Wall Street Financial Truth

Chapter 18 How do rich people make money (1)
The financial system that dominates the world today is, after all, the financial system of Wall Street.It can exclusively enjoy the world's resources, enabling financial giants to obtain monopoly power from governments and the public around the world to speculate.This has created an unequal global distribution of wealth - a frantic plunder of the world's wealth under the guise of maximizing shareholder equity.Financial innovation is becoming more and more derivatized. After it is blown up, it can "shear the sheep" and make a lot of money.

1. "I broke the economy!"

One morning, before I entered the office, I glanced at the TV on the wall in the hallway.At that time, the breaking news of CNN Financial Station was broadcasting. The reporter was interviewing an old man. The title on the subtitles shocked me: 'I broke the Economy! (I destroyed the economy)' At first I thought that the former CEO of CFC (National Financial Corporation, the largest mortgage lender in the United States) or "F&F (Freddie Mac, Fannie Mae)" was repenting, and then calmed down. Look, it's Stanley Bing, a columnist for the American "Fortune" magazine. His writing style is famous for its humor.But how could it be that he destroyed the economy?So, I stood still and listened to him.

He said seriously: "I have a list of the 10 stocks that have risen the most this year. Unfortunately, I don't own any of them. This is no coincidence. Whenever I buy these stocks, they fall. OK Well, then I will buy the index, and as soon as I buy the index, the index also falls. You see, the housing market was good, but two years ago, I just bought an apartment in Manhattan, and the price began to fall."

Hearing this, I laughed out loud, and I couldn't help but think of my buddy Xiang Yu (who has the same name and surname as "Overlord").He has been trading in stocks for many years, and one day he told me mysteriously: "I don't know why, it's really evil. Any stock, when I didn't buy it, it kept going up, and as soon as I bought it, it immediately fell. You see Google stock, starting from 100 yuan, I thought it was expensive, but it rose all the way to 300 yuan. I bought 10 shares, but I didn’t expect it to fall back to 250 yuan the next day. When I couldn’t help but sell it at 220 yuan, it It started to rise again, and when it reached 400 yuan, I bought another 10 shares, but it fell back to 250 yuan in a few days, and I sold them all in a fit of anger. Unfortunately, it then skyrocketed to 700 yuan. Listen to the analysts , this is a stock that has risen to at least 1000 US dollars. I don’t believe in evil, and I bought another 10 shares. But when I just bought it, it turned around and fell all the way, and it fell to 500 yuan that day. Don’t sell it, just become a shareholder, and it has been hovering between 300 and 400 yuan, and now my wife calls me a ‘stock god’.”

Funny right?This is the embarrassment and helplessness of many stock speculators.I remember when I first entered Wall Street, Mike, my department boss, invited some of us newcomers to a French restaurant for dinner.This Mike is a Jew and a well-known gold medal financial analyst on Wall Street. He often goes on TV to help everyone choose stocks.Being able to get in touch with big names at close range, we naturally couldn't let go of the opportunity. Everyone kept asking questions about investment skills. Mike allows everyone to ask a question.I was worrying about where to invest in my 401K (401K clause), so I seized this opportunity and asked him what stocks to buy with my retirement money.Unexpectedly, he answered me: "My pension only buys Fix-income (fixed-income bonds), and they are all guaranteed by the government. Buy stocks? How can we Wall Streeters use our own money to buy stocks? You haven't heard of it. 'OPM'? We only play Other People's Money! This is the most valuable piece of advice I can give you. Remember, remember!"

I have always kept these words in my heart.However, when "Dian COM" was crazy, I really couldn't resist the temptation to play a few games in the sea, and ended up with a loss of 5 US dollars. Only then did I really understand the value of Mike's words.

At the end of 2007, when I returned to Toronto from New York, my friends gave me a farewell farewell before leaving.My buddies are either doctors or masters. Several of them are also Wall Street "masters". Almost all of them have been in the stock market for more than ten years. , What to buy and what to earn.This time, everyone drank too much and told the truth after drinking. As a result, no one made money from the stock market. The largest loss was 50%, and at least 20%. , I'm still embarrassed to say I lost it.

