Wall Street Financial Truth

Chapter 34 How the Common People Protect Their Wealth (4)
The vice president of McDonald's Real Estate Agency in Canada said that the trend of Vancouver's housing market is very similar to that of Beijing, Shanghai and Hong Kong, where housing prices have risen sharply. It is largely driven by wealthy mainland Chinese immigrants and speculators.Of course, the "zero interest rate" bailout policy adopted by Canada for the global financial crisis is also another incentive to drive up housing prices.

However, the Chinese people's "love house" complex collided fiercely with the living habits of Europeans and Americans.The traditional idea of ​​Europeans and Americans on owning a house is that buying a house is just another lifestyle choice, and it is not fundamentally different from buying a Mercedes-Benz.In Europe and the United States, the typical family life of the middle class is step-by-step, go to school, get married, have children, and then raise children, raise dogs, work, pay bills, listen to opera, watch movies, travel, lose weight, see a doctor, take medicine... In their concept , Life should be like this, 1/3 of family income is used to pay taxes, 1/3 of family income is used to pay daily expenses, and another 1/3 of income is used to pay mortgages.Obviously, the upsurge of real estate speculation by new Chinese immigrants has greatly affected the quality of life of the locals, and protests are inevitable.

Australia has implemented a housing purchase restriction order for foreigners, which is rare in Western countries known as free markets. It is a specific measure that foreigners (mainly Chinese) can't bear to speculate in Australian real estate; followed by South Korea, Japan, Brazil, etc. Countries have also introduced similar purchase restrictions.In Vancouver, the English-language media reported heavily on the rush of Chinese (especially mainland Chinese buyers) to buy properties in Vancouver. Some developers have received protest emails from local people, saying that the high housing prices are a disaster for the next generation, and there are too many Chinese. Immigration was restricted, and some even threatened to blow up developers' offices.

The Canadian government obviously heard the voice of protest, and after weighing the pros and cons without giving any warning, it suddenly announced: From now on, only 700 investment immigration cases will be accepted worldwide, entrepreneur immigration will be completely stopped, and the number of skilled immigrants will be halved, or even Quotas will also be adopted for parents to reunite immigrants. To some extent, this has actually restricted the reunion of parents and immigrant children.The adjustment of Canada's immigration policy will undoubtedly have an irresistible impact on the housing markets in places such as Vancouver and Toronto.

However, the United States next door to Canada does not seem to mind China's hot money. At present, the United States is "sincerely" opening its doors to welcome investment immigrants.Many real estate projects were directly exported to China across the Pacific Ocean, with the investment amount reduced from US$100 million to US$50, under the advertisement of "buy a house in Beijing and immigrate to the United States".As everyone knows, this is because the U.S. economy is in a quagmire, and it is difficult to extricate itself for a while, especially the housing market is still falling, and immigrants are in need of hot money.And the United States is not afraid of the influx of Chinese hot money. They have their own ways to deal with it, just like they did with Japan back then. Twenty years ago, the Japanese were so proud that they even uttered the bold phrase "buy America".As a result, I suffered a lot within a few years.

In view of this, investors who are eager to go to the United States to buy the real estate market must be cautious, cautious, and more cautious, lest the sharp sword of the downward housing market hurt themselves!It is more hoped that speculators who want to make a fortune by speculating in European and American real estate three
9. Is it better to buy a house or rent a house?

I recently read a news article saying that "the world's most expensive mansion worth 1.25 million US dollars is aimed at Chinese buyers".At present, this mansion located in Los Angeles has appeared on Vanity Fair magazine, and has been reproduced by many major European and American media. They all praised it as having the style of the Palace of Versailles. "When night falls, you don't need to turn on the lights, just light candles, and you will be taken back to France in the 18th century", known as the "Little Versailles Palace" on the coast of the Pacific Ocean.

Such a luxurious and elegant mansion style stems from the fact that Mr. Saberstein hired the world's best art history experts and buyers to take care of everything for him.The main designer of this mansion, Parisian antique furniture dealer and art history expert, Mojie, perfectly combined oriental furniture art with French 18th century furniture.This palace-style building was once owned by the American media tycoon Saberstein, and the salon living room is where the family often gathers.There was no mention in the news of why the media mogul was selling the mansion, but Coolway said there were many wealthy potential buyers in China.

This piece of news can't help but make me feel that time and space have changed, as if I went back to more than 20 years ago, when the American economy was in a downturn, a large number of luxury houses were sold off, and Japan was "in full swing" at that time, due to the sharp rise in the Japanese currency , the real estate industry is soaring.It is said that the land occupied by the Japanese Imperial Palace in Tokyo is worth as much as the entire California of the United States; if you sell all the houses in Tokyo, you can buy the entire United States.With their pockets bulging, the Japanese felt like they were floating up, and they walked like crabs. They brought a lot of money to the United States to sweep up goods.

