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Pretty nice work for a 'janitor'. :-)
Also, congratulations on programming in awk. The world of
programming would be a better place if more people coded in
powerful, flexible, and unpretentious languages like awk.
Now on an even less serious note: if you have a hedge fund and
take out the cost of a plane ticket the Cayman Islands or
Bermuda, how long would it take for LB to overtake BB? :-)
Leslie
janitor@xxxxxxxxxxxx wrote:
>
> Suppose you have a hedge fund and suppose you open a
> "model account" with something like $1000.00, just to provide
> an actual "real money" track record showing precisely what an
> investor's account has done over the life of the fund.
>
> If your hedge fund is wildly successful, the model account will
> grow to a tremendous equity and the taxes on those profits would
> be immense (it is feverishly hoped).
>
> How do you pay the taxes on the model account? You certainly
> don't want to withdraw funds from the model account to pay its
> taxes; that'd ruin the very purpose of the model account.
>
> I explored a wacky scheme that I will call Big Brother / Little Brother.
> Perhaps some omega-list readers may enjoy seeing its operation.
> If not, I apologize for boring you.
>
> The idea is this: you open TWO accounts. The Little Brother
> account is the Model Account and is opened for $1000.00. You
> never withdraw funds from this account, never ever ever, so it
> shows the exact real-money track record that investors received.
> The Big Brother account is opened for 100X more initial money
> (i.e. $100K). It pays taxes for BOTH itself AND for its little brother.
>
> Naturally, Little Brother's equity will grow faster than Big Brother's:
> BB is paying taxes and LB isn't. So, eventually, LB will catch up
> to BB and overtake BB. But if that happens a long loooong time
> after the fund begins, giving you a loooong unbroken track record
> in the Model Account, it is probably good enough. If it gives you
> a (plug in your favorite number here) 25 year track record, you
> are probably happy.
>
> So I fired up the LINUX box and ran the program AWK to see
> where these "overtake" points might occur.
>
> Not surprisingly, they are *strongly* dependent upon the taxation
> rate, and the hedge fund's Compound Annual Growth Rate ("CAGR")
> after deducting fees and performance bonuses.
>
> Just as your intuition would predict, the computer results said:
> * The lower the taxes, the longer it takes LB to overtake BB.
> * The higher the profits (CAGR), the less time it takes LB to overtake.
>
> Here is some of the output. In every case, BB was funded with
> $100k and LB was funded with $1k. Taxation rates and compound
> annual growth rates were varied.
>
> Conculsion? 100X seems like a good ratio between BB and LB,
> giving you at least a 15 year track record before LB overtakes BB.
> UNLESS you hit very large (after fees) profit percentages, in which
> case you might want to use 1000X.
>
> tax 30% cagr 35% overtake in 50 yrs $ 2434191022
> tax 35% cagr 35% overtake in 43 yrs $ 297864178
> tax 40% cagr 35% overtake in 37 yrs $ 49205728
> tax 45% cagr 35% overtake in 33 yrs $ 14814281
> tax 50% cagr 35% overtake in 30 yrs $ 6021148
> tax 55% cagr 35% overtake in 27 yrs $ 2447248
> tax 60% cagr 35% overtake in 25 yrs $ 1342797
> tax 65% cagr 35% overtake in 23 yrs $ 736789
> tax 30% cagr 40% overtake in 45 yrs $ 2689264815
> tax 35% cagr 40% overtake in 39 yrs $ 357162090
> tax 40% cagr 40% overtake in 34 yrs $ 66408730
> tax 45% cagr 40% overtake in 30 yrs $ 17286737
> tax 50% cagr 40% overtake in 27 yrs $ 6299831
> tax 55% cagr 40% overtake in 24 yrs $ 2295857
> tax 60% cagr 40% overtake in 22 yrs $ 1171356
> tax 65% cagr 40% overtake in 21 yrs $ 836683
> tax 30% cagr 45% overtake in 42 yrs $ 4131312924
> tax 35% cagr 45% overtake in 36 yrs $ 444508508
> tax 40% cagr 45% overtake in 31 yrs $ 69348978
> tax 45% cagr 45% overtake in 28 yrs $ 22747625
> tax 50% cagr 45% overtake in 25 yrs $ 7461602
> tax 55% cagr 45% overtake in 22 yrs $ 2447530
> tax 60% cagr 45% overtake in 21 yrs $ 1687952
> tax 65% cagr 45% overtake in 19 yrs $ 802831
> tax 30% cagr 50% overtake in 39 yrs $ 4914369920
> tax 35% cagr 50% overtake in 33 yrs $ 431439883
> tax 40% cagr 50% overtake in 29 yrs $ 85222693
> tax 45% cagr 50% overtake in 26 yrs $ 25251168
> tax 50% cagr 50% overtake in 23 yrs $ 7481828
