Bias against finance

Often hear a saying: “the closer you are to the money, the more money you can make.”

I’m a programmer, so my core job is to dive into the world of code and make it as perfect and bug-free as possible.

The limitation of this kind of thinking has kept me enclosed in a very narrow world. I refuse to learn about the world outside of code, like finance. So much so that when I was developing the “bulk futures trading platform”, I was plagued by a problem for more than a week. The code could not be written.

When the price of a commodity is on the rise, you can buy the order for $100 and sell it to close out the position when it reaches $110. You can make $10. This kind of buy goes up the truth everybody can understand, I also can understand.

When the price of a commodity is in a downward trend, you can sell the order for $100 and buy it to close out the position when it falls to $90, you can also make $10. This is not easy to understand, it took me a long time to understand.

Went to school for many years, from addition, subtraction, multiplication and division to calculus, but never finance (which also has something to do with the school I went to). And my family, more do not have financial common sense, also cannot edify me.

Of course, the deeper reason lies in me. In the past, I was not interested in finance and was unwilling to take the initiative to learn, which led to my financial blindness.

It’s time for a change!

02. What is money?

People who have studied history know that Qin Shihuang adopted the standard system of weights and measures developed by Shang Yang, which unified the weights and measures of the whole country for the first time, including the unification of currency, which had a great influence on the later generations.

So what exactly is money? Money is a contract of exchange rights.

Long, long ago, people exchanged sheep for twenty chickens, one cow for ten chickens — they could not do more than exchange a drumstick; It would not have been possible to exchange a leg of lamb; Just want to exchange a leg of ox, still can’t.

But with the advent of money, that dilemma changed. We are even more lucky in the Internet age. We don’t even need to carry paper money (legal tender) when we go out. We can walk around with smart phones (with electricity).

Is there any place in the world where money doesn’t exist? Some would say not in prison. But as anyone who has seen The Shawshank Redemption knows, in prison, money turns into a cigarette, and the people in the prison exchange through the cigarette — the wisdom of human beings is really infinite.

Inflation and deflation

About two months ago, WHEN I went to the supermarket, I suddenly found that the price of apples had soared to 10 yuan (more than) a jin. I was so scared that I quickly checked and found that the apples had not become bigger.

Consider that your salary has not risen for several years, and you really feel the great pressure of “inflation” — when your salary has not risen but prices have risen, it actually indicates that your purchasing power has decreased, and your salary has been cut.

What’s more, another obvious consequence of inflation is that money sitting in the bank is worth less and less. Five years ago, you could get at least five pounds of apples for ten dollars. Now you can’t get a pound of apples for ten dollars — the point is, the apples haven’t gotten any bigger.

So how does inflation happen? The reason is simple: more money is flowing into the market. As for the underlying reasons for the proliferation of money, I don’t know.

Many economists believe that mild and benign inflation is good for the economy. However, I have been impressed by the descriptions of inflation in “history” books, and by the dark national period when ordinary people carried a bag of money to buy a loaf of bread.

After a bit of inflation, talk about deflation. Let me just ask you, under what circumstances does deflation happen?

The first section of “Economic Organization in a POW camp” in Xue Zhaofeng’s Economics Lesson talks about the concept of austerity:

Every time there was an air raid around the camp, and shells exploded right next to the camp, people became very depressed and thought they were almost dead. Why did they save so many cigarettes? Let’s live today. They smoked cigarettes. The next morning, they found that the bread was selling for the price of three cigarettes, but now it was selling for the price of one cigarette, so there was deflation.

Why is that? Because they’re not just smoking cigarettes, they’re smoking money. In other words, with deflation, a cigarette can buy you a loaf of bread instead of a third of a loaf.

Under the condition of inflation, people should borrow money from the bank to buy a house, because the income from the rising house price is more than the interest on the loan. In a deflationary situation, people should pay down their debts as quickly as possible, because the pressure on debt becomes greater.

Let me give you one more idea.

In recent years, many businesses have fallen in love with crowdfunding. Buyers pay the merchants in advance, and the merchants receive a certain amount of money to produce or purchase goods, and then distribute them to the buyers. Buyers’ money actually holds its value against inflation, provided they don’t abuse it.

How banks work

Three years ago, I once saw Chen Daoming’s red-crowned Merchant Hu Xueyan. I couldn’t understand it. I couldn’t figure out how the banks worked.

I now understand that the principle of how banks work is simple, down to one sentence: “All people do not withdraw all their savings at once.”

People deposit their money in the bank, and the bank grants them a portion of the interest. The bank then lends out the money, charging the borrower higher interest rates.

This is how banks work, and it applies to banks as well. Of course, banks have to draw the line at lending, and they must ensure that a portion of the amount of money is not lent out, so that savers can get it when they need it.

Stocks and stock markets

Stock is the ownership certificate issued by joint-stock company. Companies issue stock to raise money (money that does not have to be repaid), and shareholders own or trade stock as an investment.

The biggest characteristic of the stock is always change (harden stop and drop stop cannot change). The stock market is a place where shares that have already been issued are bought and sold.

Similar to futures trading, you make money when you buy a stock at a lower price and sell it at a higher price (shorting is also said to make money). Of course, you can’t sell the shares immediately after you buy them. You’re doomed to lose money because of the fees.

A lot of friends have had the experience of buying and selling stocks beside, but most are to lose money, really so-called “one enters the stock market deep like the sea”!

It is said that programmers have a natural advantage when investing in stocks, because we have a natural ability to analyze complex data – draw k-charts. But this ability does not guarantee steady returns in the stock market.

Then again, where there’s more risk, there’s more money to be made. If you are not willing to know, the opportunity is gone.

6, the last

I talked to an old woman in the community who often praised her son-in-law. He said that her son-in-law would buy stocks regularly, and for nearly ten years, he would make more money if he bought them. It is said that his family won 60,000 yuan when they gave birth to their first child.

Whether it’s buying lottery tickets, buying stocks, investing in real estate, whatever it is, there are people who make money and people who lose money — even more so than there are people who make money.

But one point I want to make is this: since it is said that the closer you are to the money, the more money you make, we can’t stay away from it, can we?