More on Economics & Investing
Sam Hickmann
3 years ago
Donor-Advised Fund Tax Benefits (DAF)
Giving through a donor-advised fund can be tax-efficient. Using a donor-advised fund can reduce your tax liability while increasing your charitable impact.
Grow Your Donations Tax-Free.
Your DAF's charitable dollars can be invested before being distributed. Your DAF balance can grow with the market. This increases grantmaking funds. The assets of the DAF belong to the charitable sponsor, so you will not be taxed on any growth.
Avoid a Windfall Tax Year.
DAFs can help reduce tax burdens after a windfall like an inheritance, business sale, or strong market returns. Contributions to your DAF are immediately tax deductible, lowering your taxable income. With DAFs, you can effectively pre-fund years of giving with assets from a single high-income event.
Make a contribution to reduce or eliminate capital gains.
One of the most common ways to fund a DAF is by gifting publicly traded securities. Securities held for more than a year can be donated at fair market value and are not subject to capital gains tax. If a donor liquidates assets and then donates the proceeds to their DAF, capital gains tax reduces the amount available for philanthropy. Gifts of appreciated securities, mutual funds, real estate, and other assets are immediately tax deductible up to 30% of Adjusted gross income (AGI), with a five-year carry-forward for gifts that exceed AGI limits.
Using Appreciated Stock as a Gift
Donating appreciated stock directly to a DAF rather than liquidating it and donating the proceeds reduces philanthropists' tax liability by eliminating capital gains tax and lowering marginal income tax.
In the example below, a donor has $100,000 in long-term appreciated stock with a cost basis of $10,000:
Using a DAF would allow this donor to give more to charity while paying less taxes. This strategy often allows donors to give more than 20% more to their favorite causes.
For illustration purposes, this hypothetical example assumes a 35% income tax rate. All realized gains are subject to the federal long-term capital gains tax of 20% and the 3.8% Medicare surtax. No other state taxes are considered.
The information provided here is general and educational in nature. It is not intended to be, nor should it be construed as, legal or tax advice. NPT does not provide legal or tax advice. Furthermore, the content provided here is related to taxation at the federal level only. NPT strongly encourages you to consult with your tax advisor or attorney before making charitable contributions.
Sylvain Saurel
2 years ago
A student trader from the United States made $110 million in one month and rose to prominence on Wall Street.
Genius or lucky?
From the title, you might think I'm selling advertising for a financial influencer, a dubious trading site, or a training organization to attract clients. I'm suspicious. Better safe than sorry.
But not here.
Jake Freeman, 20, made $110 million in a month, according to the Financial Times. At 18, he ran for president. He made his name in markets, not politics. Two years later, he's Wall Street's prince. Interview requests flood the prodigy.
Jake Freeman bought 5 million Bed Bath & Beyond Group shares for $5.5 in July 2022 and sold them for $27 a month later. He thought the stock might double. Since speculation died down, he sold well. The stock fell 40.5% to 11 dollars on Friday, 19 August 2022. On August 22, 2022, it fell 16% to $9.
Smallholders have been buying the stock for weeks and will lose heavily if it falls further. Bed Bath & Beyond is the second most popular stock after Foot Locker, ahead of GameStop and Apple.
Jake Freeman earned $110 million thanks to a significant stock market flurry.
Online broker customers aren't the only ones with jitters. By June 2022, Ken Griffin's Citadel and Stephen Mandel's Lone Pine Capital held nearly a third of the company's capital. Did big managers sell before the stock plummeted?
Recent stock movements (derivatives) and rumors could prompt a SEC investigation.
Jake Freeman wrote to the board of directors after his investment to call for a turnaround, given the company's persistent problems and short sellers. The bathroom and kitchen products distribution group's stock soared in July 2022 due to renewed buying by private speculators, who made it one of their meme stocks with AMC and GameStop.
Second-quarter 2022 results and financial health worsened. He didn't celebrate his miraculous operation in a nightclub. He told a British newspaper, "I'm shocked." His parents dined in New York. He returned to Los Angeles to study math and economics.
Jake Freeman founded Freeman Capital Management with his savings and $25 million from family, friends, and acquaintances. They are the ones who are entitled to the $110 million he raised in one month. Will his investors pocket and withdraw all or part of their profits or will they trust the young prodigy for new stunts on Wall Street?
His operation should attract new clients. Well-known hedge funds may hire him.