> tax 55% cagr 50% overtake in 21 yrs $ 3325257
> tax 60% cagr 50% overtake in 19 yrs $ 1477892
> tax 65% cagr 50% overtake in 18 yrs $ 985261
> tax 30% cagr 55% overtake in 36 yrs $ 4587852385
> tax 35% cagr 55% overtake in 31 yrs $ 512803458
> tax 40% cagr 55% overtake in 27 yrs $ 88843192
> tax 45% cagr 55% overtake in 24 yrs $ 23857727
> tax 50% cagr 55% overtake in 22 yrs $ 9930375
> tax 55% cagr 55% overtake in 20 yrs $ 4133351
> tax 60% cagr 55% overtake in 18 yrs $ 1720437
> tax 65% cagr 55% overtake in 16 yrs $ 716103
> tax 30% cagr 60% overtake in 34 yrs $ 5444517871
> tax 35% cagr 60% overtake in 29 yrs $ 519229686
> tax 40% cagr 60% overtake in 26 yrs $ 126765060
> tax 45% cagr 60% overtake in 23 yrs $ 30948501
> tax 50% cagr 60% overtake in 20 yrs $ 7555786
> tax 55% cagr 60% overtake in 18 yrs $ 2951479
> tax 60% cagr 60% overtake in 17 yrs $ 1844674
> tax 65% cagr 60% overtake in 16 yrs $ 1152922
> tax 30% cagr 65% overtake in 33 yrs $ 9109325374
> tax 35% cagr 65% overtake in 28 yrs $ 744846007
> tax 40% cagr 65% overtake in 24 yrs $ 100491821
> tax 45% cagr 65% overtake in 22 yrs $ 36911596
> tax 50% cagr 65% overtake in 19 yrs $ 8216957
> tax 55% cagr 65% overtake in 18 yrs $ 4979974
> tax 60% cagr 65% overtake in 16 yrs $ 1829191
> tax 65% cagr 65% overtake in 15 yrs $ 1108601
> tax 30% cagr 70% overtake in 31 yrs $ 8193465726
> tax 35% cagr 70% overtake in 27 yrs $ 981006660
> tax 40% cagr 70% overtake in 23 yrs $ 117456288
> tax 45% cagr 70% overtake in 21 yrs $ 40642314
> tax 50% cagr 70% overtake in 19 yrs $ 14063084
> tax 55% cagr 70% overtake in 17 yrs $ 4866119
> tax 60% cagr 70% overtake in 15 yrs $ 1683778
> tax 65% cagr 70% overtake in 14 yrs $ 990458
> tax 30% cagr 75% overtake in 30 yrs $ 11171292210
> tax 35% cagr 75% overtake in 26 yrs $ 1191108207
> tax 40% cagr 75% overtake in 22 yrs $ 126998626
> tax 45% cagr 75% overtake in 20 yrs $ 41468939
> tax 50% cagr 75% overtake in 18 yrs $ 13540878
> tax 55% cagr 75% overtake in 16 yrs $ 4421511
> tax 60% cagr 75% overtake in 15 yrs $ 2526578
> tax 65% cagr 75% overtake in 14 yrs $ 1443759
> tax 30% cagr 80% overtake in 29 yrs $ 14048506052
> tax 35% cagr 80% overtake in 25 yrs $ 1338258845
> tax 40% cagr 80% overtake in 22 yrs $ 229468252
> tax 45% cagr 80% overtake in 19 yrs $ 39346408
> tax 50% cagr 80% overtake in 17 yrs $ 12143953
> tax 55% cagr 80% overtake in 15 yrs $ 3748134
> tax 60% cagr 80% overtake in 14 yrs $ 2082296
> tax 65% cagr 80% overtake in 13 yrs $ 1156831
> tax 30% cagr 85% overtake in 28 yrs $ 16354477245
> tax 35% cagr 85% overtake in 24 yrs $ 1396206814
> tax 40% cagr 85% overtake in 21 yrs $ 220513188
> tax 45% cagr 85% overtake in 18 yrs $ 34827266
> tax 50% cagr 85% overtake in 17 yrs $ 18825549
> tax 55% cagr 85% overtake in 15 yrs $ 5500526
> tax 60% cagr 85% overtake in 14 yrs $ 2973257
> tax 65% cagr 85% overtake in 13 yrs $ 1607166
> tax 30% cagr 90% overtake in 27 yrs $ 17684534181
> tax 35% cagr 90% overtake in 23 yrs $ 1356998042
> tax 40% cagr 90% overtake in 20 yrs $ 197841966
> tax 45% cagr 90% overtake in 18 yrs $ 54803869
> tax 50% cagr 90% overtake in 16 yrs $ 15181127
> tax 55% cagr 90% overtake in 14 yrs $ 4205298
> tax 60% cagr 90% overtake in 13 yrs $ 2213315
> tax 65% cagr 90% overtake in 12 yrs $ 1164903
> tax 30% cagr 95% overtake in 26 yrs $ 17818259684
> tax 35% cagr 95% overtake in 22 yrs $ 1232329482
> tax 40% cagr 95% overtake in 20 yrs $ 324084019
> tax 45% cagr 95% overtake in 17 yrs $ 43707280
> tax 50% cagr 95% overtake in 16 yrs $ 22413990
> tax 55% cagr 95% overtake in 14 yrs $ 5894540
> tax 60% cagr 95% overtake in 13 yrs $ 3022841
> tax 65% cagr 95% overtake in 12 yrs $ 1550175
> tax 30% cagr 100% overtake in 26 yrs $ 33554432000
> tax 35% cagr 100% overtake in 22 yrs $ 2097152000
> tax 40% cagr 100% overtake in 19 yrs $ 262144000
> tax 45% cagr 100% overtake in 17 yrs $ 65536000
> tax 50% cagr 100% overtake in 15 yrs $ 16384000
> tax 55% cagr 100% overtake in 14 yrs $ 8192000
> tax 60% cagr 100% overtake in 12 yrs $ 2048000
> tax 65% cagr 100% overtake in 11 yrs $ 1024000
>
> -------------------------------------------------
> Get your free @Elvis e-mail account at Elvis.com!
> http://www.elvis.com
--
Regards,
Leslie Walko
610-688-2442
--
"Life is a tragedy for those who feel, a comedy for those who
think"
Horace Walpole, 4th earl of Orford, in a letter dated about 1770
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