Chapter 57 5. Avoid the loss of inflation

●A person's success requires some luck.Most of the so-called dips are unsuccessful. ●You can buy a property, but you must have a hedging investment. It is not advisable to just think about buying the bottom. ● No matter how the real estate falls again, it will not be too painful in your heart, and you can still see it. ●If you want to invest, don't speculate on changes in the situation. It is difficult to make a fortune if you want to buy the bottom. In the 1960s, Hong Kong’s economy was very depressed. At that time, Li Ka-shing bought a large number of unfinished buildings, and finally made the famous Cheung Kong Industrial. This bargain hunting can be said to be very successful.

But that's his luck.Frankly speaking, a person's success requires some luck.Most of the so-called dips are unsuccessful. So I said today that when you are facing a depression, you can buy a property, but you must have hedging investment, and it is not advisable to just think about buying the bottom.Your purpose of buying a property is to avoid the loss of inflation.How to invest cash, for example, if I invest 100 euros, then I have to buy 100 US dollars at the same time, what does that mean?hedge.If you don't make money, of course you won't lose money.Cash investment can hedge the risk of exchange rate.But the risk of inflation cannot be hedged.We are different from Li Ka-shing. He keeps US$22.1 billion in cash because he has turnover needs. A company as big as his needs turnover at any time, so he needs cash.For example, if we have spare money on hand, basically there is no need for turnover. If you keep this spare money in cash, although you can hedge the exchange rate risk, the inevitable result of keeping it in your hand is that you will be hit. Inflation loss.

So what to do?Just now I talked about the issue of real estate. Li Ka-shing’s investment at that time was commercial investment. He made a one-shot deal and bought these few, which happened to be the right one.It didn't take long for the economy to recover, and then it just happened to make a fortune.But we can't invest in this way, because if we buy real estate now, we must pay attention to the concept of hedging when buying real estate. How to hedge? What are the benefits of buying real estate?First of all, it can see it. This is different from stocks, which do not know how to fall.No matter how much real estate falls, it will not be too painful in your heart, and you can still see it.And taking the real estate markets in Taiwan and Hong Kong as examples, you will find that after 15-30 years, buying real estate may offset the impact of inflation, making it difficult for other assets.So in the long run, you can consider holding real estate in order to hedge against inflation.My approach is to keep cash in a hedged form, such as equal amounts of gold and dollars, or equivalent amounts of euros and dollars.Then use the hedged cash and real estate to hedge again, so as to hedge the risk of inflation in the long run.When I invest in real estate, I will further use the form of high mortgages to better hedge against inflation.Of course, my strategy refers specifically to investment. If you can only buy a house to live in, you can’t use this strategy. You should wait a little bit in the first half of 2009 and make a decision after observation. Home prices will continue to soften in most areas.

If you can survive the depression period and enter the bubble period, you will make money.The problem is that we don't know how long the depression will be.During the depression period, I think everyone should not have illusions, don't talk about buying bottoms or predict what will happen to the US dollar and the euro, and then go for it.You find out that your judgments are all wrong.Let me give you an example. I have studied and taught in the United States for so many years, and I know in my heart that the world's exchange rates are basically determined by the United States. Just in the middle of 2008, the U.S. dollar continued to depreciate. I believe that our investors, even investors all over the world, believed that the U.S. dollar would depreciate, so everyone bought gold, oil, euros, Australian dollars, etc., because everyone believed that The dollar will lose value.But please think about it, will things really develop in the direction everyone thinks?Does the US president's financial team think so too?But readers, please think about it, it is impossible for them not to know things that are known even at our level.On a dark and windy night, the US government suddenly made a move.When the price of oil rose to $147 a barrel that day, the U.S. government suddenly decided to convene a Congress to listen to the administration, calling those American international financial speculators over to scold them, and even threatened to sue them.Since that day, the international oil price has dropped from 147 US dollars a barrel to the present.As a result of the drop in oil prices, the U.S. dollar immediately strengthened. Who said that the U.S. currency will depreciate?Nonsense, you find that it will not depreciate at all, but it has been strong for several months, so investors all over the world who invest in other currencies lose money, and the United States earns it back.The actual situation is so complicated, so I advise readers, if you want to invest, don't speculate on the changes in the situation, and it is difficult to make a fortune if you just want to buy the bottom.

The audience raised two related questions about this chapter. I list their questions and my answers below for readers' reference. Audience: Because I am engaged in international trade, the steel mills are losing money in the whole industry, and the steel companies are also laying off employees, and they are laying off workers drastically.Life is very sad, because the EU and the United States have not placed any more orders, and there are still some trade restrictive measures, such as anti-dumping and so on.And in terms of currency settlement, we have always used the US dollar as the settlement currency. Does this have something to do with it?Because recently I heard news that the People’s Bank of China wants to use RMB as a settlement currency between China and ASEAN in the European Union or ASEAN. I don’t know why the People’s Bank of China thinks this way, please explain it to us its meaning.