Jake Freeman didn't listen to gurus or former traders. At 17, he interned at a quantitative finance and derivatives hedge fund, Volaris. At 13, he began investing with his pharmaceutical executive uncle. All countries have increased their Google searches for the young trader in the last week.
Naturally, his success has inspired resentment.
His success stirs jealousy, and he's attacked on social media. On Reddit, people who lost money on Bed Bath & Beyond, Jake Freeman's fortune, are mourning.
Several conspiracy theories circulate about him, including that he doesn't exist or is working for a Taiwanese amusement park.
If all 20 million American students had the same trading skills, they would have generated $1.46 trillion. Jake Freeman is unique. Apprentice traders' careers are often short, disillusioning, and tragic.
Two years ago, 20-year-old Robinhood client Alexander Kearns committed suicide after losing $750,000 trading options. Great traders start young. Michael Platt of BlueCrest invested in British stocks at age 12 under his grandmother's supervision and made a £30,000 fortune. Paul Tudor Jones started trading before he turned 18 with his uncle. Warren Buffett, at age 10, was discussing investments with Goldman Sachs' head. Oracle of Omaha tells all.
Sam Hickmann
3 years ago
What is this Fed interest rate everybody is talking about that makes or breaks the stock market?
The Federal Funds Rate (FFR) is the target interest rate set by the Federal Reserve System (Fed)'s policy-making body (FOMC). This target is the rate at which the Fed suggests commercial banks borrow and lend their excess reserves overnight to each other.
The FOMC meets 8 times a year to set the target FFR. This is supposed to promote economic growth. The overnight lending market sets the actual rate based on commercial banks' short-term reserves. If the market strays too far, the Fed intervenes.
Banks must keep a certain percentage of their deposits in a Federal Reserve account. A bank's reserve requirement is a percentage of its total deposits. End-of-day bank account balances averaged over two-week reserve maintenance periods are used to determine reserve requirements.
If a bank expects to have end-of-day balances above what's needed, it can lend the excess to another institution.
The FOMC adjusts interest rates based on economic indicators that show inflation, recession, or other issues that affect economic growth. Core inflation and durable goods orders are indicators.
In response to economic conditions, the FFR target has changed over time. In the early 1980s, inflation pushed it to 20%. During the Great Recession of 2007-2009, the rate was slashed to 0.15 percent to encourage growth.
Inflation picked up in May 2022 despite earlier rate hikes, prompting today's 0.75 percent point increase. The largest increase since 1994. It might rise to around 3.375% this year and 3.1% by the end of 2024.
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Jano le Roux
2 years ago
Quit worrying about Twitter: Elon moves quickly before refining
Elon's rides start rough, but then...
Elon Musk has never been so hated.
They don’t get Elon.
He began using PayPal in this manner.
He began with SpaceX in a similar manner.
He began with Tesla in this manner.
Disruptive.
Elon had rocky starts. His creativity requires it. Just like writing a first draft.
His fastest way to find the way is to avoid it.
PayPal's pricey launch
PayPal was a 1999 business flop.
They were considered insane.
Elon and his co-founders had big plans for PayPal. They adopted the popular philosophy of the time, exchanging short-term profit for growth, and pulled off a miracle just before the bubble burst.
PayPal was created as a dollar alternative. Original PayPal software allowed PalmPilot money transfers. Unfortunately, there weren't enough PalmPilot users.
Since everyone had email, the company emailed payments. Costs rose faster than sales.
The startup wanted to get a million subscribers by paying $10 to sign up and $10 for each referral. Elon thought the price was fair because PayPal made money by charging transaction fees. They needed to make money quickly.
A Wall Street Journal article valuing PayPal at $500 million attracted investors. The dot-com bubble burst soon after they rushed to get financing.
Musk and his partners sold PayPal to eBay for $1.5 billion in 2002. Musk's most successful company was PayPal.
SpaceX's start-up error
Elon and his friends bought a reconditioned ICBM in Russia in 2002.
He planned to invest much of his wealth in a stunt to promote NASA and space travel.
Many called Elon crazy.
The goal was to buy a cheap Russian rocket to launch mice or plants to Mars and return them. He thought SpaceX would revive global space interest. After a bad meeting in Moscow, Elon decided to build his own rockets to undercut launch contracts.
Then SpaceX was founded.
Elon’s plan was harder than expected.
Explosions followed explosions.
Millions lost on cargo.
Millions lost on the rockets.
Investors thought Elon was crazy, but he wasn't.
NASA's biggest competitor became SpaceX. NASA hired SpaceX to handle many of its missions.
