Rudy Explains Why the Rich Don’t Buy Taxable Events:
In short, dividends trigger a 1099-DIV or 1099-INT on taxes every year. Most wealthy people would prefer to borrow against their assets in MANGA (Microsoft, Amazon, Netflix, Google [Alphabet], Apple) stocks at extremely low rates. They can make money in other ways like selling covered calls for 0.5% profit a month max. I will do a detailed article on some investment opportunities normal people can’t get tomorrow.
Full Transcript Below:
Folks! Rudy, Alpha Investments. Sorry no real background setup today. I printed out this message from a patron. This is a financial video. Nothing to do with Magic the Gathering, nothing to do with collectibles, but I felt this was such a good financial question I want to make a whole video on it. Okay I’m going to read you guys a question. Rudy hope your day is going swell. Okay question for you why don’t people all over the country just buy a ton of stock (equity / wall street) just buy stock of companies that pay dividends? It pays you better interest than any savings account at a bank or credit union. I personally have positions in Coca-Cola, AT&T, Verizon, Hasbro, utility companies, pharmaceutical companies, oil companies, etc. This is what he’s saying not me. Once the dividend pays out I just end up buying more shares and reinvest in the dividend thus I get free stock and more dividends. Why doesn’t someone – why first of all question number one why would someone put money in a non-dividend paying stock? Question number two am I missing something why don’t people just buy the living hell out of stocks that just pay dividends? This is a complicated complicated complicated question. Okay so a lot of people are not gonna like the answer to this because you’re gonna start to realize how unfair the world is I know talking from a guy who’s in a warehouse filled with you know endless boxes of sealed cards where I could just live on selling a box for the rest of my life and not work. Okay here’s the thing folks everyone’s situation is different wealthy people don’t look at money the same way that regular people who are watching this video look at handle save invest or spend money in this world I’m going to try to make this video is going to be a little cruel a little cold a lot of you aren’t going to like this wealthy people are not rich people rich people are not wealthy people regular working blue collar regular class middle class most people who work in the united states sorry for the rest of the world I’m not too familiar with your economies and rules and everything but in the united states we all we operate under a very an aggressive capitalistic society love it or hate it I’m just telling you where we are wealthy people don’t view money the way you do so let’s get into this okay first things first there’s a lot of categories that are under this iceberg number one dividend stocks wealthy people many times don’t like dividends when you get paid a dividend or an interest payment at the end of the year you’re gonna get a 1099 div or a 1099 int okay sega license tax advisor not a guy who can’t afford a haircut if you want real advice but I’m gonna just tell you what I wealthy people many times don’t want those tax implications because once that money’s handed to you like he said you just buy more stuff that’s true but you’re still going to have a taxable event if you’re wealthy you’re going to be in the highest tax rate what 39 or something if you’re in Florida like me you don’t have state and city and all this other wealth tax crazy stuff that these other cities and states have you know I love Florida (Florida man right) look at the hair now this gets to the next part of the question non-dividend paying stocks re the companies reinvest all their capital for future r d intend to have a better stock price appreciation so as a longer 5-10 year time frame the shares of that company should reflect an accelerated growth stock type of approach they should accelerate and grow the share price at a better rate than an income seeking dividend yield seeking what he used okay so Coca-Cola well they’re probably normal three percent yield atm t complicated company getting ready to have spin-offs dividend cuts it’s gonna be complicated not getting into that this video Verizon I love the company I use Verizon I can’t really complain much I’m sure there’s a four five six percent yield same thing papa Hasbro again I own probably um oh god how many shares uh a couple thousand shares of Hasbro I’m not really sure where it’s at um utility companies pharma companies I’m sure I love pharma companies I personally I have a lot of position in pharma companies Bristol Myers, the mercks, all these different things, the Pfizers, person meyers, merck, pfizer, there’s like five or six big ones but the point is I’m not recommending these this is what he’s listing but as as a whole the dividend thing is great but a taxable event becomes a big issue now we’re going to go to a different part of this video but well before we do understand something when stocks pay a dividend there are a lot of Timmys out there that will buy the stock before the dividend also known as buying the dividend if you don’t know this a stock has a multiple dates; an announcement date, an ex-dividend date, uh you have to be on the books for a dividend payable dates now an ex-dividend if the stock pays out a dollar dividend the