There is now a sharp contrast between the characters of the two Chinese and American Teacher Ma. One is being enshrined as a god and sent into space; the other's character has collapsed on the way back to earth. History does not repeat itself, but the rhymes are always the same. I always feel that the rhymes of the two teachers Ma are the same. There is only one way to avoid the collapse of your character, that is, don’t fake it. With the advent of self-media, ordinary civilians have also begun to fabricate their own personas. I know that some people's financial situation is actually very bad, but the fragments of their lives that they post in their circle of friends are completely inconsistent with the facts, especially their spiritual lives. Many people look like Q People who deceive themselves and others about their lives, pretend to be happy, live for others to see, and act very immersed in their performances. Such people have no roots in life. In Canada, no one has talent but not talent, and talent is not enough, because this is a country of equal opportunities. There are two things that people who live a rootless life are dishonest about. One is that they are not capable enough but think they don’t need to work hard; the other is that they fail to file their taxes truthfully. In Canada, even if you want to live an ordinary life, you must work hard and file your taxes honestly, otherwise you will not be able to find your roots. People who live a rootless life like to show off in their circle of friends that they are independent of the world and have a rich spiritual life, but in fact they reveal the reality of their lack of material wealth. For ordinary civilians, don't create magical characters. It's easy to be self-defeating and expose your privacy. The root of financial health is being honest with yourself.
In addition to not pretending to be doing well, be absolutely honest about your investments. My personal experience tells me that when investing in assets outside my circle of competence, I am like a leek, and there is never a time when I am not harvested. I only know about banks and real estate, and buying some bank stocks and real estate is enough. Li Lu introduced what value investing is in his new book. He did not use abstract principles, but used concrete examples to illustrate what value investing is. Timberland, a company that makes rubber shoes. When the stock price fell, Li Lu not only studied the company's financial statements, but also tried every means to get close to the founders and board members. He tried to understand everything about the company as comprehensively and in detail as possible. After confirming that it was a target asset, he immediately held a heavy position. Canadian investment and financial management guru Garry Slovsky also wrote in his "Investment Jungle" that he usually has to interview the company's directors when he wants to hold a heavy position in the company. Just looking at the financial statements is not enough. Garry Slovsky has been a board member of several Canadian listed companies and has experience in many industries. Stock investors who can't even read financial reports are like gorillas shooting darts and losing their hard-earned money in blind picks. There are two streets in the stock investment market, Wall Street and Buyi Street. Wall Street has always made money from Buyi Street. The reason is simple. People in Buyi Street are dishonest in financial management. They only look for hot investments and do not understand value investing. Li Lu's book quoted a figure that 95% of retail investors in the stock market follow the trend blindly, while only 5% of investors read financial reports and get involved. Investors who have had their leeks harvested are not harvested by others, but are the consequences of self-deception. The root of investing is to be honest about your circle of competence.
Material wealth is rooted in possession of goods, not money. Goods that can become assets should have three characteristics: 1. Be in demand; 2. Have the properties to satisfy the demand; 3. Can be owned. Taking real estate as an example, all living people have a need for housing. Except for Mr. Ma in the United States, a house has the properties to meet the living needs - a man-made fixed space. You can own the property through your own efforts to save a down payment and obtain a loan. One of Adam Smith's original intentions in writing "The Wealth of Nations" was to tell the world that gold is not wealth. He gave an example: If the most powerful country in the world collects all the gold in the world, other countries will not be able to use gold as a medium of exchange. Therefore, they will either barter or use other metals or shells as a medium of exchange. What is the use of having all the gold? More than 200 years ago, Adam Smith told people that gold is not wealth, but today there are still people speculating on gold, and they deserve the heavy losses. Today's Bitcoin is the gold of more than 200 years ago, because it is also obtained through mining. Some people speculating on Bitcoin now are the same as speculating on gold 200 years ago. Judging from the rhyme of history, even if Bitcoin obtains the status of a reserve currency today, its fate in 200 years will be the same as gold today. The medium of exchange can be gold, paper money, or Bitcoin, but these media of exchange themselves are not goods. A house is a real asset because it can be lived in, everyone needs it (except Mr. Ma in the United States), and it can be obtained. The house we buy today will be sold 20 years later. If the United States defaults on its national debt and Bitcoin replaces the U.S. dollar as the reserve currency, then you can just ask the buyer to pay in Bitcoin when you sell the house. There is no need to go mining now or participate in frightening speculation in the secondary market. A house is a real asset and the root of family wealth.
03 How to have light in your eyes
I have read many books and films about the subprime mortgage crisis, with the purpose of finding the turning point of the U.S. economic recovery after the subprime mortgage crisis and learning how to turn the crisis around. When the crisis occurred, Tim Geithner was the president of the New York branch of the Federal Reserve and the third most important person on the crisis response team after Bernanke and Paulson. After Obama came to power, he replaced former Treasury Secretary Paulson and replaced him with Geithner. Bernanke was later replaced by Yellen. Geithner was the only person who fought through the subprime mortgage crisis. The title of Geithner's book about this period of history is "The Stress Test." He used the title of the book to answer the answer I was looking for. After the large-scale bailout in the United States, it was discovered that the entire banking system has a problem of insufficient equity capital. However, we don’t know which banks are healthy and which ones are weak. We don’t know how much equity each weak bank needs to replenish. In this way, the government is like sitting on a powder keg and needs to be bailed out forever. The economy is far from seeing the dawn of recovery. Geithner launched a stress testing program at the beginning of taking office, allowing 19 banks to participate in very strict stress testing, and the Federal Reserve completed the testing independently. Banks that are diagnosed as lacking equity capital need to raise equity capital themselves. If they cannot raise equity capital, the government will rescue them, thereby avoiding large-scale bank nationalization. In the United States, bank nationalization is regarded as a disaster. When investors hear that a bank is going to become a state-owned bank, they will sell the stocks of that bank. The stress test was very successful, and not many banks were considered to need to replenish their equity capital. Therefore, in the end, the government not only calmed down the financial crisis, but also allowed banks that were afraid of being nationalized to actively raise equity capital, thus avoiding endless government bailouts. After the stress test, the U.S. economy embarked on the road to recovery.
In Canada, whether you are doing well or not does not depend on how well you perform in your circle of friends. Go to the bank and do a mortgage stress test, and your true colors will be revealed immediately. Some people cheat when taking out loans and bypass the bank's stress test. They are seeking death. They have failed the stress test, but they have put a loan shark's shackles around their necks. What are they doing? Whether your family is financially safe and stable, the bank has a ruler and a free test. Don’t hide your illness and avoid medical treatment. After passing the bank's stress test, move forward, otherwise you must retreat or even deleverage. It is not enough to have roots under your feet. If you want to have light in your eyes and move forward, you must also pass the bank's financial stress test.
Conclusion: 2020 was magical, and there will be new problems in 2021. Although I have been getting busier and busier recently, I still hope that my readers will not enter the New Year carrying the confusion of last year. My vision and understanding are limited, so I will try my best to share my personal views on these confusing issues, hoping to give readers an additional perspective on the world. I was touched that my last article last year was rewarded. On the official account, I was originally just distributing some personal opinions, but I didn’t expect that so many people would recognize and even reward me. Thank you all. I wish you all can face life honestly and bravely in the new year, and pass the bank's stress test with roots in your feet and light in your eyes.
