Understand economics from scratch

Chapter 29 Why You Don’t Manage Your Money—Practical Finance You Must Know (1)
Finance is a modern branch of economics, which has developed very complex and rich. For ordinary readers, what needs to be understood is the most basic and practical part.

For example, since 2012, there has been a long queue of people buying wealth management products in the lobby of banks.This is a phenomenon that has never appeared since the fund industry as a whole entered a bear market at the end of 2007.If you have a certain degree of common sense in the financial industry, you can clearly analyze the reasons for this.China is a country with interest rate controls. Banks have no right to adjust the level of deposit interest rates according to the relationship between money supply and demand in the financial market. However, the competition among Chinese banks became fierce after the Third Plenary Session of the Eighteenth Central Committee in 2012.In order to compete for depositors' deposits, banks have launched various wealth management products that can flexibly adjust the rate of return.The return rate of wealth management products can more truly reflect the supply and demand relationship of monetary funds in the financial market, but it does not violate the policy of interest rate control. It is a development strategy that has the best of both worlds.

Financial Markets: A Legal Gamble
Professor A and Professor B had a whim and used the temptation of 100 million US dollars to gamble and cut their own flesh.Professor A and Professor B agree that if he dares to cut his own flesh, then Professor B must give him $100 million.Professor B agreed, and Professor A thought of how Guan Yunchang scraped his bones to heal his injuries in order to survive.There are 100 million US dollars here today, so I might as well follow the example of the ancients, so I made up my mind and cut myself.So, $100 million came in hand.Professor B reluctantly signed the check.

Professor B was depressed all the way and felt very uncomfortable. He not only wanted to earn 100 million US dollars back, but also wanted to earn more, so he told Professor A that I cut my own flesh twice, and you can give me 150 million US dollars, which can be discounted.The original price was $200 million.Professor A felt that it was beneficial, so he agreed.As a result, Professor A gave Professor B $150 million.Professor A wants to make money back again.If they continue to gamble like this, each time trying to earn more than the last time, then there are only two final results, they have to pay taxes for each transaction, and they continue to cut their own flesh.If the transaction between Professor A and Professor B is carried out through the platform of the financial institution, then the commission must be paid to the financial institution.The financial institution saw the pleasure of self-mutilation of Professor A and Professor B, and also collected a lot of money. Professor A and Professor B are thankless.

In fact, the game in finance is like this. Each participant in the game will not generate any value, but just transfer money from one person to another, and then from the other person to the next person. The cycle repeats, each time, each hoping to make more money from the other.So there is an exact assessment of financial markets: legal betting.

Just like in a gambling game, financial trading institutions are the spectators, and consumers are the gamblers who enter it. It has nothing to do with whether you lose your fortune or earn a slam. Anyway, it only charges a commission.The man who sits in the manor always controls the rules of the game, and you must be right when you come.Your money is played around by financial players, and you may find that you have not gotten anything. Not only is your energy wasted, but your money is taken away by others invisibly.