next day the stock price will be adjusted down they take the dollar off the stock price so the next day that 51 stock assuming the market opens flat without any you know pre-market ups or downs a dollar will be removed from the stock price on x dividend so don’t buy the dividend just to get a taxable event I just want to get that out there now we’re going to go back to the vid part of the video it’s going to make a lot of people very you’re going to I really don’t like these type of videos because it makes you really realize how tilted and how unfair the world is people need to understand the reason wealthy people don’t pay [ __ ] in taxes is because they understand how the tax system works when it gets very complicated for wealthy people wealthy people don’t make money on a w-2 they don’t get a paycheck okay most wealthy people are entrepreneurs they make their money through holdings real estate inventory collectibles assets holding tons of equity tons of corporate debt or commercial paper there’s a lot of categories okay wealthy people prefer to put 10 million dollars in a large cap tech company in the SPYs or then the QQQs or big companies you have to understand something wealthy people use the assets to leverage their lifestyle in purchasing additional assets by utilizing this approach rich people don’t pay taxes I know really what the [ __ ] I don’t get it how do I say this again if I have 10 million dollars in xyz stock there’s no dividend let’s say it goes up 10 a year who knows make up something that 10 million dollars in equity I own if you have a good brokerage firm you can borrow against that equity usually up to 50 of your value most wealthy people will usually kind of try to 20 30 maybe a third they don’t want to get up to a margin call so if you have 10 million dollars let’s pretend Rudy has 10 million dollars in ruby stock I can go to my brokerage firm and I can borrow three million dollars against my 10 million at literally like one to two percent interest think about that for a second do you all understand the power the [ __ ] leverage you could do if you borrow three million dollars at like one and a half percent at like basis points if you could borrow with that like do you understand the financial weapon of destruction you could do to to anything collectibles stocks real estate the power you you need you need to look and make decisions like the wealthy people do to understand that now let me explain that further ruby I don’t get it why don’t they just sell three million and buy it why would they pay even one or two percent because if they sell the stock assuming it’s all profit maybe stock options company stock whatever let’s just assume it’s all profit Rudy has 10 million of ruby star if I sell 3 million of Rudy stock and I got to pay 39 long term capital gains let’s just keep it easy or let’s just make 50 in taxes because I live in uh New York or California or somewhere with a ton of taxes let’s just say I pay 50 of 33 million so I’m gonna lose half of my three million dollars just liquidating clicking that mouse button or like every billionaire millionaire does I can literally go to the account withdrawal three million dollars ring sun comes up okay I got three million of my checking I now borrowed and have access to three million at one point five percent interest with no expiration no call date no amateurization date would I sell 3 million in stock and pay 50 percent in taxes or would I borrow 3 million in stock for the rest of my life and just pay one to two percent you know as well I do in the next 20 years the s p 500 is gonna average more than one or two percent a year so if you could endlessly as a wealthy person endlessly borrow at stupidly low interest rates that regular people don’t have access to you never use banks and loans and mortgages and car loans anymore you don’t use credit card and you don’t care and then that’s the moment you start realizing holy [ __ ] that’s kind of incredible holy [ __ ] why is that why am I hearing this from a guy like Rudy on a card channel who doesn’t get a haircut you start to ask yourself a lot of questions why is this not discussed more when they bash billionaires I wish I wish I was that’d be awesome on the news why don’t they explain how they’re doing it well that’s how they’re doing it that’s how you learn Elon Musk dude I think Elon Musk had like I don’t know I don’t know how many billions he had borrowed against his Tesla stock to fund like Spacex and other ventures and crazy things and his hot new wife against his old ex-wife or who knows whatever the point is and of course you know everybody’s bashing billionaires and that’s just the cool thing to do in our culture I wish I was a billionaire that’d be worth bashing and you know he that’s what he’s been doing and recently he volunteered to sell a bunch of Tesla stock just because twitter voted for it it was funny pickup sorry but it’s important for everyone to just understand so back to the original question Rudy wives out well the answer to your question is it depends where you are on this road of life what hand of cards you were dealt in life what your future perspective is in life where you live in this world there’s so many variables that’s why I don’t like financial videos like this because the nasty truth of it is going to make most of you upset which apparently you can’t even we don’t have a thumbs down button on