Wall Street Financial Truth

Chapter 36 How the Common People Protect Their Wealth (6)
The funniest part of the film is that whenever the mother and son go out, his mother has to explain to everyone: "My son is here for vacation, and he is only staying with me for a few days." Of course, the storyline The protagonist is financially independent, and he returns to his mother's house for a specific reason, to find his lost love.

But now, in North America (the United States and Canada), the impact of the financial tsunami continues unabated, and the unemployment rate remains high.This has forced many unemployed young people to move back to their parents' homes, living under roofs they don't own.

Xiao Wang, the son of my friend Lao Wang, joined Merrill Lynch three years ago as soon as he graduated from university. He has been promoted to the position of a trader's assistant. More than 3 thousand dollars. "Even if it's only for a few streets, I don't hesitate to take a taxi or something. It's very grand." Old Wang said.

Unexpectedly, the trader that Xiao Wang followed made a miscalculation at the end of 2009 because of short selling. In the first half of 2010, the stock market rose, and he lost a lot, causing investors to lose more than 20 million yuan!Get fired by Merrill Lynch.Xiao Wang was also implicated and was laid off.This is a terrible situation. Xiao Wang sent hundreds of resumes in a row, and had more than 6 interviews. He has not found a suitable job for [-] months, and the unemployment benefits are not enough for living expenses.Lao Wang couldn't bear his son to go to work. Fortunately, the house at home was big enough, and Xiao Wang's room was left untouched, so he enthusiastically "invited" Xiao Wang to move back home.

I think that when Xiao Wang moved out, the old couple entered the "empty nest period". Lao Wang's wife was not used to it for a while, and often had a runny nose and tears, and Lao Wang suddenly felt empty.Now is just right, take this opportunity to have a family reunion, and also make up for some family affection.

After dinner one day, he came to the kitchen with a big paper bag and said to Lao Wang who was washing the dishes: "Dad, you are really dressed in such rustic clothes. What did you buy?" Hearing the sound, Lao Wang looked at the clothes his son had laid out, they were all brand-name clothes that he only dared to look at when he went to the store but dared not buy them, and he cried out in pain, "Oh, I can't wear my current clothes in my life It’s over, you’re out of work again, this…” He wanted to say that the reason why your dad can still support you is because of savings, never wear pants that cost more than 30 dollars, and never buy clothes that cost more than 50 dollars .But seeing the kindness on his son's face, he had no choice but to hold back the next words.

It's no wonder that Xiao Wang spends a lot of money. In the years when he was working, the bonus was [-] to [-] to [-], or even hundreds of thousands, so he didn't care about hundreds of thousands of clothing expenses.But this time, Xiao Wang paid for the Christmas gift to Lao Wang by swiping his card. Wouldn't Lao Wang have to pay for it at that time?Lao Wang is really afraid that in the end, "it is easy to invite God, but it is difficult to send God away".If you don't spend your own money on the old, you won't feel bad.

At present, the unemployment rate in the United States has climbed to the highest level in 30 years, and the greatest impact is on young people under the age of 35.According to recent statistics, more than 41% of young people say they do not have any security.Many graduates of the School of Business and Finance this year cannot find jobs, and they can only continue to live with their parents.Even those lucky enough to find a job, the salary is so low that seven out of ten say they don’t have enough savings for two months’ basic expenses, and almost a quarter of young people say they don’t even have enough money for basic expenses every month. Can't handle it... As a result, more and more people have to stay in their parents' house, or move back to their parents' house like Xiao Wang, thus cutting off the cost of high-end apartments.This shows from another level that the real estate market has plummeted as no one rents and no one buys it.

The financial crisis is now an economic crisis, especially the European debt crisis. The global economy is not optimistic.

But the facts show that the consumption concept of young Americans has changed. They used to be extravagant, swipe their credit cards frantically, consume in advance, and don’t know how to manage money. Now they are finally going to accept punishment...

14. Who to rely on for the elderly care
"The gap between heaven and earth is like a white horse..." In the blink of an eye, more than two years have passed since the global financial crisis.Although the governments of various countries are doing their best to rescue the market, the curative effect is extremely limited.Especially for the "baby boomers", the sudden financial crisis has caused their wealth to shrink sharply, and the uncertain factors in the future have disrupted their earlier plans - to enjoy a happy retirement life.

To put it bluntly, most of my friends are born around the 20s, and now the topic of discussion when we get together is to define when to retire?Is it time to start a new career and try new challenges, and use the money earned to make up for the loss of retirement funds due to investment in the stock market and housing market?If there's one thing we've learned from the financial crisis of the past two years, it's that just as the housing market is booming and the stock market is booming, the market has caught up with lightning speed and given the retirement assets of the "baby boomers" to devoured.

