Understanding Stock Borrowing Strategies

You buy stocks, you never sell them, you borrow against them.

Okay, explain that to me like I'm a

ten-year-old.

So-

Sure. You own a hundred dollars in Amazon stock.

Yeah.

You need money to buy something. Instead of selling the stock,

and let's say it's

gone up fifty percent, let's say it's g- doubled, you would have to realize the

capital gain and pay long-term capital gains on that fifty dollar gain.

No, just borrow against it and let the stock continue to

grow.

What rich people do is they'll buy a stock.

So I'll, I'll spend ten K on Amazon stock, and then I go to a

bank, and the bank give me a five thousand

dollar loan against

my Amazon stock tax-free.

Right.

And I just hold the Amazon stock. Now I've got five thousand c- tax free.

If the Amazon stock goes to twen- uh, twenty thousand dollars in value, then I

can, I can go to the bank and say, "It's gone up.

Now give me another five thousand dollars."

Borrow more.

And I just spend and live off that money.

Now, if the Amazon stock collapses,

I'm fine because the loan was against the stock,

so they'll sell the stock at a

certain point as it's collapsing to get their money back.

One of the great tax schemes in history is that stocks grow.

Think of yourself as a stock.

You, you go up in value a million bucks a year.

You're making a million dollars a year doing a very successful podcast.

Every year, the government in the UK is gonna take forty cents of that, forty

percent of it. If you own a million dollars in stock

and it goes to two million,

you don't get taxed on it till you sell it.

Yeah, so just never sell it.

Never sell it.

And that's what Elon's doing with his companies.

Never sell it.

People say he's got, you know, two hundred billion dollars, whatever.

In fact, he's borrowing tax-free against those

companies.

And then when he finally needs to sell it to pay off some of those loans, he moves

to Texas, despite the fact he built all his wealth

in California.