YouTube anymore because that was too sensitive or some [ __ ] like that we can’t even have a thumbs down button on YouTube how am I supposed to make a meta zoom video and tell everybody the thumbs down what the hell I mean just anyways it’s annoying disabling thumbs down buttons it hurts feelings Jesus man what’s wrong with our world so that’s why these complicated financial videos I tend to avoid it’s like complicated tax things because it doesn’t apply to everybody it doesn’t it doesn’t apply equally across the board there’s no way to make it applicable to most of you watching because everyone’s situation is so damn complicated from everywhere from location type of income what you do what’s your future what’s your age where do you live what’s your bracket it just doesn’t work but I’m here to tell you all from you know 2017 looking Rudy without a haircut in a warehouse in the middle of the night I’m here to tell you all I may smell like cardboard and ink but this is really how the world is I’m sure a lot of you aren’t going to like what I’m going to say but the reality is I wish I was a billionaire I’m nowhere near poor I’ve been very fortunate in this world and I’m very honored and I feel very happy and privileged that I’ve made it this far because I’ve seen what goes out there I’ve seen what 2020 did to millions of people it’s been it’s been rough and it’s it’s sad it is but the reality is again really wealthy people like I’m looking at this guy’s question and I don’t mean to be an [ __ ] but I can tell he is not a wealthy individual because a wealthy individual actually doesn’t want dividend payments because they don’t need the cash flow and they need preservation of capital they just want to grow on paper because they don’t want those payments I’ve done that with some of my stuff in the last couple years certain you know I used to be and this is no recommendation but I used to be and I kind of still am a huge fan of mortgage reits this is one of my favorite wall street companies and I hate giving stock stuff like this because again people are going to be able traumatic with it but there’s a company called like anally capital management they had a small division that was spun off years ago called cim chimera because I when I was at my brokerage from days in um like 2007-89 you know me and all the guys and actually uh these um um anyways a group of us were actually like we bought into this chimera company and the goal was see how long we could hold it and who could get enough dividends where it would we would literally be playing with the house’s money like we calculated something like at the time it was it was insane folks like in like 07 or no no it was after the 08 crash so we were buying like chimera and it was like three dollars a share at the time after the crash and we all bought like 10 20 000 shares and it was it had like a dividend yield of 15 percent in like 0.9 in 2010 and we were like okay based on the dividend yield in five years we’ll get all our money back and we’ll have all like 10 000 shares all of us we’ll have it free and we had it it was just a funny thing and we bought that company because we liked the company logo because it was like a chimera with like three heads and [ __ ] it was cool and again it’s just stupid stuff but the reason I’m bringing this up is I still love mortgage reits anally capital management there’s like armor residential reits you know you got the nrz’s and the o’s and um oh god I can’t remember the names off top of my head uh ANLY cion arr agnc or hts hatteras I don’t know if they’re still around they may have merged with other companies since 0809 I apologize but you know these mortgage reits were pretty much you know backed by mortgage-backed securities wow you know and every month when these companies would get people’s mortgage payments they would pay either monthly or quarterly pass through dividend or you know sometimes return of capital so it really wasn’t much they just take off the share price and get back to you they would pay you all kinds of cash flow and pass it through to you anyways moving on the point was you know I still like that stuff but even I have reduced my exposure to some of these companies that pay too much in dividends or return of your principal because it really wasn’t beneficial for long term and I didn’t want to have excessive capital you know or excessive capital excessive taxable income on those type of payments on a 1099 at the end of the year because again I’m not a tax advisor but you know you get a 1099 dividend int maybe a 1099 miscellaneous for some of you out there especially in the crypto world you’ll get maybe a 10 imb for brokerages you know brokerage exchanges for you know returns and cost basis for your you have to put in your you know your basis of buy and sell and you know that your proceeds as they say but the point is you know when I read this guy’s question there is nothing wrong with coke in these companies you know oil companies Hasbro, Coca-Cola, Verizon you know the pharmaceutical I mean look full transparency I probably have a position every one of these companies is mentioning because I believe long term they’re all going to be around and even with inflation they’re just going to raise the prices of Coca-Cola eventually be 20 bucks for a bottle of Coca-Cola and the stock price will just be adjusted with inflation I I’m not concerned about it like I