The situation in finance is deceitful. I usually hear this saying how much money a certain fund manager makes, and that one saying that a certain analyst can get an annual salary of several 10 yuan. It seems that the financial industry is full of money.Even when looking for a job, many people are determined not to enter the non-financial industry.The financial industry seems to have a bright and smooth path. An ordinary analyst, taking Tianxiang Investment as an example, can get a monthly salary of 400 yuan after entering, sign a three-year contract, and the liquidated damages are relatively high, so generally old Honestly, I worked there for 3 years, and then changed jobs to earn more than 3 yuan a month, and then gradually became several 1 yuan. Many people go to the financial industry not for this, but to become a fund manager in the future , Fund managers plus dividends can get tens of millions of yuan.But is the financial industry really that rich?There are so many analysts on TV, and companies like Tianxiang recruit massively every year. Is it possible that once you enter the financial industry, you will have so much money?If an analyst can really get an annual salary of 10 yuan, then he would already have hundreds of millions of assets in stocks with this 10 yuan annual salary. How many people in China have hundreds of millions of assets?But if he is not so sure, how can he be offered an annual salary of several 10 yuan by the fund company?What kind of mouth must that be, turn shares into gold!What surges in the financial industry is not money, but the impulse to make money.Lin Yuan, a retail investor, was once known as China's stock god. He said that he entered the market at 10 yuan, and in 8000 it became 16 million yuan.Regardless of whether it is true or not, the myth of Lin Yuan has indeed moved a lot of people. Many stockholders have gone around to ask for advice, thinking that there are some tricks to investing in the stock market. As for gold and futures, they are even more yearning. The hype of gold in China is still new. For things, futures can use leveraged funds to make some people who want to make money but have no money yearn for it.But the "Emperor of Migrant Workers" Tang Jun once said that he never invests in financial markets, including stocks, futures and other financial derivatives, because he always earns less and loses more. Tang Jun, with his ability to control wealth, , His words should be of great reference value, just don’t believe that there is any panacea in the financial market that can make you win every battle. Here, the sword of Damocles is always hanging in the sky, and you may be tricked at any time.If you don’t win today, it’s nothing more than Professor A who cut the flesh, and you act as Professor B; if you win tomorrow, you will be the one who cut your own flesh.If you want to continue playing in the financial industry, you must have the courage to try the fun of self-harm forever. Many people spend their money in the financial industry. When they make money, everyone is happy, but once they lose money.Crying, making trouble, and hanging themselves three times, some jumped off the building directly. When the stock market plummeted in 4, many such things happened. If you can’t afford it, don’t envy others for making money by playing. Putting your life on the line for desire Very worthless!The financial industry itself is a zero-sum game. You must be fully prepared. If you take other people’s money, you will have to pay it back one day. It’s still the old saying that you have to pay it back when you come out to mess around.

The game in finance: who is taking advantage of it
There was a president of the United States who was very dull when he was a child, and people said he was stupid.Because every time people throw money on the ground, there are 5 cents and 1 yuan, but this child only picks 5 cents each time.So people thought that this kid was really stupid, and recommended it to everyone who saw him to try it out. Sure enough, as soon as people put in money, he would pick the little ones, while his partners all picked the big ones.An old lady kindly advised the child not to be taken advantage of, but to pick more and not less. The child smiled and asked secretly: "If I pick too much, will they still give me money?"

Who is being taken advantage of?
A consumer always has the desire to keep making money. He believes that money must be earned through money, and he believes in the myth of huge profits in the financial industry. Seeing that someone suddenly became rich and earned it by playing with capital and finance, he invested wildly and sought after .However, the result of the game in the financial market is that some companies are happy and others are sad.If others make money, you may not make it yourself. Often when you follow up blindly, you are taken advantage of.Just like the kid in the above story, although it seems that he was taken advantage of on the surface, he got real benefits, and those who invested money in him were the real takers in the end.

In the financial market, mentality is the most important thing. People say that retail investors will not make money. This sentence also makes sense, because if you are in the financial market for the purpose of making money, it is easy to have a mentality of eager for quick success, which will make you lose money. Falling into the magic circle of their own design, most people do not have a rational mind to analyze in the financial market. Once they see what others hype and make money, they want to follow suit, and they lose in the end.

Finance is inherently a virtual economy and does not create wealth by itself.It’s just a game in which wealth is transferred between each other. It’s a zero-sum game. Winning and losing is nothing more than A’s money going to B’s and B’s money going to A’s. In this game, financial institutions are both platforms that provide Those who are also participants.

For example, the stock exchange is a trading platform specially provided for people to conduct securities transactions and equity transactions. The stock exchange is not a profit-making organization, but a management organization. Every transaction will charge a certain commission. The staff of the stock exchange are called securities. broker.In a sense, the stock exchange is more like an intermediary.