Tesla's shaky beginning
Tesla began shakily.
Clients detested their roadster.
They continued to miss deadlines.
Lotus would handle the car while Tesla focused on the EV component, easing Tesla's entry. The business experienced elegance creep. Modifying specific parts kept the car from getting worse.
Cost overruns, delays, and other factors changed the Elise-like car's appearance. Only 7% of the Tesla Roadster's parts matched its Lotus twin.
Tesla was about to die.
Elon saved the mess as CEO.
He fired 25% of the workforce to reduce costs.
Elon Musk transformed Tesla into the world's most valuable automaker by running it like a startup.
Tesla hasn't spent a dime on advertising. They let the media do the talking by investing in innovation.
Elon sheds. Elon tries. Elon learns. Elon refines.
Twitter doesn't worry me.
The media is shocked. I’m not.
This is just Elon being Elon.
Elon makes lean.
Elon tries new things.
Elon listens to feedback.
Elon refines.
Besides Twitter will always be Twitter.
Owolabi Judah
3 years ago
How much did YouTube pay for 10 million views?
Ali's $1,054,053.74 YouTube Adsense haul.
YouTuber, entrepreneur, and former doctor Ali Abdaal. He began filming productivity and financial videos in 2017. Ali Abdaal has 3 million YouTube subscribers and has crossed $1 million in AdSense revenue. Crazy, no?
Ali will share the revenue of his top 5 youtube videos, things he's learned that you can apply to your side hustle, and how many views it takes to make a livelihood off youtube.
First, "The Long Game."
All good things take time to bear fruit. Compounding improves everything. Long-term work yields better returns. Ali made his first dollar after nine months and 85 videos.
Second, "One piece of content can transform your life, but you never know which one."
Had he abandoned YouTube at 84 videos without making any money, he wouldn't have filmed the 85th video that altered everything.
Third Lesson: Your Industry Choice Can Multiply.
The industry or niche you target as a business owner or side hustler can have a major impact on how much money you make.
Here are the top 5 videos.
1) 9.8m views: $191,258.16 for 9 passive income ideas
Ali made 2 points.
We should consider YouTube videos digital assets. They're investments, which make us money. His investments are yielding passive income.
Investing extra time and effort in your films can pay off.
2) How to Invest for Beginners — 5.2m Views: $87,200.08.
This video did poorly in the first several weeks after it was published; it was his tenth poorest performer. Don't worry about things you can't control. This applies to life, not just YouTube videos.
He stated we constantly have anxieties, fears, and concerns about things outside our control, but if we can find that line, life is easier and more pleasurable.
3) How to Build a Website in 2022— 866.3k views: $42,132.72.
The RPM was $48.86 per thousand views, making it his highest-earning video. Squarespace, Wix, and other website builders are trying to put ads on it and competing against one other, so ad rates go up.
Because it was beyond his niche, Ali almost didn't make the video. He made the video because he wanted to help at least one person.
4) How I take notes on my iPad in medical school — 5.9m views: $24,479.80
85th video. It's the video that affected Ali's YouTube channel and his life the most. The video's success wasn't certain.
5) How I Type Fast 156 Words Per Minute — 8.2M views: $25,143.17
Ali didn't know this video would perform well; he made it because he can type fast and has been practicing for 10 years. So he made a video with his best advice.
How many views to different wealth levels?
It depends on geography, niche, and other monetization sources. To keep things simple, he would solely utilize AdSense.
How many views to generate money?
To generate money on Youtube, you need 1,000 subscribers and 4,000 hours of view time. How much work do you need to make pocket money?
Ali's first 1,000 subscribers took 52 videos and 6 months. The typical channel with 1,000 subscribers contains 152 videos, according to Tubebuddy. It's time-consuming.
After monetizing, you'll need 15,000 views/month to make $5-$10/day.
How many views to go part-time?
Say you make $35,000/year at your day job. If you work 5 days/week, you make $7,000/year each day. If you want to drop down from 5 days to 4 days/week, you need to make an extra $7,000/year from YouTube, or $600/month.
What's the quit-your-job budget?
Silicon Valley Girl is in a highly successful niche targeting tech-focused folks in the west. When her channel had 500k views/month, she made roughly $3,000/month or $47,000/year, enough to quit your work.
Marina has another 1.5m subscriber channel in Russia, which has a lower rpm because fewer corporations advertise there than in the west. 2.3 million views/month is $4,000/month or $50,000/year, enough to quit your employment.