don’t care if the market’s skyrocketing when you watch this video or it’s dropping because if you if you have 10 million dollars in Rudy stock even if it drops to 9 million hell if it goes to 8 million or hey maybe it goes great it goes to 10 11 12 13 million if you’re looking at it from a different perspective you stop worrying and also wealthy people have the privilege and the benefit that when the stock market drops they just buy ever on the way down they don’t care well Rudy I’ve tried buying on the way down but then by the dip right but the dip keeps dipping and I keep getting slapped well rich people don’t have that problem I know people out there that literally every time the dow or something or the market drops at least like they have dude I had a friend years ago where every time the market would drop like one percent he would buy like 20 grand and if the market dropped two percent he’d buy like 40 grand but if the market had an up there he would never buy anything if the market went up for a month straight he would never buy it could go up for a year he’d stop by it was a craze like I like I’ve seen that stuff and it kind of does work but again if the market starts dropping every day for a month a week you know two months three months he would buy endlessly on the way down so no matter how much it dropped he always came out ahead even if he bought the dip you know every other day it dropped and keeps dropping and you’re buying you know what’s a good example is he using um hasbro stock since you know we’re talking about magic right let’s say he’s buying hasbro has rose at let’s just say a hundred dollars a share even if it went to 95 he put 10 grand in he wouldn’t buy again unless hasbro wants like 92 or 90. then he’d do it again if it dropped more he’d put another 10 grand now if it stopped dropping and either went sideways and consolidated or went higher he’d just do nothing he would just ride it and start collecting dividends and let it go up but every time it dropped he would just keep buying everything and if you don’t have a limit because you’re wealthy essentially you can endlessly buy no matter how much it goes down because eventually it stops going down and you bought all the way no matter what and then when it turns you’re immediately making money because you bought everywhere all the way down so then once it turns it goes up a little bit the last few buys are already in the green and it just it accelerates the recovery and that’s what these wealthy people do and of course not to mention and I don’t recommend it if you have 10 million in Rudy stock even if you don’t have the available cash or maybe you don’t have the cash for a month or two you can literally borrow one margin for like one percent again if you’re paying a cost of capital at like one or two percent or 1.5 let’s pretend interest rates go up at some time the next 100 years maybe they’re paying two to three percent interest it’s so low you know as well as I do you can put that money in any overall spy or the queues and triple leverage whatever you want to do I don’t care the point in the long run you still come out ahead and that’s why wealthy people just get flipping wealthier and regular working people can never catch up because the system is intentionally designed where you [ __ ] can’t catch up the slope is so steep you cannot run fast enough to get up that hill because when you’re wealthy and you have this ability to have that much access to capital at that kind of price and you can leverage and borrow against your securities rich people don’t sell stock that’s the kicker it’s it’s crazy dude I knew a guy back in 2011. he bought the dip after the 08 crash he put like dude it was I think I placed an order phone I was at the firm the dude bought like four or five hundred thousand dollars I think it was Goldman Sachs (GS) or was it (BAC) Bank of America or no maybe JP Morgan he was the financial let’s say I saw his Goldman (GS) because Goldman that was time like somebody kind of was late in the video no one’s watching I swear like oh niners and that was like warren buffett did like a billion dollar thing with Goldman Sachs where he got like long-term leaps or warrants for the company and Goldman Sachs dropped like 50 a share and his warrants for like eighty or ninety dollars a share and Goldman went back to hundreds and it was like some anyway I placed this order for this client okay listen to this this is cool I’m gonna end the video and uh sorry I get wound up in my old financial days everybody so this client bought like half a million dollars in Goldman Sachs hundred dollars a share and I remember like a year later I followed up with him and his hundred dollar Goldman Sachs was at like 200 a share so it was half a million was that like a million he was up at half a million dollars turned into a million and I remember calling him like hey dude congrats blah blah blah captain Timmy can I work for you young Rudy was like dude this guy nailed it I said hey you want to lock in profits yo you know I was kind of a licensed advisor and I said look I recommend I did the reco you know as a fiduciary this and that you diversified and you’re locking your profits blah blah you already told me it’s enough science selling [ __ ] cause I don’t wanna pay taxes dude was loaded I don’t know what he did maybe he did like breast augmentation or brain surgery or fixed Rudy’s hair for