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<p>I own a dozen houses and the taxes and interest certainly do far exceed the deductions. The deduction will be based on your tax bracket…ie if you are in a 35% tax bracket it would essentially be 35% of what you are paying out in taxes and interest. </p>
<p>Thus, you are not saving more. In fact, you are paying out more by having those deductions. For example, if I own a million dollar home and don’t have a mortgage, I won’t be able to deduct any interest but I will still be paying out far less than someone who is taking a mortgage interest deduction.</p>
<p>i still think it is morally unjustifiable to have 10 yachts, when there are people dying cause they don’t have 10 cents. most billionaires give a small portion of their money to charity, but the amount is nothing in comparison to how much they COULD give.</p>
<p>I’m not really sure how it all works, but my family bought a huge house for tax purposes and now my dad pays less in taxes.</p>
<p>The tax savings are not much. Eventually the deductions will be outstripped by the cost of maintaining and servicing the property.</p>
<p>Fact of the matter is that, they act like they do because they want to. America is an open society where government does not dictate how people spend their money. And thank goodness for that. </p>
<p>People often love to compare how doctors, teacher etc are doing great for the world and still getting paid less. Well the reason why they are not generating such large paychecks is due to simple supply and demand. The guys this show highlighted (Cohen, Lampert) are in a field with an income distribution far to the right. An often quoted statistic is that 90-95% of all traders fair. So the trader who is at the 90th-95th percentile is breaking even although s/he is better than the majority in the field. Its not that the entire group is making outrageous amount of cash. </p>
<p>On the other hand, doctors and teachers are in a field which is “trainable” and has a large supply of people who are willing and can do the job. This is not the same for HF managers pulling in billion dollars a year. The number of guys that can post returns of that nature are infinitesimally small. </p>
<p>And finally, you can’t judge a person’s use to society solely through direct impact. It was described by Smith as the invisible hand which converted individual greed into collective progress. The winnings Lampert made through revitalizing Sears and Kmart have ended up providing jobs to thousands of employees who otherwise would have been out on the streets right now. The quick paced trading by Cohen has ended up providing liquidity to the marketplace which has decreased transaction expenses (for your pension funds) and increased market stability. Increased market liquidity, which in turn decreases market volatility, has led to an easing of lending practicing which in turn fueled (among other things) home ownership. </p>
<p>In a highly specialized society it is foolish to solely look at direct impact of actions. Society’s goal should be to maintain a playing field such that skilled individuals have the freedom to apply and generate progress.</p>
<p>I just watched it today! very jealous…</p>
<p>mahras2…that seems like an excuse for businessmen. Doctors spend years in training, and btw, there is actually a shortage of doctors, so not that many are actually there to do the job like you said.</p>
<p>No thats an excuse for anyone involved in a specialized society. View it this way:</p>
<p>The average trader has (without question) a life span of less than a decade. Most entering traders last for a few years. Its an industry where the majority fail but a very small minority rake in big bucks. </p>
<p>Your average doctor, regardless of specialty, most likely can practice until s/he retires, and has a steady paycheck. There is also very little dramatic change in income distribution as the paycheck of a pediatrician regardless of skill doesn’t vary much. This is not the case with traders. The vast majority will not make much money and will move into other industries. The small minority will make money and the very minuscule population at the top of this small minority will make fortunes which are described in shows like the VH1 one.</p>
<p>I would also point out that there are quite a few TV shows (as thats what we are going by here) which shows incredibly ostentatious spending by doctors. Doctors are no saints and they are compensated for their service to society.</p>
<p>mahras, you will make a fine trader some day</p>
<p>Mahras, just curious, how many people in hedge funds and i- banking (thought by most to be the most lucrative) make over 500k/ year? Is it a good percent, or is it the top of the field?</p>
<p>Last year, decent amount (I can’t give you an exact figure…and I don’t think anyone can). But again, you are looking at year on year rates which fluctuate wildly. Last year (A quarter ago really), cheap credit and search for alpha resulted in a massive flurry of buyout deals and hedge fund investments which generated fat paychecks. But now there are entire divisions that are awaiting [or have already gotten] layoffs. </p>
<p>Although I haven’t watched the show, it seems they profiled that Devaney guy who was involved in the ABS sector. A quarter ago he was flying high, but after taking a beating from the subprime bust he is having to sell off his yacht and some other toys he had acquired. </p>
<p>On the other hand, do pediatricians, neurosurgeons, radiologists etc see such volatility? Do they go from making 1MM per year to making 100K per year (and thats an optimistic senario)? The expected value of earnings for the average doctor is greater than the expected value of earnings for the average trader. Your average doctor will have a long worklife, and will earn a relatively steady paycheck. Your average trader will have a short worklife, will suffer from greater income volatility, and will be in a field where the median income is far less than the average.</p>
<p>I agree, Hedge Funds and Banking jobs are not steady careers to say the least. Besides a lot of Investment Banking firms recruit engineering majors from top tier schools for analyst positions the chase to land that job may prove to be a complete waste of time.</p>