For example, the Rockefeller Center, a landmark building in New York, was purchased by the Japanese at a huge sum of money. The American people burst into tears when they learned about it, and their grief and indignation were unbearable.However, as the U.S. real estate bubble burst in the early 20s and the U.S. economy entered recession, Japanese capital had no time to withdraw, and their assets in the U.S. shrank sharply. Rockefeller Center returned to the hands of Americans. During the period, the Japanese lost more than 90 million US dollars.

Of course, this is not to persuade the rich not to buy luxury houses, but to explain that buying luxury houses or ordinary apartments is actually just a lifestyle choice in Europe and the United States.The rich have so much money that they can’t spend it all. It’s understandable to enjoy the life of a luxury house, but if you expect to invest huge sums of money in overseas purchases to increase the value, you have to think twice.

In fact, in many countries in Europe and the United States, the ratio of renting houses to self-owned houses has been half and half for many years. The ratio of renting houses in big cities is even higher, and it is not temporary renting, but a kind of normal living.Due to the high real estate taxes in Europe and the United States, after the government collects land taxes, it provides a large number of low-rent housing of various types, so that most people do not need to buy a house to live.

For example, when I was in New York, I lived on Roosevelt Island in Manhattan, where the environment is elegant and quiet.I rented a high-end apartment built by the United Nations, mainly for the United Nations staff, and the rent for them was quite cheap, and for people like me who did not work for the United Nations, the rent went with the market.

There are two other types of apartments on Roosevelt Island.One type is provided by the government for low-income families to live in. As long as the family’s annual income is lower than the specified figure, they can apply for occupancy. The rent is 30% to 40% lower than that of ordinary apartments on the market.I once had a colleague who was laid off for a year but was "a blessing in disguise" and his annual income met the application criteria, so he rented this type of apartment.In the second year, his wife also went to work, and the income of the two of them greatly exceeded the application standard, but the government did not check every year, so they lived together for several years.It was not until the child reached school age that he had to move out of the island for the sake of the child.

The lease method of another type of apartment is different. When moving in, the lessee only needs to pay the salary of the year (based on the annual salary). No matter how long the rent is in the future, there is no need to pay rent, and only a few hundred dollars per month is required. That's it.If you get tired of living and want to move out, the prepaid salary will be refunded to you without interest.Just think, this kind of deal is too cost-effective. Once you live in this type of apartment, almost no one will move out unless you die of old age.I'm only sorry, because the real estate is not yours, and no matter how high the house price rises, it has nothing to do with you.

This way of living is even more normal in Europe.Therefore, in Europe and the United States, for many years, whether to rent or buy a house is nothing more than choosing a different lifestyle for the public.In fact, the trend of housing prices in Europe and the United States in the past few hundred years was basically only equal to the inflation rate. That is to say, real estate was not an investment option for ordinary people at all.

Especially in this subprime mortgage crisis, the housing prices in the United States have fallen very sharply, and they are still falling, completely destroying the so-called "American Dream" that mainly owns houses.Except for Australia and Canada, housing prices in European and American countries are falling.In several major cities in Australia and Canada, housing prices have not fallen mainly due to the support of the Chinese.

Take Toronto as an example. In the past two years, a large number of immigrants have come from Beijing and Shanghai. They are used to the high housing prices in Beijing and Shanghai. Looking at the housing prices in Toronto, it is simply too cheap. Many people use it as soon as they land. Buying extravagantly with cash, the financial crisis in Toronto has only been experienced for half a year, and the real estate slump has passed, which has led to a steady rise in housing prices.In Sydney, Australia, because the Chinese raised the housing prices to the point where the locals could not bear it, forcing the government to issue a restriction order, the housing prices fell back.

Analyzing various situations, it will be difficult for Europe and the United States to see the beauty of real estate in the past 10 years in the next few decades. It is just a rare dream.Therefore, if you want to enjoy a beautiful environment and change a different way of life, it’s okay to buy a house; but if you want to “invest” (in fact, it’s just speculation) in real estate, you think Europe and the United States will continue to record high housing prices like China. Wishful thinking may be in vain.

10. Take away the "wine glass" of the economic feast

The People's Bank of China raised the deposit reserve ratio several times in 2011.What is this indicating?

Obviously, this is aimed at an overheated housing market.This move by the central bank confirms a famous saying by former Federal Reserve Chairman William Martin: 'The Federal Reserve's job is to take away the punch bowl just when the party gets going.' Take the wine glass away when the hustle and bustle starts"), it seems that the PBOC is already taking the "wine glass" away.It shows that the central bank strongly hopes to cool down the economy and sends a signal to the overheated housing market. In fact, it is the government's determination to tighten monetary policy to prevent inflation.

If the housing market continues to heat up, not only will inflation appear, but it will also hurt China's overall economy.There are many lessons learned from the past: the United States relied on real estate to drive its economy, which resulted in two crashes in 1989 and 2007; the economic powerhouse Japan relied on real estate to drive its economy. In the late 80s, it set a myth that the property prices of the entire Tokyo could buy the United States. However, housing prices plummeted overnight, making the Japanese economy sluggish for 20 years, and it is still sluggish today; the same drama has been staged in the emerging markets of South America, Southeast Asia, Hong Kong and Thailand, and recently in Dubai.

