The world's funniest economics stories

Chapter 25 The accumulation of wealth is not based on wages but investment (1)——
Investment Economics

1. The secret of only borrowing $1-financial management
Only $1 loan? 1!What kind of secret is hidden here?Let us follow this woman to see what happened.

A few years after World War II, a New York bank received a woman who asked for a $1 loan.According to the detailed rules of the loan, the manager thought about it and felt that it met the loan requirements, so he replied that the woman can get a loan, but she needs to provide a guarantee.

The woman carefully took out a large stack of bills from her purse, raised her head and said to the manager, "These are guarantees, and the total amount is 50 US dollars." The manager looked at the bills and asked the woman again for confirmation: "Are you really sure?" Borrow only $1?" "Yes, but I would like to be allowed to prepay," the woman said. "No problem. This is US$1. The annual interest is calculated at 6%. The loan can be repaid in advance for one year. At that time, we will return the bill to you." The manager answered meticulously.

Although the mist in the manager's mind had not cleared up to this time, but because the woman's loan was in full compliance with the bank's lending regulations, he could only complete the loan procedures for the woman in accordance with the regulations.The woman calmly signed the loan contract, took the $1 and turned to leave.At this time, the manager couldn't help asking: "Excuse me, the notes you guaranteed are worth so much money, why do you only loan $1? Even if you want to borrow $40, that's okay."

The woman smiled slightly, and then said frankly: "I must find a safe place to store these bills. However, it costs a lot of money to rent a safe. It is safe and can be taken out at your place. It only costs 6 U.S. dollars a year." Isn't it very cost-effective?" After hearing what the woman said, the manager suddenly realized that he couldn't help but respect the woman.

Why does the manager who suddenly realized that he respects the woman?This brings up the issue of finances.This woman is worthy of being a financial expert.Around us, we often see many seemingly ordinary people who have accumulated extraordinary wealth. Their secret is to be good at financial management.To use a very popular saying at the moment is "If you don't manage money, money ignores you."

There is no specific definition of money management.Generally, when we talk about financial management, it is nothing more than sacrificing immediate consumption to increase future consumption.Because people like the things in front of them, and they always like to get the benefits in front of them.And financial management requires some payment. The cost of this payment is to sacrifice the current consumption and increase the accumulation for future consumption.

Some people think that managing money can only be done after you have a certain amount of savings in your hands.In fact, financial management does not start until you have more money, but only when you have less money.Every day, whether we go shopping, go to the bank to deposit money, or buy insurance, these are all financial behaviors.Financial management is a profound knowledge. Those who are too frugal need to learn how to spend money, and those who are too wasteful need to learn to save money.Spending limited money to achieve unlimited things is the peak of financial management.

In daily life, financial management usually includes securities investment, real estate investment, children's education, insurance and other aspects.

[1] Securities investment.This kind of investment is not something ordinary people can understand, so we need to have a deeper understanding of this aspect in order to do well.Otherwise, don't touch it lightly.

[2] Real estate investment.Real estate, as we civilians, the house can be regarded as the most critical of real estate.Is it more cost-effective to buy a house, or is it more cost-effective to rent a house?Is it a one-time payment, or is it a good deal to take out a loan and mortgage?And so on, we need to carefully consider.

[3] Children's education.Education is prepared for children, and this part of the funds is an uncertain preparation.There can only be more, not less.In addition, it is necessary to figure out what kind of education your children can receive.Under the current spending constraints, how can we get better education?
[4] Insurance.From an economic point of view, insurance is the transfer of objectively existing future risks and transforms uncertain losses into definite costs—insurance premiums.For example, accidental injury insurance, each of us will have something unexpected, because we don’t know when it will happen, and we don’t know how much it happened. Sometimes, once it happens, it may be very serious, and expensive medical expenses will make us The family is falling apart.For individuals, insurance is to pay a little premium in normal times, in order to obtain sufficient compensation in the event of a risk, so as not to suffer a major shock.

