Wall Street Financial Truth

Chapter 32 How the Common People Protect Their Wealth (2)
From the above example, it can be seen that the value of money keeps depreciating at home, and it is not acceptable to put it in the ordinary account of the bank, because the interest rate cannot keep up with the rise in prices.Where is the best place to put the money?

Here to tell you, a statistical report I saw.The report counts the rankings of the returns of various investment instruments in the United States in the first 80 years.In the past 80 years, the United States has experienced many stock market booms and real estate booms; it has also experienced the Great Depression, the 9 incident, several stock market crashes and the bursting of the real estate bubble. How many ups and downs.This summary statistics report should be able to explain the problem very well. What is the problem?

The lowest rate of return on investment is ordinary bank deposits. From a domestic point of view, the average annual interest rate is only 3% (the demand rate is even less), which cannot match the inflation rate of 3.5%. The slightly higher rate is government bonds. The average rate of return is 5.5% per year. The statistical results show that investing $1925 in government bonds in 1 increased in value to more than $2005 in 7; Around US$1925, the average appreciation rate is 1% per year.Investing in real estate is similar to government bonds and can beat inflation.

再来看股票投资的回报率。这个统计在每个不同阶段选100家有代表性的大公司股票平均值。假如1925年投入1千美元的话，到2005年的市值是200万，平均年回报为10%；而最高的是投入不同阶段的1000家小公司的股票，每年平均的回报率是14%，当然是那些有潜力成长为大公司的小公司！
So to sum it up in one sentence, money begets money, money is made in circulation, and 1 yuan of money becomes 10 yuan in circulation 10 times.The key is to have the right investment and opportunity.Of course, investment and risk are brothers, and making money depends on personal ability.

4. What is the best investment product?

CNN has several episodes of "Morgan Tonight" program, talking about the benefits of opening Weibo. Everyone agrees that Weibo brings people closer, and everyone can discuss issues of concern and express their opinions.For this point, I have a deep feeling, which makes me write with a purpose, very good!

For example, many netizens often ask me, what is the best investment product?To answer this question, I first ask them what is investing?Although there are many answers, few of them satisfy me, because most people obviously confuse the concepts of investment and speculation.

Earlier I talked about the difference between investment and speculation.The income from investment comes from the wealth generated by the investment product; while the income from speculation comes from the losses of another speculator.In other words, speculation is participating in a zero-sum game (not counting transaction costs and taxes, the sum of money lost and money earned is zero).Furthermore, only investment can generate wealth, while speculation is only the redistribution of wealth.

From the above definitions, it can be seen that the hottest real estate, stock and gold speculation in the world these years has nothing to do with investment at all. In fact, it is just a speculative behavior of buying low and selling high. How can it be called the best investment? .Of course, for those with rich market experience, speculation can certainly make money and make a fortune.But for ordinary people, due to the extreme asymmetry of information, most of them can only be losers in this zero-sum game.Therefore, unless you have an extraordinary sixth sense, try to speculate as little as possible, and at most make small bets for fun and just have fun.

Knowing the difference between investment and speculation, someone asked again: "Should I choose investment products by myself, or should I hire professionals (so-called financial experts) to manage my money?"

It happened that Hong Huang (CEO of China Interactive Media Group) mentioned on her Weibo that the personal investment and wealth management account she opened in Deutsche Private Bank "the more you manage, the less money you have." She accused "I will soon be regarded as a proletarian by them ".

Coincidentally.I think of 2008, when Libyan President Muammar Gaddafi handed over US$13 billion to Goldman Sachs for "management". In less than two years, the loss of this huge sum exceeded 2%, leaving less than 98 %.I can't help but sigh that Goldman Sachs is really "bull"!With such a huge amount of money, even if you go to a casino to gamble, it is difficult to lose like this.This is no wonder, because neither Hong Huang nor Gaddafi has read "Who Finance Makes Rich".If they have read this book, they will understand that if their money does not become more "reasonable" and less, how can the "experts" who "help" them "financial management" have more and more money in their pockets?

The classic Wall Street book "Where is the Client's Yacht" was written by Schweder, a former Wall Street trader.When Schweder came to New York from other places to try his luck, he finally found a job on Wall Street and became a trader.When he first entered the industry, he didn't understand anything. He heard that someone made money from the stock market, so he asked his colleagues around him why and how did the stockholders make money?The result was beyond his expectation. Everyone had different opinions, but no one could explain why he made money.But from the title of his book, Where is the Client's Yacht, you should be able to see the clue.