However, fund companies are market participants. Fund companies funded by banks or directly funded by the state are called public funds. The funds here mainly come from properties that must be maintained and increased by the state plan, such as pensions and infrastructure funds. Wait, such fund companies have relatively strict risk control. They generally buy national medium- and long-term bonds or other fixed asset income, and some fund companies also speculate in stocks. Bonds, in the end, almost made ends meet, and the high-profit stock operation allowed the Nobel Fund to rapidly increase in value.

A private equity fund is established by several partners. It is a financial institution that manages funds for the public in the form of trust and entrusted financial management. It mainly focuses on high-profit stock operations. Buffett is the founder of private equity funds.In addition to formal private equity institutions in the market, there are also some master stock operators. Since they do not have the strength to register a fund company, they make an agreement with shareholders to speculate in stocks with their money, and return the losses to the shareholders. seven open.The other party accounted for three, and the shareholders accounted for seven.

It can be seen that financial institutions are composed of powerful and experienced experts. When they speculate in stocks, they often have several plans in advance, plan in advance, and use some means, including raising prices, shaking positions, etc. to manipulate For a certain stock, although the country's strict regulations do not allow operations in the stock market, it is impossible for the stock market without a banker.The institution will also lose money, but if it loses money, at most it can continue to operate with another fund manager.But if retail investors lose money, they are likely to lose their pension money because they don't have that much strength.There will never be a real winner in the financial market. Since it is a money game, there are always people who make the rules. Some people follow the trend and make money, while others follow the trend and lose money.In the financial market, you are not being taken advantage of, but others are. Only people with a good attitude can sit firmly on the Diaoyutai.So what the financial market sometimes plays is just a state of mind.A person with a good mentality will not be jealous when he sees others making money. A person with a bad mentality will not rush to cut the meat when he sees himself losing money, because he has his own ideas, whether it is gold, futures, stocks, or stock index futures, as long as it is The same is true for financial products or derivatives. In 2008, many institutions were trapped, and the overseas fund manager of Ping An Insurance was also replaced. However, as individuals who could not bear it, they were burdened with a large amount of debt, and some even chose to commit suicide.

Who is being taken advantage of in the financial market?People who don't have a clear mind will be taken advantage of.

Lottery, Gambling and Investing: The Psychology of Picking a Beautiful Woman

Choose the face you think is the most beautiful from 100 pictures of beauties. If you choose the face, you will get a prize. If you don’t choose it, you will be fined. The most beautiful face is chosen by the majority of people. How should you vote?You don't know how to vote, but you choose a pretty face that you think most people will recognize.The standard you choose is not how beautiful the beauties are in the photos, but the psychological expectations of most people.

Studying economics, it doesn't teach you how to make money, but it can teach you how to make choices; make the right choices, and you can make a lot of money.

Investing is to find the price range that most people think. If you find it right, you will be right. Few people make money in investment, and most people lose money. Therefore, it is especially important to find the hearts of the people. Investment and lottery gambling are mentioned together, thinking that they are the same, because the result is that the profit is less and the loss is more. Therefore, some people regard buying lottery tickets as investment. There is a certain similarity between lottery and gambling. expectation psychology.

The odds of making money from the lottery are so slim that, mathematically speaking, the odds of winning a lottery ticket are less than the odds of being hit and killed by a car on the way to buy a lottery ticket.Tens of thousands of people die in car accidents all over the world every year, but few have won hundreds of millions of dollars in prizes.Usually the odds of casinos are 80% or even higher, but they still attract too many people to gamble, all because people have too much expectation of small cost in exchange for big profit, and too many people hope to get rich overnight.

