Wall Street Financial Truth

Chapter 35 How the Common People Protect Their Wealth (5)
However, this famous financial expert will definitely be ridiculed by some people as "crow's mouth".Because when judging and analyzing things, especially the direction of the economic situation, economists will come to completely different conclusions in the face of various economic data.Optimistic economists are often dubbed "drummers", while pessimistic economists are dubbed "crow mouths".

Regardless of the merits and demerits of the trumpeter and the crow's mouth, generally speaking, it is very scary to not have a crow's mouth.For example, in Japan 20 years ago, the real estate bubble was formed due to the loosening of credit, which eventually led to economic collapse, and the Japanese economy lost 20 years, and it has not recovered.A post-event investigation by Japanese scholars showed that when the real estate bubble was blowing bigger and bigger, none of the officials of the Bank of Japan or the mainstream media publicly expressed concern about the collapse of the bubble.In other words, Japan did not have a "crow mouth" economist back then.

Having said that, the crow's mouth is "disgusting".

Recently, when communicating with a celebrity in the domestic real estate industry, he complained that an economist had said that housing prices were extremely high since 1989, and that there was a bubble in housing prices in 1992, and that the bubble was about to burst in 2002. He also warned everyone that the bubble must burst.As a result, housing prices in China have skyrocketed.Are these economists socially responsible?Didn't it just grow a crow's mouth for nothing!
In fact, this dear friend may not have thought that it is a good thing that the early warning did not become a reality!If no one gives an early warning and unfortunately happens suddenly and becomes a black swan event, it will be miserable!As described in the book "Black Swan", if 10 years ago, someone had warned of the 9 terrorist attack even one hour earlier, then the 11 incident would not have happened.In fact, intelligence agencies did receive relevant news before, but they did not pay enough attention to it.And after 9, the United States set up an early warning system. For several years in a row, the hazard warning lights kept jumping, and everyone was trembling all the time, but nothing major happened.

Of course, compared with predicting the economy, early warning of terrorist crises is much easier to control.However, there are so many crows in the economic and financial circles of the United States, and 200 financial crises, large and small, occurred in the first 135 years.

People like to hear good words and myths, and don't like ugly truths.Do you still remember the story Mr. Lu Xun told about a child who was just born, and a lot of people gathered around the child and said a lot of festive words, and someone suddenly said, "This child will die in the future", and was beaten severely.

It can be seen how annoying the truth is.The economist Keynes, who knows the economic model proposed by him the most, knows that using loose credit is actually playing a Ponzi scheme, and sooner or later he will fail.So he laughed at himself, "In the long run, people are going to die."Its meaning is nothing more than "lazy people eat lotus root, eat a piece, wash a piece", if you have wine today, you will be drunk today, let's live a day.

In fact, we should salute all crowmouths!
It's like a doctor telling everyone "don't smoke". Smoking is harmful to health, and the probability of getting lung cancer is very high.But not all smokers get lung cancer.Because doctors concluded that "smoking gets cancer" is just a trend, and each smoker has different genes, some smokers died of other diseases before they were diagnosed with lung cancer.Even if you really get lung cancer, it will be sooner or later; and even if you get it, you don't see God right away.This is why the crow's mouth is "disgusting" and the reason for the inaccurate prediction.But we must not say that doctors are meddlesome.

Let’s take the Canadian housing market as an example.

After the U.S. housing market collapsed, many economists predicted that the Canadian housing market would follow in the footsteps of its big brother.Because Canada, like the United States, loosened credit, it will inevitably produce a real estate bubble.The early warning of this group of crow mouths was heard by the Canadian government.Due to the hysteresis effect, the Canadian government immediately cut interest rates and loosened credit to support the housing market.This does not mean that there is no bubble in the Canadian housing market, but that the "disease" has been temporarily controlled by using the low interest rate policy, but the root cause of the disease is still there.

In particular, credit continues to loosen due to the prolonged period of low interest rates.Just like being addicted to drugs, it is difficult to get rid of drugs, so we simply "fight drugs with drugs" and continue to aggravate drug addiction.Now the debt ratio of Canadians has exceeded the international warning line of 145, and has reached a high of 150, higher than the 147.2 before the outbreak of the US subprime mortgage crisis, and is marching towards 160.Recently, the "crow's mouth" all over the world has pointed out that the Canadian housing market bubble has burst, and Canadians are very upset to hear it.

Obviously, the Canadian government is caught in a dilemma. If you don’t raise interest rates, the disease will only get worse; if you raise interest rates, what if the housing market follows in the footsteps of the United States?So the governor of the central bank can only keep warning the common people: Thank you for not borrowing too much!His intention is very clear, the housing market will collapse in the future, don't blame me for not warning you!
In the market, the opposite of the crow's mouth is the trumpeter.For example, someone said in 2009 that in 2010, the Dow Jones Industrial Average would reach 3 points, and the Chinese stock market would reach 1 points.These words are quite sweet. In bookstores, those books with a bull market of 3 points and a Dow of 2012 points are the favorites of everyone; and the author in the movie "500", the warning book he wrote, only sold [-] copies.It can be seen that ugly words are "disgusting", but they are good medicines that are good for the disease.

