I even believe that all ports must be allocated through price. In a commodity economy, equivalent exchange is the foundation for ensuring smooth transactions.
The Difference Between Working and Investing
Earning money by investing, rather than earning money by exchanging time, is the biggest difference between working and investing.
Average Investment Level: Seeking Relative Victory
In the field of investment, achieving absolute victory is not easy, but achieving relative victory is more realistic. Investors who achieve relative victory can become profitable, while those who achieve absolute victory may become masters. However, mastery is not achieved overnight, nor can everyone become a master. Therefore, for ordinary investors, becoming a relative victor should be the primary goal.
The Relationship Between Return on Investment and Time
“Investment” refers to putting personal money, time, or energy resources into something expected to yield profitable or satisfactory returns. The return demanded by an investor depends on how much investment risk they perceive. If an investment is extremely risky, investors usually expect a higher rate of return.
Time and Liquidity: Key Factors Affecting Returns
Risk factors include Time and Liquidity. The longer the time required for an investment, the higher its rate of return should be. The longer others occupy your capital, the greater the possibility of capital loss due to unforeseen accidents. As an investor, you hope this risk is compensated.
Furthermore, investors must consider the liquidity of the capital. Liquidity refers to the ease or difficulty of investing and withdrawing capital from an asset. When you urgently need money, can you quickly withdraw funds from the invested company? If so, the investment has high liquidity, or in other words, the asset is easily convertible to cash; conversely, it has low liquidity.
Applicability of Installment Payments
Due to the existence of uncertainties, installment payments may be a more suitable choice.
Xiao Chen is in love, but his income is meager, making it difficult to meet Zhenzhen’s material needs. It is his girlfriend’s 20th birthday, and he must give her a gift no matter what. He gathered some money, bought a gold ring, and wrote on the card:
“Dear Zhenzhen, Happy Birthday! And I wish you happiness for all the holidays from today until we get married!”
Stock Market Bottom Fishing: Caution in High-Risk Operations
An old friend was rushing to catch a boat, driving as fast as possible to the dock. When he arrived, he found the boat had already left the shore. He locked his car, immediately jumped onto the boat at a sprinting pace, completing the action in one go without any pause. His action startled everyone on the boat, and the captain wondered, “Sir… the boat hasn’t even docked yet…”
Bottom Fishing refers to the strategy of buying when the stock price has fallen to its lowest point, especially after a sharp decline in a short period, anticipating that the price will quickly rebound. Buying the cheapest stock is the opportunity that all investors aspire to, and it is the profitable model adhered to by value investors. However, there is no clear standard for what constitutes the “cheapest” or “bottom” price. Bottom fishing is often a description of buying at an already occurred low point, but it is difficult to judge what future point will be the true bottom. Furthermore, sometimes a stock price drops rapidly not because it is undervalued, but because the company’s fundamentals genuinely have problems. If you buy at this time, the stock price may not rebound quickly; instead, it may fall further due to unclear fundamentals.
Investment master Peter Lynch once said, “Don’t bottom fish.” This means that if an investor is certain that the company’s fundamentals are not seriously flawed, and the stock price has fallen below reasonable valuation levels, they can consider buying without trying to predict the bottom.
Moral Hazard: The Hidden Danger of Selfish Behavior
Moral Hazard is not synonymous with moral depravity; rather, it refers to actions taken by individuals engaged in economic activities that maximize their own utility while being detrimental to others. Alternatively, it can be said that when one party in a contract does not fully bear the consequences of the risk, they will take selfish actions to maximize their own utility. This concept was proposed by Western economists in the 1980s and belongs to the field of economic philosophy.
Moral Hazard manifests in various forms, the most common of which are the following two:
Deliberately Causing Insurance Accidents For example, deliberately causing cargo loss or personal injury to defraud the insurance company. This behavior is increasingly prevalent in our country, especially in life insurance, where cases have occurred of insuring a person and then killing the insured to claim the insurance money, posing a threat to social stability.