a living who knows what he did maybe he’s a taco connoisseur and I remember you know what he did you know what he had me do he had me sell like a hundred covered call contracts at like almost at the money and he got like a thirty thousand dollar premium he collected on his million dollars like three percent he collected like 30 grand instantly in his in his uh brokerage firm account sorry I almost said the name of the company and um I was like dude well the price keeps going up you’re going to get exercise you’re going to be forced to sell egos I don’t care is it but then you have your taxes because now I don’t care if I get exercise right when it dips back down within 30 days i’ll buy it right back and it’ll qualify as a wash sale and you know it won’t count as a taxable event and I was like that was the first time I learned about wash sales I was like wait what I was like wait what I remember and you know I learned these things and you know this is you know young Rudy was like I’m gonna go to lunch and I’m gonna go Chipotle and spend seven dollars on a burrito bowl and get some chips and there’s no queso back then and you know I was thinking about that all afternoon I was like man I’m driving my little rickety truck and you know for my dad and I still drive that truck to uh deliver all the patrons mail and um you know he told me that and I was just like I had like this epiphany moment I was like this dude made a half a million doesn’t want to sell luck and profit he wrote he took option contracts we wrote covered calls he sold to some other schmuck which I guess made money not a smoke because then the price went up even more he got exercise expiration they took his shares locked in his profit and then right when there was a dip for like two days he bought it right back and I was just like dude this is some crazy shenanigans dude that’s why I learned the power that again wealthy people sell tons of covered calls that are way out of the money that literally had like some 90 chance of expiring worthless and I remember looking into that years ago and I was like okay and this really wealthy guy taught me he said you know Rudy we have a million dollars your covered call that should be go past usually 30 days he said try to keep in case the market swings hard you want to be able to reset that marker on the chess board I was like oh okay and also time decay and time erosion the time premium drops off after 30 days and I was like oh okay so the value for a 30 contract 30 day contract’s not the same as a 60 day you don’t just double it he said no there’s a curve I was like learning all this stuff and taking notes about theta and time decay of learning about the greeks and everything and you know this gets crazy folks and this guy was telling me is remember a million dollars you should only be collecting a half a percent a month it’s like a half percent a month I said he said well a half a percent is all you should receive on your balance I said why so low he goes that’s how you know you’re setting the bar the strike price so far the odds of execution or execution exercising and everything are so minimal it’s probably not going to happen and I was like okay okay and I remember that and I remember thinking to myself why don’t you just set your strike price closer to sort of half a percent of a million dollars which is what five grand a month five grand a month for free I was like why don’t you move it closer so you get like 20 grand a month he said no now you’re being greedy and you’re being a pig you’re gonna get slaughtered and I was like that was the first time I heard that phrase and I was learning all this stuff man of course the rest is history the dude was super wealthy I’m jealous I still strive to be at that level and um I have to end this video ladies and gentlemen to come down off my adrenaline rush I’m gonna call it quit spend some time with the family go to bed tonight um overall I applied most of this knowledge the best I could to the world of cardboard to build my alpha investment empire in the collectible world and for the most part most of this stuff did kind of line up pretty well it has treated me very well and things have worked out very well but I would not be here today if it wasn’t for these experiences and not really the education in college and again I’m sorry folks I just if I could do it over again I probably would not have gone to college but being around some of these wealthy people and just learning from them when I didn’t have anything and asking them questions and then being open to a newbie a noob sabot like me to just you know what’s this how’s that work and being trained and getting my broker’s license and learning this and all these series you know six seven 63 65 or 66 no series 66 uniform combined security zack where that [ __ ] was you know I never did the series nine for compliance I thought it was stupid but anyways the world the point of this video is I hope some of you learned something and I hope it answered the question about dividends and why wealthy people regular people and everybody view things differently to sum up to answer the question from an hour ago there’s nothing wrong with buying dividend stocks but it may not be for most people and people who invest a lot tend to be wealthy wealthier people tend to not want cash flow anymore hope you guys learned something
Rudy Alpha Investments – December 1st, 2021
