Chapter 188 Every inflation is an opportunity to get rich

Tuesday, January 23, 2024.

The Shanghai Composite Index opened low at 2746 points. Just a few minutes later, it plummeted to the lowest point of 2724 points. It then fluctuated upward all the way and finally closed at 2770 points, an increase of 0.53%!

The most exciting thing in the market today, apart from the news yesterday that GCH will "take favorable measures to stabilize the market", is the hot foreign index ETF.

After the Nikkei index hit a 34-year high, a large amount of speculative funds also poured into the Nikkei ETF, pushing the premium to 20.49%!

Even more outrageous is the US 50ETF, which hit its daily limit yesterday and then resumed trading today, hitting its daily limit again, 10.01%! The premium has reached 21.02%!

This is the second consecutive day of limit up.

In addition, the Nasdaq index ETF closed at the upper limit of 9.99%, and the premium rate reached 18.20%, which means it has risen by more than 20 points in three days.

Some investors shouted the slogan "Buy Nasdaq and reap the world."

The dislike for A-shares has almost reached its peak.

Li Feng was extremely bored, so he reopened the trading room in Jingu Building, but changed the name to "Stockholders' Teahouse". Every day when he had nothing to do, he would chat with his fellow stockholders.

Watching groups of stock investors rushing into these ETFs for speculation, it was as if I saw my own shadow from more than ten years ago.

Beside him, Xiao Bo drank tea and asked:

"Li Feng, this is bizarre. Why are foreign stock markets constantly rising while our domestic stock market keeps falling? Is it because our Guo Jia's feng shui is bad? Or is that bronze bull statue at the door of the trading room wrong? It's a bear, not a bull?"

Li Feng handed Xiao Bo a cup of tea and analyzed:

"As the saying goes, a rising tide lifts all boats. How much liquidity have been released overseas in recent years? Is inflation high? How can the stock market not rise? Although fiscal and monetary policies have been relaxed in China in recent years, distant water cannot quench immediate thirst. Look at last year, the real estate industry, the mother of the economy, had an annual development investment of only 11,091.3 billion yuan, a decrease of 9.6% from 2022..."

"The collapse of real estate and its industry chain is like a black hole, swallowing up all kinds of funds in society... Many investment institutions have been struck by the thunderbolt and collapsed... Although the cost of capital is very low now, without the real estate link, the benefits cannot be transmitted to the end users, and the monetary multiplier effect cannot be formed... Ultimately, the funds are idle..."

"Look, the CPI data for October, November, and December last year showed negative growth for three consecutive months, just like in 2022... The CPI data for the whole year only rose by 0.2%... In fact, the economy is already in danger of deflation."

"As the saying goes, when the big river is full, the small rivers are full; when the big river is empty, the small rivers dry up. With the current economic and fiscal and monetary policies, can you still expect fresh capital to flow into the stock market and for the stock market to rise?"

"This is also the reason why everyone has been saying that the economy is bad and money is hard to make in recent years."

After a pause, Li Feng continued:

"Deflation is harmful to the economy, and moderate inflation is most conducive to economic growth... We need a planned inflation to pull the economy out of the quagmire..."

"Inflation? Will the money become worthless? That's not good, right?" Xiao Bo was shocked when he heard this and said.

Li Feng explained:

"Inflation is essentially a seigniorage imposed on currency holders. This has little impact on the working class, as wages will rise accordingly. It has an even smaller impact on the poor, as they don't have much savings to begin with. It also has little impact on those who hold assets, as their assets will also rise with inflation. It is most detrimental to those who hold large amounts of currency."

"During an inflation cycle, inflation will drive out all kinds of low-cost funds, push up various assets, and look for various investment opportunities."

“Every inflation cycle is an opportunity to make money!”

"For example, during the 2001-2007 inflation cycle and the 2014-2017 inflation cycle, those who invested in real estate and stocks generally managed to preserve and increase the value of their capital. There are also other investments, such as antiques, tea, stamps, and even Bitcoin..."

“It can be said that once inflation hits, there are thousands of ways to get rich, and countless opportunities to make a fortune!”

Hearing this, Xiao Bo was still a little hesitant and asked, "Are you so sure?"

"Not only is it certain, it is certain. The benefits of inflation are simply too numerous for the government to refuse. At this point in time, inflation can not only resolve the real estate debt crisis, but also the government debt crisis..."

"For example, if you used to earn 5,000 yuan and owed someone 300,000 yuan, it would take you six years to pay it off. But if inflation comes, the debt remains the same 300,000 yuan, but your monthly salary doubles to 10,000 yuan. You only need three years to pay it off... It's like the debt is directly halved..."

"Similarly, housing prices are very high now, over 10,000 yuan per square meter. But if inflation hits and the average salary in our city rises to over 10,000 yuan a month, a young couple could buy a house in just three years... Is it still expensive? Definitely not..."

"Because, although the housing prices have not moved, they have actually been cut in half..."

"So I say, we need some inflation."

His eyes lit up as he said, "Li Feng, if that's the case, then when inflation hits, what opportunities are there to make a fortune?"

"To be honest, I really don't understand this time, and I don't know..." Li Feng said honestly,

"In the past, the economy was basically stimulated and inflation was boosted by increasing investment, such as the 4 trillion yuan infrastructure plan in 2008 and the real estate inventory reduction campaign that began in 2014..."

"However, this time the leadership has repeatedly emphasized that it will cross the cycle and will no longer blindly flood the market with money or engage in large-scale infrastructure construction. It is clear that these two paths have been abandoned..."

"Not to mention, this year's economic policy is to seek progress while maintaining stability."

"I personally believe that it should, and must, be a reasonable monetary easing to trigger some controllable inflation, raising inflation to around 2%... or even higher..."

"We don't need to know the detailed path, we just need to grasp the general direction and know that inflation is bound to come... and decide on our investment path based on this evidence."

At this point, Xiao Bo also heard the hidden meaning of Li Feng's words and couldn't help but ask:

"Want to buy a house? They say the last ones standing win. Many real estate companies have gone bankrupt in the past two years. Are the good times coming for the remaining real estate companies?"

Li Feng denied:

"I don't recommend buying a house. The real estate market has a 20-year cycle, and it's only been a few years. Without going through some ups and downs, you won't see the sun tomorrow. I personally think the real estate industry won't pick up until around 2028."

"So long? Why?" Xiao Bo was shocked when he heard it.

"It's simple. If we want the real estate industry to thrive again, we need to be able to sell properties. If house prices fall now, inflation picks up a bit in the future, and people's incomes go up, then only then can prices be held back. This all takes time."

"This is just some of my speculation, maybe it will be different in the future."

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It's the end of the year, and I have a lot to do, so my updates are a bit erratic. This chapter took me two or three days to write, but it doesn't delay anything. It's all about macroeconomic analysis, and I'd like to share it with you all. I hope you can give me some feedback.

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