [00:52:30] S0: K. [00:52:31] S1: Whether these are psychological or it's like how you manage the money, if it manages you, like, are the differences upon those different wealth marks?
00:52:31 · Molly O'Shea, Michel Del Buono
[00:52:31] S1: Whether these are psychological or it's like how you manage the money, if it manages you, like, are the differences upon those different wealth marks? [00:52:41] S0: It's all over the map. It's really hard to generalize. Again, some people live very, very modest lives and never touch this windfall they have and have plans for either a very big charity, they give it all the way to a foundation. And other people spend it again with the hope of not leaving much behind. Some people really want their children to have a lot. Some people are worried that giving too much of their children is a problem, so they limit what they give their children a surprisingly small amount. I find there are cultural differences across The US and even the world. I find on the West Coast people tend to give away a lot and not necessarily give to their kids. I find on the East Coast or Europe, in fact in Europe I believe it is illegal to quote unquote disinherit your children. [00:53:28] S1: Wow. [00:53:29] S0: Right? To some degree. So you can't say I am not leaving anything to my kids. So it is just very it's all over the map. There's no real good generalization to make. [00:53:39] S1: Should you charter a jet or should you buy a jet? And then if you do buy the jet, how do you make money off of it?
00:53:39 · Molly O'Shea, Michel Del Buono
[00:53:39] S1: Should you charter a jet or should you buy a jet? And then if you do buy the jet, how do you make money off of it? [00:53:46] S0: Jets are expensive. The maintenance of an airplane is very expensive. It has rules about how many times it lands before you have to do certain overhauls. You have to have a crew, fuel. So it's a very expensive proposition. Again, it's a personal decision, but if you're not going to use it a lot, it can be quite costly. If you use it for business purposes, now you can sort of depreciate and take advantage of the same tax credits that you do with real estate and oil wells. But you have to be able to prove that it was used for business purposes and all that. And so there's there's certain rules around that that I don't know exactly. So these are the things you have to trade off. Right? But it's very expensive. And if your goal is to accumulate long term wealth, you know, think twice before you buy one of these things. Right? They're very expensive. [00:54:35] S1: Super mega yacht or just a mega yacht? [00:54:38] S0: Don't know. [00:54:39] S1: You don't know? Don't know. Should you get a house in Malibu, or should you get three islands in the Caribbean? [00:54:46] S0: That that's a personal one. I would get three islands, but that's a personal one. [00:54:49] S1: That's that's a personal one. Will you save the penguins or the rainforests? You [00:54:58] S0: tell me. [00:55:00] S1: I don't know. I think the rainforest saves the penguins, so that might come before it. What are the craziest questions that people ask you?