Weekly Update from RLA Tax and Wealth Advisory

By:  Dennis Tubbergen

Will the Last One Out of New York City Please Turn Out the Lights?

         The recently elected mayor of New York City, Zohran Mamdani, has very publicly announced his intentions to make wealthy New Yorkers and wealthy New York City property owners tax targets.

         As I’ve been reporting here this year, the wealthy and affluent vote with their feet, with many moving their residences and their businesses to more tax-friendly jurisdictions.  That trend is continuing and accelerating.

         Citadel Chief Executive Officer, Ken Griffin, has already made the move to Miami with his business and personally.  Mayor Mamdani recently doubled down on his plans to tax the wealthy and even publicly called out Griffin when the mayor stood in front of Griffin’s New York City penthouse valued at $238 million and proposed a tax on luxury real estate owned by non-residents of New York City.  Of course, that now describes Griffin.

         Griffin said he watched Mamdani’s video three times (Source:  https://www.zerohedge.com/political/another-wall-street-giant-plotting-its-escape-mamdanis-new-york-city-report) and said he found the video “creepy and weird”.

         Griffin relocated his business from Chicago to Miami recently and had this to say about the New York Mayor’s actions, “Looking at what Mamdani did to me and more broadly is doing to the City of New York is triggering the trauma that I went through in Chicago.”

         Griffin added, “We went to Miami and revised our building plan to make it a bigger office building.  What the mayor of New York has made clear to my partners, and principally my New York partners, is that we need to double down on our bet in Miami.”

         Now, on the heels of Griffin moving, another high-profile financial firm is leaving New York City.  Apollo, a private-equity behemoth, announced that the company would be establishing a ‘second headquarters’ in either Florida or Texas.  (Note:  both states have no personal income tax)

         I fully expect many more stories like this one as the year progresses.

Warren Buffett on the US Dollar

         Omaha’s most famous investor, billionaire Warren Buffett, is worried about the future of the US Dollar.  During a recent meeting with Berkshire Hathaway shareholders, the Oracle of Omaha openly stated that he’s worried about the US Dollar’s eroding value.

         “We wouldn’t want to be owning anything that we thought was in a currency that was really going to hell, and that’s the big thing we worry about with the United States’ currency,” Buffett commented.

         “Fiscal policy is what scares me in the U.S.”, Buffet further stated.

         Evidently, Mr. Buffett is concerned that more than two decades of persistent and increasing government deficit spending may be close to reaching a tipping point.

         The US Dollar Index, which measures the purchasing power of the US Dollar against the purchasing power of the currencies of the six major trading partners of the US, is down 8% already year-to-date.  (Source:  https://finance.yahoo.com/news/warren-buffett-big-worry-over-161500718.html)

How Argentina Slashed Housing Costs

         When the current president of Argentina, Javier Milei, took office in 2024, the monthly rent for an apartment in Buenos Aires averaged 90% of income.  Fast-forward to the present, and rent costs now average 30% of income.

         Just in case you think it was a master stroke of new policy orchestrated by a group of politicians that was responsible for far more affordable rents, it was not.  It was exactly the opposite – slashing regulations and allowing landlords and tenants to negotiate without government interference was responsible for the remarkable housing cost about face.  (Source:  https://www.profstonge.com/p/how-argentina-cut-home-costs-70)

         Shortly after taking office, Milei eliminated rent controls, made lease agreements simpler, and even put landlord protections in place.  That’s counter to the policies imposed by many self-proclaimed socialist politicians who put extreme tenant rights protections in place and cap rents to the point that landlords simply quit renting.

         Milei’s reforms allowed landlords and tenants to determine their own lease terms without government interference.  Landlords could set the rental terms and ask for rent payments in any form that they desired, including asking for rent payments in dollars, gold coins, or Bitcoin.  

         Once the oppressive government regulations were set aside, landlords got back in the game.  Rental listings tripled as more than 200,000 vacant rental units were put back on the market.

         Compare that to some big city rental policies in the United States.  The aforementioned city of New York is looking to triple rent controls to include one third of all housing. 

         In the city of Los Angeles, rent controls now affect 75% of all housing.  Minneapolis and St. Paul recently imposed new rent control regulations and subsequently saw building permits crash by 80%.

         It’s no coincidence that New York City has 50,000 vacant apartments because landlords have decided that it’s not worth the trouble or the risk to rent them out.  This, even though there are more than 160,000 families looking for housing.

         Similar problems exist in other large cities that have pursued similar policies, including Los Angeles and San Francisco.

         When I wrote the book “Economic Consequences” more than 15 years ago, I included a chapter about seemingly well-intended government policies that create unintended consequences.  This is just one more example.

RLA Radio

         The RLA radio program this week features an interview that I did with Mr. Simon Popple, a commodities and precious metals expert.  In last week’s issue of “Portfolio Watch”, I told you the same thing. 

         The interview is now available by clicking on the "Podcast" tab at the top of this page.

Quote

“Happiness is being stuck in an elevator and discovering the ravishing blond with you is a liquor salesperson with a case of samples.”

                                           -Johnny Carson