The story we were telling young people that if they apply themselves, go to school and get a job they'll be able to afford family, house, vacations is moving further and further away for more and more people.
The turn towards financial nihilism will continue.
This doesn't make any sense. The population has experienced massive uplift over the last few decades. Their parents weren't going on vacations with the family as kids, they were struggling to put food on the table. Houses are outpacing inflation, but the home ownership rate continues to climb.
Especially in Korea, I know there's a sense of despair in the young adult population on their future. How will they afford to get married, have kids, have a house? Leads to chasing financial outcomes that are uncertain - crypto boom in Korea years back is an example
For those who don't know what's going on in Korea, KOSPI is up 3x in the last year and a large amount of HBM employees have made huge amounts of bonus pay. This has led to an insane FOMO frenzy in a society that's already very competitive.
Add to that, stock gains in Korea are often used to finance housing purchases (or real estate investment) so many retail investors are scared of being "locked out" of housing (which is a requisite status symbol for dating or marriage) if they're not making the same capital gains others are.
Currently Korean social media is full of stories of leveraged day traders who've gotten rich the past year, HBM employees who've made bonuses worth decades of salary (e.g. memes of Samsung employees in luxury cars), etc. Lots of comments along the lines of "everyone is getting rich except me". It's all reminiscent of the crypto frenzy in the US a few years ago but way more intense and concentrated.
They've also driven a noticeable drop in stock prices in the closing minutes that have been used by quant algos to squeeze even more money out of the market as the leverage is a unmanaged algo that was predictable and could be driven up before it had to force trades.
It's not just the gambling of people, but the systematic use of bots to squeeze leveraged vehicles.
The problem isn't leveraged funds, it's margin on leveraged funds.
Leveraged funds are the safest way for the average investor to get access to leverage because unlike margin there is no risk of margin calls, and your money generally won't go to zero unlike options which are vastly more complicated and can expire.
The reality is that using leveraged funds (or any leverage) is a completely rational move because the average person will never retire wealthy unless they're already making a tech salary or similar.
Investing has always been gambling, even Warren Buffet made his biggest early wins on all-in bets.
If you invest only $200 a month in the S&P 500 from the age of 18 to 65 you'll end up retiring a multi-millionaire. It doesn't take a lot but people are either unaware of how it works or not disciplined enough to put aside $200 a month. Considering that on average Americans are spending $150+ a month on subscription services and $300+ eating out there's plenty of room in the budget for investing $200 a month.
As a Korean, the reason people rush into stocks is simple: labor value has been completely destroyed.
Realistically, it's nearly impossible for high income young people in their 20s and 30s to buy a house in Seoul. That forces them to move to the provinces, but then there's almost no infrastructure. No companies either.
So many people turn to leverage in hopes of a life changing reversal.
The recent rise in the KOSPI index happened because some of the loopholes that Korean conglomerates used to make inheritance easier were blocked by revisions to the Commercial Act. One of the uncertainties that had been called 'Korean risk' was removed, and the market went up.
For a Korean man, the moment you leave Seoul, not just the outskirts, but out of Seoul entirely, there's no one to talk to about IT jobs. I live outside Seoul, and the infrastructure gap is about 10 to 20 years behind. On top of that, there are no IT companies, just mostly low income manual labor jobs.
The median monthly income for Korean men is about 3 million KRW, while the average Seoul apartment price is 1.3 billion KRW and the median price is 997 million KRW. That means you'd need to work for about 25~30 years just to buy a home, but job tenure is getting shorter, so that's not realistic.
So people gamble on leverage, hoping for a life changing win. Everyone around me knows it's gambling, but they figure they're already in a dead end situation anyway, so they have nothing to lose.
I live and work in IT outside Seoul, but the IT business has already matured, and there are many well established companies. The Korean market itself is small, so early movers have already taken the lead. There's no room for latecomers like me. That's why I take on work from the West, China, and Japan regardless, but even that's hard without a reputation.
The moment you leave Seoul, a Korean's chances of success drop to nearly zero. That's why people cling to the city so desperately.
And honestly, I've hardly gambled on my life. But I'm drowning in debt, and sometimes I feel like a fool for working so hard.
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[ 0.22 ms ] story [ 17.6 ms ] threadThe turn towards financial nihilism will continue.
(Which is not to imply that these are smart men).
https://www.reutersconnect.com/item/south-korean-retail-inve...
But it seems there's still a lot in their FA phase in the FAFO cycle.
Add to that, stock gains in Korea are often used to finance housing purchases (or real estate investment) so many retail investors are scared of being "locked out" of housing (which is a requisite status symbol for dating or marriage) if they're not making the same capital gains others are.
Currently Korean social media is full of stories of leveraged day traders who've gotten rich the past year, HBM employees who've made bonuses worth decades of salary (e.g. memes of Samsung employees in luxury cars), etc. Lots of comments along the lines of "everyone is getting rich except me". It's all reminiscent of the crypto frenzy in the US a few years ago but way more intense and concentrated.
It's not just the gambling of people, but the systematic use of bots to squeeze leveraged vehicles.
Leveraged funds are the safest way for the average investor to get access to leverage because unlike margin there is no risk of margin calls, and your money generally won't go to zero unlike options which are vastly more complicated and can expire.
The reality is that using leveraged funds (or any leverage) is a completely rational move because the average person will never retire wealthy unless they're already making a tech salary or similar.
Investing has always been gambling, even Warren Buffet made his biggest early wins on all-in bets.
Realistically, it's nearly impossible for high income young people in their 20s and 30s to buy a house in Seoul. That forces them to move to the provinces, but then there's almost no infrastructure. No companies either.
So many people turn to leverage in hopes of a life changing reversal.
The recent rise in the KOSPI index happened because some of the loopholes that Korean conglomerates used to make inheritance easier were blocked by revisions to the Commercial Act. One of the uncertainties that had been called 'Korean risk' was removed, and the market went up.
For a Korean man, the moment you leave Seoul, not just the outskirts, but out of Seoul entirely, there's no one to talk to about IT jobs. I live outside Seoul, and the infrastructure gap is about 10 to 20 years behind. On top of that, there are no IT companies, just mostly low income manual labor jobs.
The median monthly income for Korean men is about 3 million KRW, while the average Seoul apartment price is 1.3 billion KRW and the median price is 997 million KRW. That means you'd need to work for about 25~30 years just to buy a home, but job tenure is getting shorter, so that's not realistic.
So people gamble on leverage, hoping for a life changing win. Everyone around me knows it's gambling, but they figure they're already in a dead end situation anyway, so they have nothing to lose.
I live and work in IT outside Seoul, but the IT business has already matured, and there are many well established companies. The Korean market itself is small, so early movers have already taken the lead. There's no room for latecomers like me. That's why I take on work from the West, China, and Japan regardless, but even that's hard without a reputation.
The moment you leave Seoul, a Korean's chances of success drop to nearly zero. That's why people cling to the city so desperately.
And honestly, I've hardly gambled on my life. But I'm drowning in debt, and sometimes I feel like a fool for working so hard.
In Germany the consensus is MSCI World or FTSE All-World ETFs.
I believe in the US most advice goes to VTSAX (US Total Market), VOO (S&P500) and maybe QQQ (NASDAQ100) which means only US stocks.
What gets recommended in other countries?