Since the outbreak of the subprime mortgage crisis, the US housing market has lost a total of 6 trillion US dollars, and the average housing price may fall back to the level of 1998 or even 1996.About one-third of the 7000 million "baby boomers" who have entered the retirement ranks have no retirement savings. In the future retirement years, the only thing they can do is to cash out the detached houses to maintain the existing The standard of living; and the Dow Jones average, which represents the stock market, has risen quite a bit in the past few months, but it is still far from the highest point.Obviously, the housing market and the stock market took away the assets accumulated by the "baby boomers" for ten years.

However, healthy living has enabled today's "baby boomers" to live longer than their predecessors.Today, the average life expectancy in Canada exceeds 80 years, and the number of longevity is still rising, thanks to the medical conditions and disease prevention system in North America.This should be a celebration, but in today's special economic context, people can't help but ask, how much money do you need to save enough to spend when you grow old (not counting inflation, tax rates and medical expenses for the time being)?
Unfortunately, the results of the investigation were disappointing.Due to people's general lack of understanding of sudden changes in the market, and lack of planning for the future, coupled with the habit of "using tomorrow's money to realize today's dream" consumption mode.As a result, North Americans have very limited savings.How to do it?People have to live well.Therefore, extending working years and increasing employment income on their own has become the only way for the "baby boomers" who are about to retire.This also means that they will re-plan their lives and exchange limited and precious rest time for money.Is it worth it?
Fortunately, China has always had the traditional virtue of "accumulating grain to prevent hunger". Most of my friends usually save money wisely, have a lot of savings, and have the financial strength to enjoy the rest of their lives.It is not necessary to be like some elderly people in North America who still go to work full-time after retirement. There is an article on CNN titled "Old People Who Know Only Work, Not Retirement." The article introduces several old people who are still sticking to their jobs. They are all over 90 years old.

Harver-Jones, 99, is a pioneer in in vitro fertilization, teaching and doing research at Johns Hopkins University.He was 65 when he was forced to retire, but he wasn't ready to call it quits.After retirement, he continued his career at Eastern Virginia Medical School, where he continues today.Jones has published one professional book and is writing a second.He emphasized: "I have been in the field of reproduction for 50 years. Although I have done some work, I need to do better." .

And Sally Gordon is 101 years old and has had a steady job since the 20s.She sees getting a job in the Nebraska legislature as her choice and hopes to hit a milestone.But she also made no secret of enjoying the extra income, which she proudly says has been used to renovate her home. In August 20, Sally was selected by the largest non-profit employment training organization in the United States and selected as a 2010 outstanding worker.

After reading their stories, I was deeply moved and relieved that I was entering middle age.Compared to them, my friends and I are young lads, we still have a long way to go, and the sense of mid-life crisis suddenly disappeared.

Although the financial crisis prolongs the retirement time of "baby boomers", it is a good thing from another perspective.Think about it, it is the peak period of the "baby boomer" career, and the income is also at the peak period, why stop working?Let the "baby boomers" who are rich in work experience pass on, help and guide young people, and earn money for the elderly while being recognized by the society. This kind of self-worth is more conducive to physical and mental health.Work can be a pastime, not a burden.

But after writing this, I can't help worrying about our next generation. If we don't step down from our positions, young people will have fewer and fewer job opportunities.The high unemployment rate among young people is already a reality in the United States.Who do they rely on? It seems that they can only find their own way out. It is better to ask for others than to ask for yourself. Let's do something...

15. The US-European model - how far can borrowing and consumption go?
In 2011, the U.S. debt ceiling was not resolved for a long time, the approval rating of President Obama plummeted, and the normal operation of government departments was threatened.At the same time, the heads of government of many European countries "fell" one by one.Ireland, Portugal, Greece, Italy and Spain, which were hit by the European debt crisis, all achieved government changes.

Irish Prime Minister Brian Cowan, known as the "golden boy" of politics at the time, suffered a crisis of confidence and had to announce an early general election and bid farewell to politics.Just in March 2011, the then Portuguese Prime Minister José Socrates resigned sadly because he could not get the support of the parliament. In November, Silvio Berlusconi, the longest-serving prime minister since World War II and former Italian prime minister, announced his resignation.Also resigned due to debt nightmares are former Greek Prime Minister Papandreou and former Spanish Prime Minister Zapatero.

These incidents seem to be a coincidence, and they are all dissatisfied with the austerity of the fiscal budget; however, tracing back to the source reveals that the consumption pattern of borrowing is one of the main causes of the government's downfall.

In the past few years, people in many European and American countries want high wages, high benefits, more vacations, less work, and it is best for the government to pay less taxes, but they want all good things.But there is no free lunch in the world.How to do it?The only way: debt consumption.