Finance is a general term for currency circulation and credit activities, as well as economic activities associated with them.Its content can be summarized as the issuance and withdrawal of currency, the absorption and payment of deposits, the issuance and recovery of loans, the trading of gold, silver and foreign exchange, the issuance and transfer of securities, insurance, trust, domestic and international currency settlement, etc.

2. Churchill, who made no profit and no loss in stocks - stocks
In 1929, Churchill, who was "disarmed and returned to the field", stepped down from the position of chancellor of the exchequer, and took his family on an interesting trip.They came to Canada and the United States respectively. In September, Churchill, who entered the United States, was warmly received by Baruch, chairman of the American War Industries Committee and financial expert.After the banquet, Baruch accompanied Churchill to visit the Wall Street Stock Exchange.No, Churchill, who was 9 years old at the time, suddenly decided to open an account and enter the market with passion.In his view, making money in stocks is really a trivial matter.

Churchill, who originally regarded stock trading as a piece of cake, was trapped in his first transaction not long after entering the market.Churchill couldn't help but feel ashamed.Therefore, he aimed at a promising British stock again, hoping to turn defeat into victory and "grow prestige" for himself.But unfortunately, the stock price fell all the way, and soon he was caught again.After repeating this several times, Churchill's one deal after another fell into the quagmire.When the market closed in the afternoon, Churchill, who felt very humiliated in the face of a large loss in his account, kept complaining to Baruch.

However, just when he was desperate, Baruch handed him an account book.It clearly records the "brilliant record" of another "Churchill".It turned out that Baruch had long expected that Churchill, a veteran in politics, might not be able to use his intelligence and wisdom in the stock market. When he first entered the stock market, he was likely to end up in a predicament of losing his troops and losing his troops.So, he prepared a life-saving straw for Churchill in advance, and ordered his subordinates to open another account in Churchill's name. Whatever Churchill bought, the other "Churchill" would sell, and whatever Churchill sold, the other "Churchill" would buy. .

After reading Churchill's story, let's first understand the basic concept of stocks in detail.

A stock is a share certificate issued by a joint-stock company [including limited companies and unlimited companies] to investors when raising capital, representing the ownership of its holders [ie shareholders] to the joint-stock company.This kind of ownership is a kind of comprehensive right, such as participating in the general meeting of shareholders, voting, participating in the company's major decision-making, receiving dividends or sharing dividends, etc.Each share of the same class represents equal ownership of the company.The size of the company's ownership share held by each shareholder depends on the proportion of the number of shares held by it to the company's total share capital.

Shares can generally be transferred for a fee through buying and selling. Shareholders can recover their investment through stock transfers, but they cannot require the company to return their capital contributions.The relationship between shareholders and the company is not a debtor relationship.Shareholders are the owners of the company, who bear limited liability to the company within the limit of their capital contributions, bear risks, and share profits.

In the trading market, stocks, as trading objects, have their own market prices and market conditions just like commodities.Since the stock price is affected by many factors such as the company's operating conditions, supply and demand, bank interest rates, and public psychology, its fluctuations are subject to great uncertainty.The greater the uncertainty of price fluctuations, the greater the investment risk.It is this uncertainty that may cause stock investors to suffer losses.

In modern society, stock investment is a very important way of investment.There is a proverb very popular in the stock market: "Don't tell me what price to buy, just tell me the timing of buying and selling, and you will make a lot of money." For stock investors, choosing the timing of buying is very important.Specifically, the timing of buying varies depending on factors such as the length of the investment period and the amount of funds, but there are rules to follow.For example, when bad news comes, due to investor psychology, when the stock price falls more severely than the news itself, it is the best time to buy stocks; There will inevitably be problems in the project construction, which will lead to the weakening of many investors' interest in this stock, and the stock price will fall. This is a good time to buy this stock.

stock classification
[1] A shares. The official name of A shares is RMB ordinary shares.It is a common stock issued by companies in my country for domestic institutions, organizations or individuals [excluding investors from Taiwan, Hong Kong and Macao] and RMB subscription and trading.

[2] B shares. B shares are also called RMB special stocks.Refers to those special stocks registered and listed in mainland China.The face value is indicated in RMB and can only be subscribed and traded in foreign currencies.

