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Schwab Leaves San Francisco for Texas

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291–300 of 325 posts

Re: Schwab Leaves San Francisco for Texas

#291

Earlier quoted context omitted.

Part of the problem with housing prices in California is that property taxes are too low. Prop 13 means existing homeowners are shielded from higher property taxes, so growing property values are only good for them, no matter how high. Thus, there's no incentive to increase housing supply, which could lower prices.

The idea that California property taxes are too low is completely wrong, they are too high. In Vancouver, my family’s house was paying around $6000/yr in property taxes and the house was worth 1.4M only because the housing market in Vancouver has been crazy for decades. My friend in Toronto pays $3800 on her $700k single family home. My house in the Bay Area I bought for $1M and my taxes were $12,000 and in the last…

In non California states, this is pretty easy, your hypothetical retiree takes out a home equity loan or reverse mortgage.

In places like New York, you don’t see mass displacement of old people.

Re: Schwab Leaves San Francisco for Texas

#292
post #106

Am I the only one who thinks nobody is talking about the elephant in the room ? i.e. the cause and effect. Fintech companies like Robinhood have popularized the concept of (a) zero fee trading and (b) better UI/UX and just better service/offering on highly scalable platforms that allow them to introduce new products/services, which are virtually impossible for legacy providers like Schwab. Seems like that is the sing…

https://www.schwab.com/public/schwab/active_trader I don't think Robinhood can even compare to the tools offered by Schwab's brokerage accounts. It's like r/wallstreetbets vs r/investing I do agree that Robinhood was the first to make trading accessible to the masses and pushed for zero-fee trading.

What percentage of the users at Schwab use the premium tools, my guess is somewhere between 1-10% ? Does Schwab earn disproportionate revenue from them ? If yes, then I can see your point but as someone below points out most brokerages make money off balances carried in the brokerage accounts. That makes Robinhood (and the likes of it ) valuable since it's more about monthly active users. My point is user base growth has been stagnant with traditional brokerages, whereas fintech upstarts are on a tear. That combined with other revenue vectors e.g. crypto trading, SIPC insured bank accounts etc. make it difficult for traditional brokerages to compete

Re: Schwab Leaves San Francisco for Texas

#293
post #106

Am I the only one who thinks nobody is talking about the elephant in the room ? i.e. the cause and effect. Fintech companies like Robinhood have popularized the concept of (a) zero fee trading and (b) better UI/UX and just better service/offering on highly scalable platforms that allow them to introduce new products/services, which are virtually impossible for legacy providers like Schwab. Seems like that is the sing…

Will be interested to see robinhoods "financials" when they finally release them. It's likely their business model is of the "give free stuff away and raise more funding" variety.

Financials are not public but they make money like other brokerages i.e. on the float. They also seem to have a fremium model. Add to that other products they are offering and I won't be surprised if they growing in revenue per user terms. Yes, they are likely using VC money for growth but also have long term potential for a viable model

Re: Schwab Leaves San Francisco for Texas

#294
post #106

Am I the only one who thinks nobody is talking about the elephant in the room ? i.e. the cause and effect. Fintech companies like Robinhood have popularized the concept of (a) zero fee trading and (b) better UI/UX and just better service/offering on highly scalable platforms that allow them to introduce new products/services, which are virtually impossible for legacy providers like Schwab. Seems like that is the sing…

Keep in mind it's not a technological wave of disruption this time, but a round of venture backed growth companies that compete for users, but do not need to make a profit.

Sooner or later they will need to make profit. I posit they are on a good trajectory to do so:

Square and Stripe will make profit in payments (they almost are) Coinbase will make a profit in crypto (it's already break even) Affirm, Lendup, Sofi etc. will make a profit in lending Robinhood and the likes of it will make a profit in trading

The reason is simple: The traditional companies that they are displacing had an order of magnitude higher cost structure and weren't able to transform their backend legacy systems quickly enough (yes, they did transform their front-end UI/UX somewhat to match the newer ones, but the core is not scalable to be able to offer newer products). If the older companies were able to make a profit the newer ones will make greater profit. Again, to take Robinhood as an example: Free trading a great lure for users, however most of the money is made on other services e.g. float. Thus giving away a small part of revenue i.e. trading cost and recoup more from other services is huge.

Re: Schwab Leaves San Francisco for Texas

#295
post #34

Earlier quoted context omitted.

It would need to be a real big exodus for property tax revenues to go down. Prop 13 limits and associated low turn property turnover means a large amount of the tax roll is assessed under current value. During the 2008 real estate crash, few of the California counties saw a decrease in property tax revenues.

Wouldn't property turnover be high if there is an exodus?

Probably yes, however, because so many properties are assessed so far under their current market value, due to historic low turnover, the high turnover of an exodus would tend to raise the overall assessed value, unless the price drop was very extreme

Re: Schwab Leaves San Francisco for Texas

#297
post #167

Earlier quoted context omitted.