The same is true for investment. When people buy stocks or futures, they hope to be optimistic about this stock or futures, so that they can skyrocket.But in most cases, there are still few surges. Investment, gambling, and lottery have one thing in common: people can't control their greed when they operate, and even scientific calculations can't stop the impulse of the heart.For example, from a psychological point of view, in most cases, people's estimate of the value of the loss is twice as high as the value of the same thing. For example, a gambler brings thousands of dollars to the casino. Returning 100 yuan, when he made 100 yuan, he would definitely be very happy, but in the next gamble, he lost 100 yuan, although he did not lose or make a profit, he still felt that he had lost money, because people generally The pain felt by loss is far greater than the happiness brought by possession. Similar psychological characteristics are consistent in investment, gambling and lottery.So sometimes, the more you lose, the more you gamble, hoping to win back the lost money; the same is true for investing, the more you lose, the more you want to earn more; you have already bought a few lottery tickets, and the money cannot be wasted, so you want to continue buying.

However, there are still significant differences between investment and gambling: investment requires that the expected return must be greater than 0, while gambling does not require that every investment people hope to make money, but this is not the case when buying lottery tickets and gambling. Although people buy lottery tickets, they hope Which one wins, but not every lottery has such an expected return, and the size of the bet, not every one hopes to win money, because the participants themselves know that it is random.Therefore, buying lottery tickets and gambling is mainly due to fluke psychology at work, but investment is not like this. Investment needs to analyze and predict the people participating in the market. Investment needs to avoid risks. Gambling and buying lottery tickets is to find risks. However, investing is a zero-sum game with many people, that is, taking the money of the big guys into our pockets. This is very important to analyze the investment psychology of everyone, but there are still many people who take the risk of gambling. Psychological investment, as we mentioned at the beginning, 100 photos, which face is the most beautiful?Because it is impossible to guess the psychology of the crowd, I have to use my intuition to choose the most beautiful one, bet on the treasure, and wait for the results of the votes of the crowd to see whether the bet is right or wrong.So some people say to use gambling to operate futures, first place a bet of 1% or 1 yuan, if you lose, double the bet, if you win, place a bet of 1% or 1 yuan from the beginning, the reason is that no matter how many times you lose , As long as you win once, you can get back all the previous losses, and become a winner in turn, winning 1% or 1 yuan.For example, the first time you lose a bet, you lose 2 yuan, because the bet is 1 yuan; the second time you lose again, you lose 4 yuan, because the bet is 2 yuan; if you lose consecutively, the bet is doubled every time, The bet gradually increased to 4 yuan, 8 yuan, 16 yuan... In this process, as long as you win once, you will win it all back, and then start from scratch with 1 yuan.This method is a good way to gamble, but there is not much need to operate futures, because futures can operate an order of 100 million yuan at the beginning. If you lose 20 yuan (futures will not fully compensate, it is different from gambling) ), next time, we will continue to operate an order of 200 million yuan, and this will continue in the hope that we can earn it back once we win. This does not make much sense, because the randomness of futures is not great, it mainly depends on market price forecasts, and gambling is There is no certainty about the next opportunity that will appear, but the futures are based on the judgment of the information with certainty. Instead of investing a little bit, it is better to invest in it all at once.

The mentality of gambling often appears in investment. Sometimes people think that investment itself is gambling. Some people can make money in investment, while others always lose money in investment, thinking that it is a factor of luck.In fact, no, rational analysis ability still takes the first place. Of course, no matter how you analyze it, it is impossible to see all the markets clearly, but scientific analysis will reduce losses in investment.

Hedge Funds: The Wisdom of George Soros

Since the 20s, the hedge fund industry has achieved great development, and its performance has been eye-catching. From the European currency crisis in 90 and the bond market crisis in 1992 to the Asian financial crisis in 1994, the world seems to be increasingly restless.Many blame hedge funds for the source of financial risk, notably for the Asian financial crisis.

At the moment when the financial crisis in the United States led to a comprehensive economic depression, a piece of news from the financial magazine "Alpha" on April 2009, 4 attracted people's attention: Soros, a well-known international hedge fund investor, has a total of He made a huge profit of 13 billion pounds and ranked fourth in the list of the most profitable hedge fund managers of the year.According to the report, Soros and other hedge fund managers' short-selling and speculative activities were accused of being one of the reasons for the financial tsunami. The news angered many businessmen and families who suffered heavy losses in the economic crisis.

(End of this chapter)