Posted by
Street Carnage
• 01.10.17 07:57 pm

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I asked Matt Palumbo to explain why he thinks Trump’s inheritance would not have made more money had he just invested it and sat on his orange ass his whole life. This is what he said. 

Inheritance: $40 million, in the form of equity in his family’s estate.

Given that Trump’s net worth is $3.7 billion today (Forbes) estimate, that means his net worth has increased 9,150% since then.

Now, what would’ve happened if Trump simply did nothing, and invested his inheritance in tracking the S&P 500 index, essentially mirroring market’s average performance.

An investment from January 1974-January 2017 tracking the S&P 500 would’ve returned 6,930% with dividends reinvested. Of course, this is the MAXIMUM possible return one could argue, as you can’t directly track an index without incurring expenses. The expense ratio at the largest S&P 500 index fund (Ticker: SPY) charged annual fees of 0.09%, which, while extremely low, were higher in the past and chip away at overall return over lengthy periods.

Additionally, all dividends are subject to taxation, even if they’re reinvested.  From 1954-1985, dividends were taxed at an individuals top marginal tax rate, meaning a maximum tax of 90% could’ve been paid on them during that period. From 1985-2003, following the Reagan tax cuts, that maximum tax rate on dividends was reduced from 50% to 28%. It wasn’t until the Bush tax cuts that dividends became more investor friendly, with a top tax rate of 15%. Ironically, a larger percentage of the market’s total return was in the form of dividends when the tax rate on them was highest.

Lastly, if Trump were to liquidate his $40 million stake in his father’s estate, he would’ve been subject to a capital gains tax on the cash, meaning he wouldn’t even have $40 million in cash to invest in the first place!

It’s really no contest. The MAXIMUM Trump would’ve been able to turn $40 million into would’ve been would’ve been just south of $3 billion. I plugged his $40 million fortune into a calculator that accounts for historical tax rates and estimated historical fees since 1974, and got a value of $2.16 billion for his ending portfolio value, or $1.91 billion after capital gains tax. 

This is the S&P 500 return calculator I used: S&P 500 Return Calculator and DQYDJ.com

-MATT PALUMBO

 


Comments
  1. Doug says:

    That also doesn’t take into account all the money hes spent and enjoyed over the course of time correct? This is if he just let the money sit for all that time so you could likely double that amount.

  2. frank says:

    He went flat broke in the early 90s and only dug out by borrowing against his siblings’ inheritances. People gloss over this point. He’d probably still be broke if his siblings weren’t also rich.

  3. frank says:

    As far as making money what Trump essentially did was secure extreme amounts of leverage and ride a thirty year expanding commercial realty bubble. Basically, he bet big with money he didn’t have, and it mostly worked out. Except for briefly when it didn’t in the 90s and he went broke.

    The question I have is: Does Trump understand that he’s mostly just lucky the market went his way? I kind of suspect he doesn’t realize it and thinks he’s a genius. Sam Zell, on the other hand, has liquidated most of his real estate holding’s a couple times well in advance of major pull backs. He seems to have deeper understanding of the market than Trump, who mostly just doubled down and got lucky.

  4. asdfasdf says:

    Hehe, well that was a quick dismantling of “Palumbo’s” little write-up.

  5. 6079 Smith, W. says:

    Little jealous, eh, Frank?

  6. frank says:

    Not jealous, just informed. The fact that he did the equivalent of betting the farm on black over and over is something that worries me about him as president. He might actually believe it’s possible to take the USA deeper into debt and make some big bets on growth, just like he’s always done. Reagan kind-of-sort-of got away with that, but that formula ain’t gonna work now. We’re broke.

  7. MadeInAmerica says:

    Now we’re paying for the wall, Gavin? Are you sure a wall is a good idea? I don’t think your half-Canadian, half-Woombie mongrel children are going to be willing to work outside.

  8. OR says:

    Donald inherited the company he had been running himself from 1971, and been working for from 1968.

    Do these people think comapnies just run by them selves, and all companies could just be sold and the money invested in stocks, that just go up and up forever?

  9. […] it all is an accomplishment. Look at lottery winners or retired athletes. According to economist Matt Palumbo, if Trump invested $40M in the market, today he would have $1.91 billion after tax. This assumes […]

  10. […] it all is an accomplishment. Look at lottery winners or retired athletes. According to economist Matt Palumbo, if Trump invested $40M in the market, today he would have $1.91 billion after tax. This assumes […]

  11. […] it all is an accomplishment. Look at lottery winners or retired athletes. According to economist Matt Palumbo, if Trump invested $40M in the market, today he would have $1.91 billion after tax. This assumes […]

  12. […] it all is an accomplishment. Look at lottery winners or retired athletes. According to economist Matt Palumbo, if Trump invested $40M in the market, today he would have $1.91 billion after tax. This assumes […]

  13. […] it all is an accomplishment. Look at lottery winners or retired athletes. According to economist Matt Palumbo, if Trump invested $40M in the market, today he would have $1.91 billion after tax. This assumes […]

  14. […] it all is an accomplishment. Look at lottery winners or retired athletes. According to economist Matt Palumbo, if Trump invested $40M in the market, today he would have $1.91 billion after tax. This assumes […]

  15. […] it all is an accomplishment. Look at lottery winners or retired athletes. According to economist Matt Palumbo, if Trump invested $40M in the market, today he would have $1.91 billion after tax. This assumes […]

  16. […] it all is an accomplishment. Look at lottery winners or retired athletes. According to economist Matt Palumbo, if Trump invested $40M in the market, today he would have $1.91 billion after tax. This assumes […]

  17. […] it all is an accomplishment. Look at lottery winners or retired athletes. According to economist Matt Palumbo, if Trump invested $40M in the market, today he would have $1.91 billion after tax. This assumes […]

  18. The Lonely Existence of OogaBooga says:

    ^”Mommy what’s that thrashing sound in the basement!”
    “Oh no worries honey, that’s OogaBooga having a temper tantrum.”
    “But why mommy?”
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  19. […] it all is an accomplishment. Look at lottery winners or retired athletes. According to economist Matt Palumbo, if Trump invested $40M in the market, today he would have $1.91 billion after tax. This assumes […]

  20. OogaBooga says:

    The loyal readers of Street Carnage are far too sophisticated to fall for such a sophomoric false flag. Step up your game, hasbara, or the Knesset is going to revoke that scholarship. Also, isn’t it great that William Kristol is so enraged and sad over Trump’s victory? Isn’t that just soooooo awesome?! G-d, I love it! I bathe in Zionist Neocon tears. I do!

  21. […] it all is an accomplishment. Look at lottery winners or retired athletes. According to economist Matt Palumbo, if Trump invested $40M in the market, today he would have $1.91 billion after tax. This assumes […]

  22. […] it all is an accomplishment. Look at lottery winners or retired athletes. According to economist Matt Palumbo, if Trump invested $40M in the market, today he would have $1.91 billion after tax. This assumes […]


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