Comment by slg
2 days ago
>without an offsetting risk premium
Once again, this is simply haggling over price. Name the premium you think is justified and add that into the law.
2 days ago
>without an offsetting risk premium
Once again, this is simply haggling over price. Name the premium you think is justified and add that into the law.
The market determines the risk, not the asset owner. The owner has no special knowledge of what the risk actually is separate from the market pricing it. You explicitly want them to accurately price it outside of a market, which is effectively impossible, ignoring that the price is highly fluid and dynamic.
If the owner is required to invent a fake risk premium then it virtually guarantees that the risk will be mis-priced. Forced rampant mis-pricing is an exploitable arbitrage opportunity of epic proportions. Every quant worth a damn will make a fortune looting this. No serious policy can ignore this defect. It has the additional political downside that no one can ever own anything anymore in a meaningful way, which won’t be popular.
No one takes this idea seriously because anyone with a modicum of finance math background can see that the math doesn’t math. Political ideology doesn’t even figure into it.
I'm getting the impression you didn't get my "haggling over price" reference. This conversation is in the context of a wealth tax which typically only applies to a very select group of incredibly wealthy people. However, your complaints are all about the scale of the economic problems this would create. That means we can continue to add restrictions to this proposal until eventually all the issues you raised disappear.
For example, imagine we only apply this to people with a net worth over $500B. That's literally only Elon Musk. He has plenty of money to hire his own team of quants to price his assets. We can even be generous with this law and make the purchase price double the valuation. Hell, we can even restrict it to only apply to stock of publicly traded companies so the wealth valuations are highly informed by market pricing. We can just keep adding rules like this until you're out of economic reasons for why a wealth tax and/or this form of valuation can't work. At that point the debate is lost and "we're just haggling over price" because once we apply it to Musk, how can you argue against applying it to Bezos...