Chapter 102 Inflation is the whip of wealth
"Generally speaking, the market bottom is lower than the policy bottom, and the interval is about a few months," Li Feng concluded.
"During the 2008 bear market, the policy bottom appeared in September, with the Shanghai Composite Index at its lowest point of 1802 points. The market bottom appeared in November, with the Shanghai Composite Index at its lowest point of 1664 points."
"In this bear market, the policy bottom has already appeared, and the market bottom should appear within one or two months."
Zhao Xinyue swallowed hard and said, "In other words, we should wait until the market bottom appears before entering the market?"
"This requires detailed analysis," Li Feng said.
"During the 2008 bear market, it took nine months for the policy bottom to appear. The market adjustment was already quite sufficient, and the risks had almost fallen.
"But this time, the policy bottom has come in less than a month after the decline. The market adjustment is not yet sufficient. Even if the index falls below 3,000 points, there are still many risks in the market. For example, there are still at least 100 stocks in the two stock exchanges that have not resumed trading."
Zhao Xinyue felt extremely regretful after hearing this, thinking to herself, "If I had known earlier, I would have waited a few more months. Why did I have to be so impulsive and buy a Gree air conditioner? If things go wrong, the market will really hit bottom, and even the best stocks will be dragged down by the market."
Then, she remembered something and asked, "The market bottom is about to break 3000 points. So, will it drop to 2000 points? Will there be another battle to defend 2000 points?"
"No," Li Feng said, "Xinyue, I once said that the stock market is fundamentally a form of currency."
"Money is like water, leaking out of banks and flowing into various assets, causing inflation. Inflation is like the whip of wealth, lashing everything and pushing up the prices of all assets. A bull market is the release of money in the stock market."
"This has created a huge wealth effect, which has encouraged people to focus on money, but has also made people anxious."
"Nowadays, due to the effects of inflation, you no longer see popsicles for five cents or candies for one cent. In the future, it's very likely that a bowl of noodles will cost dozens of yuan."
"The same goes for the stock market. The 998-point bottom of the century is no longer visible, and the 1664 points in 2008 is also gone forever. Similarly, after this bull market, breaking 2000 points is no longer possible."
"Why?" Zhao Xinyue was even more puzzled.
"Because reasonable inflation is far better than any form of deflation, no country in the world will allow deflation to exist," Li Feng continued.
"This is reflected in the stock market, where the stock index continues to rise. The Dow Jones Industrial Average, established in 1884, was only 40 points at the beginning. Now, more than a hundred years later, it has risen to over 10,000 points!"
“That’s the power of inflation!”
"No one can disobey!"
Li Feng's thinking was extremely divergent, and he traced back to the beginning of the Dow Jones Index of US stocks.
Zhao Xinyue was so confused by what she heard that she even forgot about her own positions for a moment.
After a long while, she murmured:
"Since inflation is so severe, why haven't the prices of our computers, TVs, and refrigerators increased in recent years? They've even dropped in price. Some are even dirt cheap. I heard LeTV TVs are even selling at a loss."
"This is the power of technology," Li Feng said.
"The development and progress of science and technology, especially the emergence of large-scale industrial production, has far exceeded the rate of inflation, resulting in a continuous decline in the prices of these industrial products. However, there is a critical point. Once technology stagnates, or the rate of inflation exceeds the rate of technological progress, the prices of these industrial products will also rise."
"The most intuitive way to observe inflation is through wage increases and food prices. If I'm not mistaken, your salary in 2008 was only half of what it is now!"
"Well, it really is..."
Zhao Xinyue drew inferences from this and speculated, "Is this the result of the 4 trillion yuan money injection at the end of 2008?"
Li Feng laughed and said, "This kid is teachable."
"You're the only one who understands? Humph!" Zhao Xinyue was unconvinced.
After a while, she asked again: "When will you come back?"
"Something happened at home. If there are no accidents, it will be almost done in three to five days."
"oh…"
The two chatted for another quarter of an hour before hanging up the phone.
The next day, Tuesday, August 18th.
Li Feng was woken up early in the morning.
After breakfast, Li Feng first took Uncle Zhang and the three Li brothers to complete and divide the savings book of 50,000 yuan.
Then, he drove back home, picked up his mother Wang Xiurong, and went to look at houses. They ran from the east end of the village to the west end, looking at this house and then that one. They negotiated the price again and again and initially decided to buy the house owned by the Zhu family.
The house covers an area of several hundred square meters, with several apple trees planted in the yard. It is close to the provincial road and has convenient transportation.
Just three years after the house was built, Old Zhu gave up his old business and went to the city with his son to enjoy a better life.
"Let's go home first and discuss it carefully." Li Youjiang said in a low voice.
Buying a house is a big deal, involving many aspects that cannot be taken lightly, such as whether there are any structural problems with the house, whether the neighbors are easy to get along with, whether there is loud noise at night, whether there are any problems with water and electricity... and so on.
This whole process lasted until around four or five in the afternoon. Li Feng parked the car and just returned to the house. Before he had time to drink a sip of water, a phone call came in.
"Li Feng, lend me some money, I need it urgently." Wang Dongdong's slightly hoarse voice came from the phone.
"Huh? What happened?" Li Feng asked. Although he and Wang Dongdong were not familiar with each other, they were classmates after all and lived in the same city B. If there was an emergency, he would help if he could.
"Alas—my father had a sudden cerebral hemorrhage this morning and was admitted to the B City People's Hospital," Wang Dongdong said anxiously.
"I'm about to have a craniotomy, and I need a 100,000 yuan deposit. I can't come up with that much money right away, so I have no choice but to ask you for help. Don't worry, I'll return the money to you in a couple of days..."
Borrowing money is always used to help in emergencies, not to help people get out of poverty.
Li Feng thought for a moment and said, "I'll lend you 50,000. You can figure out the rest later."
"Fifty thousand? Okay, fifty thousand is fine, thank you! I'll send you my Alipay number later!" Wang Dongdong hung up the phone after saying that.
After a while, a text message came: "XXXXXXXXXXX".
Li Feng copied it and transferred 50,000 yuan.
At this time, Zhao Xinyue called again.
"Li Feng, have you watched the stock market today?" Zhao Xinyue seemed very anxious.
"I had a lot of things to do today and didn't have time to watch it." Li Feng told the truth.
"Oh my, let's take a look, why are thousands of stocks hitting the limit down again?! The Shanghai Composite Index alone has fallen by 6.15%. Oh my - it was fine yesterday." Zhao Xinyue looked at Gree Electric Appliances in her account, which had fallen by 5.17%, and regretted it deeply.
"It dropped so much all of a sudden? Is the market bottom coming so soon?" Puzzled, Li Feng opened his cell phone.
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