Due to inertia, an overheated housing market is like a sports car with full horsepower. With this move by the central bank alone, it is unlikely that the brakes will be stopped in a short period of time, and there will be a long wait-and-see period.At the moment, people's psychological impact is obviously more than the actual impact, and they will have a wait-and-see mood in the market, making many investors who dare not easily set foot in the housing market, at least short-term speculators, restrained.

The phenomenon that deserves special attention is the "butterfly effect". This move by the People's Bank of China immediately had an impact on international stock markets, gold prices and crude oil prices, which all fell in response.

So why does the cooling of China's economy lead to the decline of international stock markets, gold and oil prices?First of all, China is currently the world's largest importer of bulk commodities. Once the economy starts to cool down, the demand for bulk commodities such as oil, steel and various other resources will inevitably decline, and the stock prices of all companies that supply such resources will naturally fall; secondly, The price of gold has soared this year in response to the depreciation of the dollar and expectations of inflation.At present, the only country in the world that is most likely to experience inflation and is a large economy is China.Once China gets inflation under control, half of the rationale for the gold price rally is lost.Oil prices are settled in US dollars. Once inflation is brought under control, the RMB exchange rate will be indirectly stabilized.Since the renminbi is currently directly linked to the US dollar, it also indirectly leads to a stabilization of the US dollar, which is another reason to eliminate the rise in gold prices and stabilize oil prices.

I think that if the "feast" of China's overheated economy continues to be noisy, then the central bank will be more aggressive in collecting the "wine glass".If the cooling effect is not obvious, then the central bank is likely to learn from Alan Greenspan and continue to raise interest rates.In any case, there is a consensus that the current loose monetary policy will come to an end.

By the way, take a look at the actions of other central banks around the world.

In 2008, Canada, the brother of the United States, saw the financial tsunami in the United States. Seeing that the crisis had already affected Chiyu, the housing market fell, and the unemployment rate rose sharply, it immediately began to significantly reduce short-term lending rates, which have been dropped to the lowest level in history.Therefore, people who could only afford 30 houses can suddenly "afford" 50 houses because of the ultra-low floating interest rate.As a result, like an emergency patient being given a shot in the arm, Canada's housing market began to rebound in the second half of last year.Recently, the Bank of Canada seems to have suddenly realized that this is precisely the cause of the US financial crisis?The current Canadian economy is just like a puffy patient.So he announced that the interest rate will be raised soon, and warned the people that when they go to the bank to buy a house, they must not forget that the current ultra-low interest rate cannot be locked in, and once the interest rate is raised, the monthly payment amount will increase significantly.As soon as this remark came out, a bucket of cold water was immediately poured on the Canadian housing market.

In the United States, although the stock market was booming last year and Wall Street wages hit a record high, the real economy is still in a slump and no improvement.The Fed also clearly knows that it can no longer continue to inject large amounts of funds, and has decided to withdraw the large amounts of funds previously injected into the system if necessary, otherwise it is brewing the next financial crisis.

In the past two years, Japan's economy, which has been stagnant for 20 years due to the depreciation of the US dollar, has been further dragged down.Recently, the Bank of Japan intends to continue to step up efforts to rescue the market, and may stimulate the economy by depreciating the yen and increasing government spending.

In fact, the central banks of many countries are also considering whether or when to close the "wine glass".

In the final analysis, "God's to God, and Caesar's to Caesar", any measures by the central banks of various countries are only short-term adjustments to the economy.In the end, the financial crisis has to be solved by the invisible hand of the market.

It can be seen from the event that the People's Bank of China adjusted the reserve requirement ratio that China's economic power should not be underestimated.I think the old Fed once spoke and the whole world listened.Now whenever the central bank of China makes a move, the whole world trembles accordingly.

11. Must pay homage to all crow mouths
I remember an article in the Wall Street Journal, written by a well-known financial expert, with a ridiculous title, "I hope the United States defaults on its debt—as soon as possible!"

The article read: "At this juncture, I really hope that something will happen. I hope that the United States will default on its debt-as soon as possible. I hope that the Republicans will shut down the government. I hope that Moody's (Moody, Global One of the big three rating agencies) downgrades our bonds and wants China and Japan to stop buying US Treasuries. I want Washington's army of officials, civil servants and consultants to be unpaid so that senior Americans are left with worthless IOUs , not a social security check...Maybe then, maybe only then, America will wake up and do something to prevent the impending fiscal catastrophe...Let's take a look at the White House budget for 2012 , It is simply a replica of the crime committed by Madoff, the mastermind of the Ponzi scheme..."

After reading this, I understood that he was speaking ironically, and couldn't help laughing, it's a hero who sees the same thing.The purpose of this article is to warn the public of a possible imminent crisis - the US national debt crisis!
(End of this chapter)