Lang Xianping: If we talk about the best situation, that is, all our foreign trade can be settled in RMB, then we have no exchange rate risk at all, and it doesn't matter whether the RMB depreciates or rises.But the renminbi is not a hard currency, and the EU will not accept it, let alone the United States.But Southeast Asian countries will accept it. For example, Vietnam, they are very happy to use RMB. If you travel to Thailand and Vietnam today, you take RMB with you. They are very happy, because it is a strong currency for them, so in regions with strong currencies , you settle in RMB, they are willing.But when it comes to European and American countries, Japan and other countries, the renminbi becomes a weak currency, so if you want to use renminbi for settlement, it will be very troublesome.If he settles with you in RMB, he will bear all the exchange rate risks. Is it necessary for him?So it is no problem to deal with small countries. If you really go to the platform of international trade and use RMB to settle with others, you must be very strong in order to do this, just like the United States, but now We have no such possibility.

Audience: Now that the central government wants to implement the free convertibility of RMB, will it be launched in advance? Lang Xianping: There is nothing wrong with this, but whether it should be pushed or not, I think it is right to push.In other words, it should have taken this step a long time ago, and should not wait until today; today, our RMB exchange rate keeps rising, which makes it very difficult for our enterprises to export.Only after encountering difficulties will I think that it is the best situation if I can quote directly in RMB.But it will take a long time to push the matter of settlement currency.The other party also needs to have time to adapt.At present, the other party says verbally, we can consider it, and we can consider it, but whether we will do it is another matter.I am very worried that the exchange settlement will still be done with the euro and the US dollar, because everyone will feel more at ease that way.And you said that the renminbi has not depreciated now, let me ask you, what if our domestic inflation is serious?Or what if the renminbi depreciates sharply?Of course, this hasn't happened yet, we don't know yet.Let's give a simple example, let me ask you, think about it for yourself, which currency do you have confidence in, the US dollar, the euro, or the renminbi?you tell me.It can't be the RMB. You may have the most confidence in the Euro, followed by the US dollar, and the RMB is the least confident. Most Chinese people are like this, let alone others!The same reason can be deduced. When you make settlement with others, is it necessary for others to use RMB for settlement? Why doesn't he use Euros and US dollars?So in this case, you can see that if the renminbi depreciates sharply or the domestic inflation is serious, the renminbi will disintegrate immediately, and no one will use it as a settlement currency.Unless it's a very stable currency.Whether the RMB can continue to be stable in 2009 remains to be seen, so it is not so easy to promote a currency, because one of the most basic conditions is that you must rely on credibility and have a long-term stable currency value, so that others will be interested, and you I don’t even have confidence, and I don’t know how other people’s confidence comes from.Should this matter be done?should do.But don't have too much expectation yourself, it is not so easy to promote a strong currency and settle the currency.

And think about it again, why do Americans let you push?So I believe that in the near future, there will definitely be a wave of counterattack forces coming out.Just like the euro, it is not so easy for the euro to be a settlement currency, and the dollar cannot give up its dominance so easily, understand what I mean, so there is still a long way to go in the future. 20 years ago, Wall Street was still able to keep its promises. However, since then, business and capital investment have turned Wall Street into a den of prostitutes.Certain things are worthless unless you can convince others to invest in them.If you can mislead an investor into investing in an asset or project that is not worth the money, then you are worthy of congratulations.If you can hide debts on your balance sheet and pass them on to your customers, that's all the more ecstatic.

However, the real reason for the outbreak of this disaster lies in the manipulated US government.None of this would have happened if there had not been a massive deregulation of the financial sector, and many relaxations of existing rules and oversight.For nearly 30 years, the U.S. government has been advocating small government and less regulations to achieve low taxes and high development, and it has also promoted it globally as a panacea for solving world economic problems. However, what the United States is facing today is high spending, high taxes, and big government. All in all, there are four ways through which the dilemma facing the United States can spread like a plague to the world.First, many foreign governments and their commercial banks would suffer direct losses from their holdings of US mortgage assets and mortgage-backed securities.Second, countries that experienced temporary housing bubbles eventually experienced rapid declines in house prices.Third, those countries that mainly export to the United States and Europe will experience economic sluggishness due to the reduction in consumer demand in the United States and Europe.Finally, currency flows will magnify losses for countries already threatened by economic crisis.Not only will businesses and banks be under pressure, but entire countries are at risk of bankruptcy, and the fall in their currencies will also amplify investment losses for foreign investors.

A philosophical conclusion based on what the public has learned from this crisis.If the public can get through this crisis, they will be stronger for it, as everyone will have to do some soul-searching to determine whether their country, their government, and their own lives are heading in the right direction.In a sense, the outbreak of this crisis is a good thing, and unless there is great pain and distress, the American public will never realize that they have chosen the wrong direction to go.And now, they are feeling the pain of threats to their jobs and homes. (This article is excerpted from "The Great Salvation" by [US] John R. Tarbert)