Let's talk about China's unbelievable housing prices that are completely divorced from any international common measurement scale.Now more and more people in China say with relief that China's real estate market is in a special situation, "Our house prices here will only rise, not fall."However, people in South America said this sentence 30 years ago; people in Hong Kong, China said it 25 years ago; people in Taiwan, China said it more than 20 years ago, and the Japanese also said it; Americans said it 5 years ago; Said it, the Irish said it, the Southeast Asians and the Muscovites said it too!Everyone also believes that their house prices only go up but not down.But as a result, one day suddenly, the housing prices there suddenly turned down... As for China, it was just not the right time. In the autumn of 3, the crazy housing market encountered autumn frost and was about to wither.

Bubble prices are like dogs that sometimes run away from their owners, but eventually return to them.Housing prices that run off track in a place will eventually return to a reasonable price.For example, in the 300 years when there was no bubble in the housing market in the United States, housing prices have been hovering between 1.6 and 1.8 times the average household income.It deviated from this ratio in the past few years, but it began to decline in July 2006, and recently it has gradually returned to 7 times the average household income.

In short, the words of the trumpeter are quite popular with the public; the words of the crow's mouth are like crows, and they are extremely unpopular.But I want to say that it is not necessary to listen to the words of the trumpeter, but it is necessary to listen to the words of the crow's mouth.Moreover, don't get angry with "Crow's Mouth" and insist on it, it will only make the condition worse.If there is a bubble, it is better to burst sooner than later.Just like quitting drugs, the sooner you quit, the less pain you will experience, and the later you quit, it will be life-threatening!
Going back to the U.S. treasury bonds mentioned at the beginning of the article, Wall Street investment banks or hedge funds have long stayed away from them. The world's largest bond fund Pacific Investment Management Corporation (PIMCO) is also selling U.S. treasury bonds.Because they all realize that the US government can repay the debt of more than 14 trillion US dollars?Not to mention repaying the principal, in a few years, the annual fiscal revenue of the United States may not even be enough to pay interest.But in America today, ordinary people don't have that sense of urgency, and neither does President Obama.Apparently, bond investors aren't in a hurry either.

Therefore, the crow-mouthed expert at the beginning of the article hopes that the United States will default on its national debt, because "no one wants to default on the bonds issued by the country, but if default is inevitable, it is better to come sooner than later."

Don't take chances!Whenever a bubble comes, someone will always say that this time is different, we are different here, but history is always surprisingly similar, history always repeats itself, the difference lies in the fact that sooner or later.The result is an 800-year history of financial absurdity.Often everything remains normal until something abnormal happens, like the earthquake and tsunami that occurred in Japan in 2011, and the sky was still clear half an hour ago.

However, this time the crow's mouth did not hit the mark, and the United States escaped.If the United States defaults, China, which is the largest creditor of the United States and holds nearly 25% of U.S. national debt, will suffer huge losses!Once China loses, the US economy will also be dragged down!

12. Are you still obsessed with "American Life"
The "2011 Earthquake" in Japan in 3 made us finally understand a fact that we do not want to admit. The most terrible disaster for mankind is not an earthquake or a tsunami, but the nuclear leak caused by the earthquake and tsunami!Because the consequences of natural disasters are predictable and calculable, but the consequences of nuclear leakage have not been known so far.It can be said that ghosts don't scare people to death, but only people who scare people can scare people to death.According to pessimism, if there is a catastrophe like "11" in the future, it will be the destruction of mankind itself that will destroy mankind!Consider Chernobyl, still a dead zone!

At present, countries around the world are re-discussing the issue of nuclear safety, although nuclear power experts have repeated their chests: "Nuclear power is not only the most environmentally friendly, but also the safest energy source, just like airplanes, it is the safest of all means of transportation. "However, judging from the continuous bad news from Japan, when everyone is in fear, the guarantee of nuclear experts is obviously difficult to be effective and unconvincing.People are even worried that some experts are employed by the nuclear power group themselves. Those who sell melons say that melons are sweet, and those who sell flowers say that flowers are fragrant. Their interests and positions dictate their positions. Their words must not be believed!
To be honest, even without the Japanese nuclear leak, it is inappropriate to view the absolute safety of nuclear energy and compare nuclear safety with the safety of aircraft, which are not at the same level at all.Just imagine, a plane crash can destroy at most one plane and a hundred people. If something goes wrong in a nuclear power plant, the price to be paid will be a region or even all mankind!How can the two be compared together?Therefore, there should be zero tolerance for nuclear accidents!
In the first 200 years, coal was the main energy source for human economic development. However, due to the serious environmental pollution caused by coal, humans have turned to oil since the 20th century. However, the shortage of oil has become increasingly apparent. In 2005, after years of exploration, it was discovered that There are 1.6 trillion barrels of oil available for development and use in the world, while the daily consumption of oil in the world at that time has reached 7100 million barrels.With the rapid development of China and India, the annual demand for oil is increasing at a rate of 8% to 10%. How many years can oil be used?If you don't find a way quickly, the oil will only last for 40 years at most!