I'm not at all surprised by the "bully" description and the drunken mantras of my group of friends.In today's world economic downturn, information is absolutely asymmetric, and retail investors will definitely lose badly if they play with the "bankers".Wall Street has always played with the money in other people's pockets. How could it be possible for ordinary investors to "pull their teeth out of the crocodile's mouth"?Most hedge funds on Wall Street have very high returns, around 30%. How do you make money?Many of them disseminate fake news to reporters through bureaucracy. If ordinary investors follow up blindly, they will be out of luck.The money earned by these hedge funds is your loss, because within a certain period of time, the total assets of the society are so much. If the money does not go into your pocket, it will go into his pocket. Whoever controls more resources is the winner.It's like a financial pyramid. The people at the top of the tower set the rules of the game and put money from other people's pockets into their own pockets.Can you still afford it?
Buffett, the expert respected by the Chinese people as the "God of Stocks", has always ruthlessly made a fortune from the majority of stockholders. "Stock God" is also playing the pyramid game. In 2003, Buffett, the "Stock God" who has always insisted that he "only buys and never sells", bought a US$5 million PetroChina stock for the first time. The "Stock God" is indeed a big deal.As soon as the news was announced, thousands of admirers followed up one after another, all clinging to the shares of PetroChina and refusing to sell them to death.People believe too much in the investment strategy of the world's number one "stock god", thinking that as long as they hold on to the stocks selected by the "stock god", they will definitely be able to make a fortune like the "stock god".

The "Stock God" lived up to expectations and waited hard for four years. After almost all his believers entered the market, he quietly sold his first investment of US$2007 million in PetroChina stocks in July 7.This sum alone has robbed 5 billion US dollars from the Chinese people.Kirk Lindstrom: "'Buy and Hold,' Buffett Sells Out Remaining Oil Stakes," October 35, 2007.In October of the same year, the "Stock God" cleared all the oil stocks in his hands.It is certain that every penny earned by the "Stock God" comes from the huge losses of Chinese investors.Because the "Stock God" bought first at a low price and stood at the top of the pyramid, and after the people who believed in the "Stock God" followed up one by one, the stock price has been raised very high. hold).After the "stock god" puts oil on the soles of his feet and throws away the stocks and runs away, the mess left behind will be cleaned up by the people at the bottom.Countless shareholders who invested in PetroChina went bankrupt!It truly complied with the tragic poem "Once you become famous, all your bones die".

I turned back to watch the TV again, and Stanley was still plausibly saying "confession" endlessly: "I am the chief culprit of the financial crisis. Who told me to buy stocks, house prices, and index prices?"

Finally, the host asked him with a smile, what else do you want to invest in now? Stanley took out a coffee can, opened the lid to show the host, the can was full of cash, he said: "I don't invest anymore, I just put the money in the coffee can. If I collapse, I don't want to be a sinner through the ages."

2. Stock trading - tumbling the four realms of the stock market
He also said that at the end of 2007, when I returned to Toronto from New York, my friends gave me a farewell farewell before leaving.My buddies are all like-minded, and several of them are "masters" on Wall Street.When chatting, the three sentences are all related to the stock market.That night, everyone talked to each other, like a summary meeting.

Student Wu was the first to speak: "More than ten years ago, after graduating and going to work, I had some spare money. I heard that my friends around me were making money by speculating in stocks. The media also preached that the high-tech era was coming, and a new round of bull market had arrived. , Opportunities are once in a lifetime, saying that so-and-so started with a few thousand yuan, and made hundreds of millions in a few years. And Soros made 10 billion a day, and Warren Buffett became the richest man in the world. It makes people feel that the stock market is like a cash machine. Without discussing with my wife, I rushed into the stock market with the first red envelope of 5000 yuan in my hand. The first stock fell by almost half in less than three days after I bought it. I quickly sold it and changed a few stocks, but the result was still a loss. After a few games, I lost almost all my money, so I can only tell my wife that there is no bonus for the first year of work. I never dare to touch stocks again." Wu is a "strict wife", and everyone laughed after hearing this.

This is a typical first state of stock trading: thinking that the stock market is an easy place to make money.

Novices entering the stock market are generally very ignorant, and most of them listen to the propaganda of the media or are influenced by relatives and friends.It's like entering a casino for the first time, and when you hear the slot machine "ding ding dong dong" spit out money, you are excited to think that everyone is winning money.So, I didn't know the depth and plunged into the stock market, and bought whatever stocks were hot.But the stock market is often deceptive, and many people can easily lose 50%.And if you want to win it back, you need a 100% rate of return. Such a high rate of return is very challenging, and it is difficult for even experienced fund managers to achieve.

Classmate Li was the second to speak: "I also went through your stage, but I don't believe in evil. I think there must be a way to trade stocks, and you must step on the shoulders of the predecessors to gain something. I bought a few immediately. This book, learning from Warren Buffett, uses fundamental analysis to study the P/E value, dividend rate and cash flow of the company. It was a bit useful at the beginning, but it didn't make much, and the increase in stock selection was not much higher than that of time deposits. Later, I heard that it is difficult for us retail investors to learn from Buffett, and we should study technical analysis in stock trading. I bought a few more books and memorized those technical graphics. At first it really worked, very good! When a wave hits, all the money earned earlier will be returned. After so many years of work, I can at most draw a tie, purely working for a securities firm (paying transaction fees).”

This is a typical second stage of stock trading: hoping to find a method of operating to make money by holding stocks.