[3] H shares. H-shares, also known as state-owned enterprise shares, refer to the stocks of state-owned enterprises listed in Hong Kong.

[4] S shares. S-shares refer to the stocks of companies whose core business is mainly produced or operated in mainland China, and the company is registered in Singapore or other countries and regions, but listed on the Singapore Exchange.

[5] N shares. N shares refer to those foreign shares registered in mainland China and listed in New York.

3. Keynes's biggest fool theory--the advantages and disadvantages of futures
Keynes can be regarded as a model for saving money by class fees. From 1908 to 1914, he taught all courses, including principles of economics, monetary theory, and securities investment.Hence his reputation as "a machine that sells economics by the hour."The motivation of Keynes to earn class fees is to be able to freely and focus on academic research in the future without being troubled by money.However, just relying on earning class fees is not enough to save a lot of money even if you vomit blood.

Keynes finally understood this truth, so in August 1919 he borrowed thousands of pounds to start forward foreign exchange speculation.In just 8 months, he made a net profit of more than 4 pounds, which was equivalent to his 1-year lecture income at that time.

"The market is risky, and you need to be cautious when entering the market." Not long after receiving the first fund, that is, three months later, Keynes lost all the profits he earned and the borrowed principal.Keynes did not give up, he must earn his own money.So, seven months later, Keynes got involved in cotton futures trading again, and made a wild bet with great success.Stimulated by this, he made all kinds of futures.If you still don't think it's enough, go to speculate in stocks.

In more than ten years, he not only made a lot of money, but by the time he retired due to illness in 1937, he had already accumulated a huge amount of wealth that he could not enjoy in his life.Keynes was a different economist. He left behind a very explanatory theory - the theory of the greatest fool, which is also a summary of his own investment activities.

Keynes once said figuratively that if you are asked to choose the one you think is the most beautiful among 100 photos, and you will be rewarded if you choose.Of course, in the final result, everyone will vote collectively to decide which photo is the most beautiful.So how do we choose?
The correct approach is not to choose the face that you really think is beautiful, but to choose whoever you guess most people will choose.That is to say, speculation is based on speculation about the psychology of the masses.Both futures and securities investment have this intention.

For example, you don't know the real value of this stock, but you bought it for 100 yuan because you predicted that someone would pay a higher price to buy it from you.Malkiel summed up Keynes's view as the biggest fool theory: the reason why you don't care about the real value of something at all, even if it is worthless, you are willing to pay a high price to buy it is because you expect a bigger one. Stupid, will pay more to get it from you.

The key to speculative behavior is to judge that there are idiots bigger than yourself. As long as you are not the biggest idiot, you will win more and win less.If you can't find a bigger idiot willing to pay a higher price to buy it from you, then you're the biggest idiot.

We can further explain the biggest idiot theory by looking at some of the speculative manias that have occurred throughout history. In 1593, a Viennese professor of botany came to teach in Leiden, the Netherlands. He brought a plant cultivated in Turkey that the Dutch had never seen before - tulip.Unexpectedly, the Dutch loved tulips very much and wanted to buy them. However, the professor offered a very high price, which made people discouraged.

Late one night, a thief broke into the door, stole all the tulip bulbs brought by the professor, and quickly sold out the bulbs at a price much lower than the professor's price.In this way, tulips began to be planted in Dutch gardens.

Later, due to the attack of mosaic disease, the petals of tulips produced some contrasting colored stripes or special patterns.And such tulips have become treasures by accident.As a result, the price of this sick tulip bulb is getting higher and higher.Someone starts hoarding, someone buys from the hoarder at a high price, and sells it again at a high price.

In the reciprocating cycle, some people start to get rich overnight, and the people around them are also passionate and actively involved in this fabulous process of getting rich. Everyone is involved, and everyone believes that there will be a The bigger fool is willing to pay a higher price for the tulips in his hand.

The biggest fool appeared in 1638, and the tulip mania that lasted for five years ushered in the most tragic scene. Soon the price of tulip bulbs fell to the price of an onion.

Futures and securities are also a kind of speculation or gambling to some extent.

(End of this chapter)