Europeans and Americans want a house, borrow money to buy it!I want a car, so I borrow money to buy it!I want a big-screen TV, so borrow money to buy it!Europeans tend to work four and a half days a week. Even if they go to work on Friday, they just chat with colleagues while drinking coffee and plan their weekend vacation.What if you don't have money for a vacation?Or borrow it.Anyway, it's too easy to borrow money, and the interest rate is so low, the money goes into my pocket, but it's mine, so don't waste it.What if the money is not paid by the due date?It couldn't be simpler, take out new debts to pay off old debts, and the debts just keep getting bigger and bigger.

However, in order to meet the needs of voters, the government has continuously lowered the interest rates of the central bank, loosened credit and encouraged consumption.This will not only increase GDP and increase political performance, but also voters live a heavenly life, wouldn't everyone be happy.Under such a large expansion of debt, the budget has been overrun by a large amount, and the fiscal deficit has increased year after year.

Most countries in Europe and the United States are like this. They have lived happily in heaven for many years. Until today, they "suddenly" fell down one by one!Today, Greece and Hungary are still struggling. After the outbreak of the Irish crisis, Portugal followed closely behind, and Italy also walked on thin ice; and the last line of defense for Spain, which is heavily indebted, will not be guaranteed... because there is only one possibility to support such a heavenly life, and that is There must be a steady stream of money to be lent to them.

In the imagination of ordinary people, rich people wear top-notch clothes, live in luxury houses, drive expensive cars, smoke cigars, and play golf all day... In fact, in real life, rich people must be those who have a plan in doing things, especially in the way of life. Individuals who are self-disciplined, take care of their health and are able to manage their money well.

For example, if you use your credit card to buy a $2000 suit and pay a minimum monthly payment of $55, you don't have millionaire makings.Because you're spending money that won't exist tomorrow by paying interest (at least 18%), which is tantamount to making a loss-making transaction.If you flip that around and you live within your means refusing to spend on credit and deposit $55 a month instead of paying $55, you're on your way to getting rich.Maybe you don't believe it, but the vast majority of the first-generation rich Americans are models of living within their means.Such was the case with John Templeton, the billionaire pioneer of mutual funds in the United States. He lived a life of extreme simplicity, never flew first class, never drove a luxury car, and seldom consumed luxury goods.His life is no different from that of the average American middle class.

So why do the poor suffer from poverty?Because the poor live on debt all year round, the interest-rate debt is like a snowball, piling up more and more. This is the case with Yang Bailao in "The White-haired Girl". On New Year's Eve, Huang Shiren forced the tenant farmer Yang Bailao to repay the debt.
In China, there has been a saying since ancient times that "poor is in debt, and cold is in the wind".The biggest difference between rich people and people who want to be rich lies in the way they pay the bill.Rich people know how to live within their means, and rarely borrow money for consumption, because they must pay interest on loan consumption.The millionaires know that wealth must be accumulated, not consumed.One of the common features of the first generation of rich people in the United States is that they are diligent and thrifty in managing their families, accumulating grain to prevent hunger, and then saving in a planned way.

What is savings?When we turn on the faucet and see the tap water rushing down, don't take it for granted. The water must be filled with water in the reservoir for the water to flow out of the faucet.The same is true for bank deposits. Someone must make sacrifices and postpone today's consumption until tomorrow—put the saved money in the bank, and save as capital investment will become possible, and ultimately achieve the goal of improving social productivity and living standards; once Stop saving, the reservoir will gradually become empty, the economic lifeline of the market will be gone, the source of capital formation will be cut off, and the real economic growth of society will not be realized.

However, in the United States over the years, many financial experts, economists, and scholars have tried their best to encourage people to save less, or even not to save. They warned people not to keep cash around them, and it is best to invest all their money in the stock market and housing market.Oprah, the most influential talk show host in the United States, once invited a well-known financial expert to teach everyone how to put money into the stock market through a 401K retirement account, saying that there will be at least a 10% return every year. After 40 years Everyone can become a millionaire or multi-millionaire. The reason is that money will depreciate in the bank. Only the rate of return of the stock market can guarantee that money will make money.As a result, fans of the talk show host immediately responded positively.My wife is one of them. She once listened to the words of those so-called "financial experts". As you can imagine, the money that jumped out of her pocket not only did not appreciate in value, but was stripped of 20% by various "financial experts".

Rational millionaires are very clear-headed. Even if they invest, they will invest most of their money in products with stable returns, with little or no speculation.They will ensure that they have liquidity on hand to maintain daily expenses, at least three years in case of contingencies.For example, the billionaire Li Ka-shing has fully prepared 200 billion in cash in the company's account; the American billionaire Ford also survived the Great Depression because he saved a large amount of cash.And Lehman Brothers, one of the top five investment banks on Wall Street, would not have "died" so badly if it had had a cash emergency of US$10 billion at that time.

(End of this chapter)