Many people were eliminated in the first stage, just like that classmate Wu, who was bitten by a snake and never dared to do anything.There are many people like Li who refuse to admit defeat. They study and study the stock market, and they are good at basic analysis and technical analysis, and they don't chase after the high and kill the low.When the general trend is very good, you can also make a few pennies, and you will think that you are Buffett, and you will feel very good.If the sky fails to meet people's wishes and encounters a big bear market, those who don't believe in evil will fight again and see the saw again and again.The final result is not much different from the first realm.

Classmate Zhou was the third to speak: "Lao Li, you are such a nerd. How can you believe in books? Who will tell you the secret of making money? Is there still Lei Feng now? Some books say to follow the market and buy when it rises. Sell ​​when it falls; and some books say that you can’t chase high and kill low, “Be fearful when others are greedy, and be greedy when others are fearful.” Coupled with psychology, this is the most important point. When you are in the stock market, you have to follow your feelings. I have long disbelieved in those stock analysis methods. I have studied a set of unique skills. Over the years, I have lost less and won more. In the company and around Among my relatives and friends, I am known as the "Small Stock God". If I hadn't caught up with the once-in-a-century financial crisis, I would have been able to wash my hands in a few years and retire from the arena.'

This man has obviously entered the third realm of stock trading: win more and lose less.

A few talented people, if they have an essential understanding of stocks, and have studied psychology, society, politics, economics and other fields.Rising from the second realm to the third realm, these people, with their special sensitivity to the sea, have become tide-riders in the sea, just like master surfers, who can follow the waves up and down, earn more and lose less.If there is no financial crisis, you can really get out of it unscathed.

I was the last one to speak: "Old Zhou, although your dear friend can win more and lose less under normal circumstances, it is obvious that you have not yet reached the highest level of turbulence in the stock market: you only earn without losing, and you will always make money! The real secret to the turmoil in the stock market - Playing OPM (earning other people's money). It is not enough to fight alone in the stock market. Sooner or later, you will miss it. You must be a banker to play the big one. This kind of money-making thing spreads the fastest, and people who reach the third level are often dismissed When others are regarded as stock gods, you still have to rely on the media to fool you. "Stock gods" can absorb a large amount of other people's funds and play OPM boldly. When encountering a bull market to make money, you can say that you have great skills, and justifiably spend 10% to 20% of your book profits. % into their own pockets. When encountering losses in a bear market, just blame the big market. Not only do they not lose money, but they still receive the 3% management fee. Look at Buffett, Petrinch, Soros and Those "beautiful" people in Rogers, whose annual income is tens of millions, hundreds of millions, or even billions of dollars, are they "stock gods"? Of course they are. But are they still playing with the money in their pockets? They have long since stopped playing It's about 'helping' others invest and manage money. It's like a doctor who is very determined to operate on others, but his own relatives are on the operating table, and his hands are shaking and his feet are weak."

Steve Schwarzman, CEO of Blackstone, the largest private equity fund in the United States, is a typical example. Although the company’s stock price fell from $31 per share at the beginning of its listing to $2008 per share in 13, the original investment The investor lost $190 billion, and his salary in 2008 was still as high as $7 million!
The fourth type, playing 'OPM' is the highest state of playing stocks, in order to truly "not to be shocked by favor or shame, to watch the flowers bloom and fall in front of the court; to stay and have no intentions, to watch the clouds and clouds in the sky!"

The superficial reason is that we want to see some logical patterns through the irrational movements in the market.Investors look for the correlation and causes behind events through stock market fluctuations, hoping to find a model that can make money.For example, of the five crises that occurred in the past, four of them were caused by unknown factors that made the market come out of difficulties. Such unknown factors are very attractive to us.We want to know about it, the same way someone who buys a lottery pays an expert to help him pick his numbers.We are convinced that there must be a pattern in betting, and if we can crack its code, we can make a lot of money from it.

On the one hand, outperforming the market is a zero-sum game—some people make money, and some people lose money.There are many extremely smart experts, and they all study the data with great concentration, hoping to find an advantage over their opponents from the massive data, but in general they can only draw with their opponents. An expert from CNBC ("Consumer News and Business Channel") believes that technology stocks are cheap and encourages investors to buy technology stocks.It happened that an investor believed that the prices of these technology stocks were overvalued, so this expert bought such stocks from investors. In this buying and selling, one of the two people is definitely a winner and the other is a loser , it is impossible to win-win.

You know, paying an investment professional to give you advice makes the problem worse.Investing is a zero-sum game, and investors as a whole get a gross profit before expenses.When we deduct the fee paid to the fund manager. Then we exchange the shares back and forth ourselves.Because of these expenses, as a result of a game between all parties, investors cannot obtain ideal market returns. Even if they earn some, they will become the consultant fees of those experts. These so-called experts are the final winners.

(End of this chapter)