Among the new energy sources, solar energy development technology is far from enough, and the cost of wind energy is too high to be worth the candle.At present, the only possible alternative to oil is nuclear energy.Clearly, nuclear power cannot yet replace oil.So what shall we do in the future?In my opinion, human beings can only succumb to nature and change the current economic model and way of life!

Because the life of modern people is inseparable from energy, mainly oil, especially in today's globalized economic model, and it is even more inseparable from cheap energy.Now almost all daily necessities for Americans are produced in countries with low labor costs, such as China, and then shipped thousands of miles to the United States.If oil is plentiful and always so cheap, who cares where a pair of Nikes come from and how much oil it takes to transport them?But when the price of oil soars to a certain level and the transportation price rises to the point where it is not as good as being produced in the United States, will Nike shoes be shipped from China to the United States again?Of course not, this is known in economics as a "diminished rate of return".

By extension, once people invest expensive energy costs to obtain goods from tens of thousands of miles away and it becomes a bad deal, this state will stop, that is to say, this economic model has to Change.In fact, recently, many American companies have plans to move their factories from Asia to South America, and some have even begun to implement them.

The most eye-catching thing is that when China's urbanization is in full swing, for example, when the city expands to the fourth ring, fifth ring, and even the sixth ring, the land that used to grow food and melons and fruits is used to "plant houses" , while the Americans did the opposite, preparing to build a super agricultural skyscraper in Manhattan, New York to grow food.After hearing this news, what will the Chinese people think?It must be incredible.

Why are Manhattanites building an agricultural building?You know, Manhattan is a place where every inch of land is expensive, and grain in the United States is extremely cheap. On an acre of land on Beijing's Fourth Ring Road, the difference in income between "growing a house" and growing grain can exceed 30 times, not to mention Manhattan. Absolutely more than 50 times.Note that it is not 50 times, but 50 times!Are Americans stupid for eating hamburgers?
of course not!This is the product of a sense of urgency full of caution.It just shows that they have realized that their development model has encountered a bottleneck, and they are starting to try a new development direction, which is an obvious signal.It's like when we were walking, they got on bikes, when we were riding bikes, they got on cars, and when we finally drove, they got back on bikes.And when we vigorously developed cities and built large buildings, they began to use buildings to grow food again.

In recent years, a new concept called "food mileage" has emerged around the world.In layman's terms, when we eat food, the transportation distance from the place of origin to the place of sale will be clearly indicated on the food label, reminding people to always consider the transportation distance when eating.Because if a bag of food is transported from a distant place, thousands of miles away, the energy consumed by transportation tools such as airplanes and ships, and the amount of carbon dioxide released are huge, which is harmful to the environment and a waste of energy.The construction of skyscrapers to grow food in the local area has greatly shortened the mileage of food kilometers, saved energy, saved space, and reduced environmental pollution. It also allows local residents to visit and learn how food comes from, just like a natural teaching classroom.

Human life must be in moderation, too much is too much.The consumption patterns advocated in the past few decades are all based on low oil prices.Unfortunately, with the gradual depletion of oil resources and the advent of the era of high oil prices, this model has come to an end!How long can we continue with the "blackened" life style that relies on oil?
The change of "American way of life" is imminent.Don't think that if you can still eat enough now, you will definitely be able to eat in the future.Imagine if we can try not to drive private cars and use public transportation more; turn down the temperature of the water heater, adjust the temperature of the air conditioner to be close to the outdoor temperature, or even turn it off; turn off the lights; ;Throw away some electrical appliances that are too power-hungry...are we ready to sacrifice these enjoyments?

13. There are also more and more "cheating old people" in the United States

In North America, children are like birds. Once they reach the age of 18, they can't wait to fly away from their parents' home, and they don't want to be restrained by their parents.Especially after graduating from university, children and parents are basically two independent entities.It is a very strange thing for married children to still live under the same roof as their parents.The movie "Mother" (1996) tells such a story:
John Henderson, who grew up in a single-parent family, is a famous science fiction novelist, but his relationship with women has always been difficult, whether it is a female colleague at work, a girlfriend, or even two failed marriages .He put it down to an awkward relationship with his mother.With the knots in his heart for many years, he decided to go back to his mother's house and spend some time with his mother in order to open the heart lock between mother and child.

(End of this chapter)