Deliberately Exaggerating the Degree of Loss When an insurance accident occurs, the insured person should immediately notify the insurer and take measures to mitigate the loss. However, some people, in order to claim more insurance money, do not do their best to mitigate the loss but deliberately exaggerate it. For example, after a ship strikes a reef, the shipowner bribes the captain to deliberately steer the ship toward the reef, causing severe grounding, which makes it easier to commit fraud.
Productivity Advantage in Competition
Whoever has higher productivity is the one who can win in competition. As the saying goes: “I can fight with a broom handle, the problem is the Northern guys don’t!”
Monetary Properties of BTC
Money is a specific commodity that serves as a general medium of exchange, possessing functions such as a means of circulation, a means of payment, and a means of store of value. It satisfies the needs of commodity production and exchange, as well as the need to hold wealth in monetary form.
Don’t Drink the Milk a Miser Offers You
There is no free lunch in the world. When faced with a sudden windfall, one must remain clear-headed and resist the temptation to take advantage, even in the face of huge economic benefits.
Supply and Demand are Mutually Causal
If there are no good men in the dance hall, will there be good women in the dance hall?
Say’s Law: Supply Creates Demand
Say’s Law, also known as the Market Law, states that under normal circumstances, a supply in the market will generate demand for it. Brodeur explains that any product supplied in the market drives the distribution of money during its production process—for instance, purchasing raw materials, paying transportation fees, and distributing wages. This distributed money will eventually reappear in the form of demand, thus forming a cycle between supply and demand.
Keynesianism: Demand Creates Supply
The British economist Keynes proposed a view diametrically opposed to Say’s Law in the 1930s: that demand can create its own supply. He believed that the free market cannot guarantee stable economic growth and full employment, and therefore, state intervention must be strengthened. When demand is insufficient, the government should take measures to stimulate demand, thereby driving economic growth and achieving the goals of full employment and increased supply. This view is known as the Keynesian Law.
Customer Value Gain: The Difference Between Total Value and Total Cost
Customer Value Gain refers to the difference between the customer’s total value and the customer’s total cost. The customer’s total value includes product value, service value, human capital value, and image value, etc.; the customer’s total cost covers monetary, time, energy, and mental costs. One way to increase the Customer Value Gain is to increase the total value purchased by the customer.
Consumption Imitation Effect: The Influence of Others
Our consumption expenditure is often influenced by those around us. For example, a young man might not wear the same clothes as his grandfather, but he will wear the same clothes, carry the same sling bag, and have the same hairstyle as his classmates or colleagues. This is the consumption imitation effect.
Snob Effect: The Charm of Scarcity and Expense
The Snob Effect refers to consumers preferring goods that only a few people can enjoy or that are unique. The fewer people who own a certain snobby good, the greater the demand for that good. Art masterpieces, specially designed sports cars, and custom-made clothing are typical snobby goods. The value consumers derive from them often stems from the privilege, status, and sense of honor that comes from the fact that “almost no one else owns the same thing as me.”
Poor Quality Assets: Worse than Having Nothing
Worse than having nothing is an asset that may bring losses at any time. Taking a car as an example, suppose someone gives you a BMW, and the other party pays the down payment; you only need to repay the mortgage monthly. However, you face not only the pressure of high repayments but also extra expenses such as fuel, maintenance, and upkeep. If you sell the car at this time, the price has often already fallen, and the proceeds are insufficient to repay the loan.
Currently, real estate is also trending toward becoming a poor quality asset. Negative assets mean not only having nothing but also owing a large debt to the bank. For example, if someone buys a house with a market price of 1.5 million RMB, and the current market price has fallen to 900,000 RMB, but the mortgage and interest they owe amount to 1 million RMB, their negative asset ratio is 10%.
Structural Unemployment: The Dilemma of Mismatched Supply and Demand
An older unmarried man encounters an older unmarried woman in the park and proposes a couplet: “Possessing a body of strength, but having no land to cultivate.” The woman immediately responds with the counter-couplet: “Wasting three feet of good land, yet no one comes to cultivate it.” This is a vivid depiction of structural unemployment: mismatched supply and demand leading to idle resources.