There is nothing wrong with moving to a better tax jurisdiction because you want lower taxes. It is perfectly legal, happens all the time, and is not something subject to a 'government review', because firms are expected to optimize their behavior in order to avoid taxes as much as possible, and even legally required to do so if they are to meet their obligations to maximize shareholder value. The whole idea that peo…

> and even legally required to do so if they are to meet their obligations to maximize shareholder value. This is a solid comment overall, but I really wish this particular widespread canard would die already. It's flatly untrue, the kind of myth that lives on because there are so many people who aren't capable of processing the benefits and costs of corporations and treat them as one-dimensional boogeymen out of a c…

It is not a canard. The purpose of a corporation is going to be specified in the corporate charter, and while some corporations are non-profits or have explicit charitable requirements, most have a charter that focuses on maximizing shareholder earnings. Almost no company has a charter that focuses on maximizing taxes paid.

That charter is a binding contract that governs the behavior of the officers of the company and shareholders, when they buy shares of a company, do so with their rights and the obligations of officers encoded in that charter. They are not buying blind -- they are buying into that charter. That is a contract that they expect to be followed.

The idea that a corporation can do whatever it wants and ignore shareholders is a fashionable myth in some lefty circles and has absolutely no basis in reality or corporate law. If you want to found a corporation whose charter is to help the poor, or to provide high paying secure jobs to workers, you can certainly do that, but then it goes in the charter and if a corporate officer were to start turning the company into a for profit venture she could get sued by the shareholders just as an officer turning a for profit company into a non-profit can get sued.

In addition to the legal obligation of abiding by the charter (in the sense that it is a contract and you can get sued for breaching it), most corporate charters are structured in such a way as to allow shareholders certain operational control: to replace board members who they don't believe are acting in their (the shareholder) interest, require shareholder approval for major things like executive pay, issuance of corporate debt, issuance of more stock, etc. This is another way that corporate officers are bound to serve shareholder interests and again these rights are all promised to the shareholder in the charter before they purchase stock, so that a shareholder knows what they are buying and what rights they have.

In addition to the daily operational controls that shareholders exercise, the charter also specifies what is necessary to change it -- usually a shareholder majority of some kind. This means if you displease the shareholders, they will sell your stock, lowering your stock price, allowing a hostile shareholder to buy up the company and throw management out and also rewrite the charter. Maybe even take the company private so they become the sole owner of the entire company. All of that is hanging, like a Damocles sword, over management, forcing management to cater to shareholder preferences.

If you don't like the current shareholder focus -- and there is a case to be made that we are too focused on the shareholder -- then you can go company by company and propose a vote to amend the current charter, assuming you can get the shareholders to agree -- but what you can't do is pretend that the vast majority of corporate charters aren't structured in such a way as to force corporate officers to maximize shareholder value. They are.

Re: Schwab Leaves San Francisco for Texas

#298
post #189

Earlier quoted context omitted.

I think equity, even relatively illiquid equity, should be wealth taxed (at least on amount >$50m). I am sure there will be novel financial tools to provide liquidity to pay this tax if this was the case. At the same time it might discourage bubbles in valuations (eg weworks).

Why carve out equity that should have a wealth tax associated with it differently based on the type? I would think that intellectually consistency would demand that either we tax all equity based on unrealized gains the same whether it is stock, equity in a business or real estate property.

I am not carving out equity. I think everything should be wealth taxed. I also think there should be a large deductible.

Re: Schwab Leaves San Francisco for Texas

#299
post #297

Earlier quoted context omitted.

> and even legally required to do so if they are to meet their obligations to maximize shareholder value. This is a solid comment overall, but I really wish this particular widespread canard would die already. It's flatly untrue, the kind of myth that lives on because there are so many people who aren't capable of processing the benefits and costs of corporations and treat them as one-dimensional boogeymen out of a c…

It is not a canard. The purpose of a corporation is going to be specified in the corporate charter, and while some corporations are non-profits or have explicit charitable requirements, most have a charter that focuses on maximizing shareholder earnings. Almost no company has a charter that focuses on maximizing taxes paid. That charter is a binding contract that governs the behavior of the officers of the company an…

You moved the goalposts. Corporate officers may indeed be motivated to maximize profits by the threat of being thrown out by shareholders. But they are not legally required to do so, or at least they have no meaningful risk of losing a lawsuit over it; the business judgment rule creates a presumption that they are acting in the corporation’s best interests, a presumption which is hard to overcome. The main exception is if they sacrifice the corporation’s interests for personal financial gain (self-dealing), but that’s not what’s being discussed here.

Re: Schwab Leaves San Francisco for Texas

#300
post #266

Earlier quoted context omitted.

Where they will learn that Texas government pays for itself with oil and gas extraction taxes, which don't exist in California.

Texas and the oil industry are one and the same, fully intertwined. God help the poor soul that owns land where a private oil company wants to build a pipeline or plant. Said land will be instantly seized by the company under eminent domain laws and the owner will get a pittance in return. If you're cool with that, then Texas is a great place for you to live. While this article is about Louisiana, the same laws (and…

Yeah. Sadly you never really own your house. Even after you payoff the mortgage, which many won't because they always refinance and consolidate loans. But even if you do end up paying off the mortgage, then you have to pay rent to the government, which who knows when your neighborhood will be torn down to build a highway or high speed rail project.

Then if you own the land, you don't even own the water, oil or whatever else might be under it. Remember abou a decade ago seeing something where a guy was disputing the county in Oregon over water rights, and they even illegally entered his property with no warrants or anythings.

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