Marina is an intriguing example because she has three YouTube channels with the same skills, but one is 16x more profitable due to the niche she chose.
In Ali's case, he made 100+ videos when his channel was producing enough money to quit his job, roughly $4,000/month.
How many views make you rich?
Depending on how you define rich. Ali felt prosperous with over $100,000/year and 3–5m views/month.
Conclusion
YouTubers and artists don't treat their work like a company, which is a mistake. Businesses have been attempting to figure this out for decades, if not centuries.
We can learn from the business world how to monetize YouTube, Instagram, and Tiktok and make them into sustainable enterprises where we can hire people and delegate tasks.
Bonus
Watch Ali's video explaining all this:
This post is a summary. Read the full article here
Vitalik
3 years ago
An approximate introduction to how zk-SNARKs are possible (part 1)
You can make a proof for the statement "I know a secret number such that if you take the word ‘cow', add the number to the end, and SHA256 hash it 100 million times, the output starts with 0x57d00485aa". The verifier can verify the proof far more quickly than it would take for them to run 100 million hashes themselves, and the proof would also not reveal what the secret number is.
In the context of blockchains, this has 2 very powerful applications: Perhaps the most powerful cryptographic technology to come out of the last decade is general-purpose succinct zero knowledge proofs, usually called zk-SNARKs ("zero knowledge succinct arguments of knowledge"). A zk-SNARK allows you to generate a proof that some computation has some particular output, in such a way that the proof can be verified extremely quickly even if the underlying computation takes a very long time to run. The "ZK" part adds an additional feature: the proof can keep some of the inputs to the computation hidden.
You can make a proof for the statement "I know a secret number such that if you take the word ‘cow', add the number to the end, and SHA256 hash it 100 million times, the output starts with 0x57d00485aa". The verifier can verify the proof far more quickly than it would take for them to run 100 million hashes themselves, and the proof would also not reveal what the secret number is.
In the context of blockchains, this has two very powerful applications:
- Scalability: if a block takes a long time to verify, one person can verify it and generate a proof, and everyone else can just quickly verify the proof instead
- Privacy: you can prove that you have the right to transfer some asset (you received it, and you didn't already transfer it) without revealing the link to which asset you received. This ensures security without unduly leaking information about who is transacting with whom to the public.
But zk-SNARKs are quite complex; indeed, as recently as in 2014-17 they were still frequently called "moon math". The good news is that since then, the protocols have become simpler and our understanding of them has become much better. This post will try to explain how ZK-SNARKs work, in a way that should be understandable to someone with a medium level of understanding of mathematics.
Why ZK-SNARKs "should" be hard
Let us take the example that we started with: we have a number (we can encode "cow" followed by the secret input as an integer), we take the SHA256 hash of that number, then we do that again another 99,999,999 times, we get the output, and we check what its starting digits are. This is a huge computation.
A "succinct" proof is one where both the size of the proof and the time required to verify it grow much more slowly than the computation to be verified. If we want a "succinct" proof, we cannot require the verifier to do some work per round of hashing (because then the verification time would be proportional to the computation). Instead, the verifier must somehow check the whole computation without peeking into each individual piece of the computation.
One natural technique is random sampling: how about we just have the verifier peek into the computation in 500 different places, check that those parts are correct, and if all 500 checks pass then assume that the rest of the computation must with high probability be fine, too?
Such a procedure could even be turned into a non-interactive proof using the Fiat-Shamir heuristic: the prover computes a Merkle root of the computation, uses the Merkle root to pseudorandomly choose 500 indices, and provides the 500 corresponding Merkle branches of the data. The key idea is that the prover does not know which branches they will need to reveal until they have already "committed to" the data. If a malicious prover tries to fudge the data after learning which indices are going to be checked, that would change the Merkle root, which would result in a new set of random indices, which would require fudging the data again... trapping the malicious prover in an endless cycle.
But unfortunately there is a fatal flaw in naively applying random sampling to spot-check a computation in this way: computation is inherently fragile. If a malicious prover flips one bit somewhere in the middle of a computation, they can make it give a completely different result, and a random sampling verifier would almost never find out.
It only takes one deliberately inserted error, that a random check would almost never catch, to make a computation give a completely incorrect result.
If tasked with the problem of coming up with a zk-SNARK protocol, many people would make their way to this point and then get stuck and give up. How can a verifier possibly check every single piece of the computation, without looking at each piece of the computation individually? There is a clever solution.
see part 2