Schweder wrote in the book that a financial expert showed off to his cousin that his leisure luxury yacht was moored beside the South Pier. His cousin asked casually: So where are the yachts of the clients?The subtext of this question is: those brokers, financial experts, and traders all claim to help customers make money, but in the end, why the yacht has no customers.In fact, it is very simple, because in the money game on Wall Street, customers are just little sheep at the mercy of others, just like Hong Huang and Gaddafi, the money will only be treated less and less.

Perhaps, these are just extreme examples, but it is not difficult to see from them that "it is better to seek help than oneself" in investment and financial management.In fact, there is no secret to making a fortune. We can only obtain wealth through hard work and opportunities.Even if there is any secret, the person who knows the secret to getting rich will never share it with you, unless this person is a living Lei Feng, and Lei Feng just can't make a fortune.Remember, there is no windfall, and most of the flowers are traps.The old American cliché goes well: There is no such thing as a free lunch.If it sounds too good to be true, it isn't.

Now everyone has to ask, what is the best investment?
In fact, the best investment product is yourself. You should invest your precious time in your brain, because no one can deprive you of the knowledge in your brain. Especially in today's commodity society, you should operate like a business. You yourself, turn yourself into the most valuable commodity that will bring you wealth at any time.

Let me tell you a little story first.I have a friend who saved 10 yuan 5 years ago. He did not use 5 yuan as a down payment for buying a house, nor did he use it to buy stocks. Instead, he read a news saying that the demand for simultaneous interpretation will increase in the future. increase.Using the analysis of supply and demand, he believes that simultaneous interpreting can make a lot of money in the future.So, my friend spent 5 yuan on further learning foreign languages ​​and practicing simultaneous interpretation.At that time, the friends around him laughed at him as stupid, but gradually he became the envy of everyone.Now the price of simultaneous interpretation in China is as high as $250 per hour!And it is increasingly in short supply.Think about it, what a good investment this is!
Furthermore, a former Secretary of State in the United States once said: "Innovative ability can bring long-term and stable returns."Yes, as we all know, in a thriving enterprise, its innovation and invention ability must be active.Because innovative inventions can help people discover new worlds, develop new resources and increase productivity; innovative inventions can provide new methods to cure diseases, so that people can reduce their troubles and enjoy the most perfect life...In enterprises that focus on invention and innovation, new invention means With new technology, it means new employment opportunities, which in turn means high profits, and high profits can drive the company's stock appreciation, thereby promoting the company's continuous development and growth.

As an individual, the foundation of innovation ability is health and brain.If the brain is the source of wealth, then health is the capital of everything.Tangible wealth is like a house, which collapses in an instant after an earthquake or tsunami, and when the stock market crashes, it will immediately become a piece of paper. Only the intangible wealth that you have - a sound brain and health, cannot be taken away by anyone.To borrow a saying from our ancestors: "There is Yan Ruyu in the book, and there is a golden house in the book." It seems that the East and the West are highly consistent on this point.

My conclusion is that the best investment product is yourself!As an individual, having the basis for continuous wealth creation is health and brain.Please invest in your brain and health at any time. If you do these two things well, wealth will be created by you at any time.

5. "The day after tomorrow" housing prices created by credit

After 2000, the Federal Reserve lowered interest rates 11 times in a row, credit was further loosened, a large amount of "tomorrow's money" poured in, and housing prices turned around again.Until the end of 2006, everyone was using tomorrow's money to buy tomorrow's house price, or even the day after tomorrow's house price, plus interest factors.If there is no money tomorrow (such as the bursting of the bubble, affecting the real economy and rising unemployment), how should lenders deal with themselves?

In the second half of 2006, US housing prices began to fall.More than four years have passed, and it is still hard to say whether it has bottomed out.According to the US real estate market research website Realty Trac announced on April 2010, 4, the number of seized properties in the United States increased sharply in March, making the number of seized properties in the first quarter hit a record high.The U.S. government has launched a series of programs to rescue the housing market, but it still cannot slow down the speed of mortgage defaults.According to Realty Trac estimates, the number of seized properties in the United States in 15 may break the record of 2010 million last year, and will break through the 280 million mark.Expect foreclosures to continue to proliferate, at least until 300 and possibly 2013.It is clear that more Americans will lose their homes, and US real estate prices will continue to fall.

These people who lost their homes have one thing in common: they all bought the houses with loans from financial institutions.

After constantly learning that the dream of countless American people to buy a house and start a family has turned into a nightmare in an instant, and countless borrowers are under the double pressure of plummeting house values ​​and high mortgage payments, I believe that many Chinese people can't help but ask: "Is the situation in the United States today? Will it appear in tomorrow's China?"

