Educate yourself
Looking for timing in the endless maze of macroeconomics, I finally surrendered. And I decided to walk the simple and peaceful path of upward trends.
This article is the original draft of a memo I randomly scribbled in my personal notes on December 20, 2022.
It was a time when the Fed was taking giant steps routinely, and my stock account was bruised blue every day. My assets were melting away, and I couldn't figure out what in the world was going on. I was frustrated. So, I started digging in blindly.
Below is my vivid (and raw) record, written while picking up pieces of information pouring out at the time.
The Memo of December 20, 2022, and the Reality Translator
Memos written at random while mimicking the analysis of experts. Only after time passed was I able to translate what these dry terms truly meant in my life.
📝 My Memo: What is PPI/CPI? They measure inflation with goods, services, rentals, etc.? 👤 Reality Translation: My account was getting crushed, and I wondered what these indicators had to do with anything. However, I felt for the first time in my life the terrifying chain reaction: when inflation rises, the Fed raises interest rates, and when interest rates rise, my stocks plummet.
📝 My Memo: There is a time lag in the effect of the base interest rate. 👤 Reality Translation: Just because the Fed raised rates yesterday doesn't mean my life is ruined today. It means that 6 months later, when I extend my loan, it will silently choke me without me even knowing. An individual is structurally bound to be 'late to the party' in this massive trend.
📝 My Memo: The paradox of interest rates and debt... It is difficult to control if total loans increase. 👤 Reality Translation: The interest rates of my coworkers who bought houses by over-leveraging doubled. Everyone was relieved, saying, 'Society is buried in debt, so the government won't be able to easily raise interest rates,' but cold macroeconomics mercilessly shattered individuals' shallow hopes.
[The formula that thins my wallet]
Disposable Income = Wages - Interest (Rates) - Fixed Living Expenses (Inflation)
It was the most painful realization at the time. Even if my salary increased slightly through an annual salary negotiation, interest rates (loan interest) and inflation (dining out, rentals, etc.) rose at the same time, so my disposable income actually shrank. It was only after writing down this brutally simple formula with my own hands that I understood why life always felt so tight even after working for 18 years.
📝 My Memo: Exchange rates, Yen carry trade, Quantitative Easing (QE), Tapering, Japan's YCC... 👤 Reality Translation: The more I dug, the crazier the variables became. The Bank of Japan's decision shakes US Treasury bonds, which in turn affects the Korean stock market. Ah, this is not a realm that an office worker reading a few books after work can predict. At the end of these scribbles, I effectively declared 'surrender'.
Thoughts Upon Reviewing the Memo
To an expert, this might look like poorly stitched knowledge. However, this memo fully captures the desperation of the winter of 2022, when I wanted to protect my assets.
Why was studying necessary?
It wasn't to beat the market. It was to understand the situation I was in. Only after writing down the simple formula 'Disposable Income = Wages - Interest (Rates) - Fixed Living Expenses (Inflation)' with my own hands could I understand why life got tougher even with a monthly paycheck, and why the market was throwing such fits.
The fierce studying of that time was never in vain. Instead, it became the most certain stepping stone that led me to true ETF dollar-cost averaging investment.
Inflation, exchange rates, employment, interest rates, quantitative easing policies of various countries... It is true that I realized predicting the timing of individual stocks by tracking all these supply and demand and macroeconomic indicators every day is an impossible realm for an office worker like me. But that doesn't mean I blindly left my investments to luck or stopped studying.
After digging and studying relentlessly from individual stocks to sector ETFs, and ultimately to index ETFs, I was finally able to establish a firm investment methodology (the KCA system) that suits me. It is a methodology of silently rowing the boat, believing in the long-term upward trend of capitalism, without trying to predict the massive waves of macroeconomics.
Now, I have two weapons. A 'thorough mindset' that doesn't waver even in a crash, and a 'correct investment methodology' refined through countless studies.
With these two weapons in hand, I will move forward fearlessly no matter what massive wave comes my way in the future.