Human nature is similar.Both Americans and Chinese feel that owning their own real estate is a symbol of success.However, the Chinese people have long been adhering to the traditional concept of saving at least seven cents of every ten cents they earn, and regard it as a prodigal son to eat more than enough food for free. In the early 20s, when commercial housing was just emerging, a 90-square-meter apartment in Hangzhou only cost about 70 RMB, which was unbelievably cheap according to the current housing prices, but the houses were still unsalable at that time. Why? Because At that time, ordinary people were not used to borrowing money to buy houses.

However, not long after, a fascinating story spread to the land of China: "One day, an American old lady and a Chinese old lady met in heaven. They asked each other about life in the world. way, lived in a big house and drove a big car, and walked around the world in style. After hearing this, the Chinese old lady regretted that she had been frugal all her life. It’s an unjust death.”

The consumption style of this "American old lady" immediately opened the eyes of the Chinese people and made them even more envious.For thousands of years, Chinese people have lived frugally, and their daily life revolves around one word - saving, never spending money that does not belong to them.Now the role model of the "American Granny" is in front of you, the same life, but a different life, if you can choose, why not?People yearn irresistibly to copy the consumption pattern of "American Granny" and get the enjoyment of "American Granny" in advance.Therefore, the seductive slogan "use tomorrow's money to realize today's dream" was loudly shouted at this appropriate time, which catered to the taste of the people and completely subverted the ancient Chinese tradition of "living within one's means".

A change in perception immediately brings about a change in action. As soon as the "American Granny" consumption pattern appeared, the Chinese people were unwilling to wait for five or six years.They gradually gave up their cautious attitude in the past, followed blindly, and rushed forward, as if they were about to risk everything.

If everyone does not rely on borrowing, then the rise and fall of housing prices can only fluctuate with the rise and fall of income, reflecting a reasonable supply and demand relationship, just like rent.For example, in Shanghai, the average house price has increased by 10 times in the past 4 years, while the increase in rent has not even doubled, which is obviously in proportion to the increase in income.This is because rent cannot be borrowed and must be paid in cash, and rent reflects real supply and demand.

The 70-square-meter apartment in Hangzhou, according to the income level of ordinary people at that time, was only equivalent to the average income of an ordinary family for three years.Ordinary families live frugally for five or six years, and they can afford to buy without borrowing money.But now, housing prices in China's first-tier cities are rising like rockets.In less than 20 years, housing prices in Hangzhou have increased by 10 to 15 times!The apartment that was 10 yuan back then has risen to 120 million yuan, or even 150 million yuan.

Those who are willing to risk it may never have thought that financial institutions are not philanthropists. "Using tomorrow's money" must pay interest.As a result, most people have become house slaves and will spend their entire lives on that house.

In fact, the "American Granny" consumption method only started in the past 30 years.From a British colony to independence, there was almost no inflation in the 1971 years before 300 in the United States, and housing prices have been maintained at 1.6 to 1.8 times the average annual household income. Ordinary households generally do not need to borrow money, and only need to deposit for a few years to buy. The next house of my own.

However, by 1971, the dollar was decoupled from gold, and the US could theoretically print unlimited money.The role of government as a regulatory function began to be lost.The national policy of lifting the ban and deregulating financial controls began in the Reagan administration, accompanied by the slogan of restoring the free market, known as the Reagan "revolution."This "revolution" was further pushed to a climax by the Bush and Clinton administrations.Financial institutions knew that the opportunity to make a fortune had come, so they changed their policy of strict loan approval and began to trick people into borrowing money to buy houses. The slogan "use tomorrow's money to realize today's dream" began to appear.Since 1971, the increase in housing prices in the United States has gradually exceeded the increase in income, from 1.6 times, all the way up to 3 times, 4 times, 5 times...

In the early 20s, home prices in the United States fell sharply for several years. After 90, the Fed lowered interest rates 2000 times in a row, credit was further relaxed, and a large amount of "tomorrow's money" poured into people, so house prices turned around and went up until the end of 11.

"Using tomorrow's money to realize today's dream" is the root cause of all bubbles in the past 30 years.why?It's actually very simple.We all know that in a market economy, prices are determined by supply and demand.Once everyone can borrow money, when everyone has "tomorrow's money" in their hands, at this time a person's purchasing power has been separated from his actual income, and the relationship between supply and demand in the market is immediately distorted.When using tomorrow's money that does not yet exist to buy a house, the false "seeking" will increase infinitely, and the house price will naturally rise sharply.

As for renting a house, as long as you pay attention to it, you will know that it has not increased in proportion to the increase in housing prices over the years, but has only increased in proportion to income.Because renting a house must be paid in cash, it cannot be paid with a loan.

(End of this chapter)