00523 The Man Hiding in the Cave: Why Do People Always Miss Long-Term Wealth Opportunities?

I. Theme of the Session

#

This session’s theme focuses on the mindset and discipline of long-term investing. Teacher James’s core message is that the vast majority of people (99.9999%) lack the ability for short-term market timing. Acknowledging one’s own ignorance and holding for the long term is the correct path to wealth. He uses the “Cave Allegory” to illustrate the limited vision of short-term investors, emphasizing that the investment timeframe should far exceed one’s working years. Successful investing requires overcoming the fear gene inherent in human nature, practicing “anti-human nature,” and abandoning erroneous asset concepts (like real estate worship) to ultimately achieve a “life of hundreds of millions” through disciplined investing.

II. Briefing Content

#

The Fallacy of Short-Term Investing and the “Cave Allegory”

#

• The Contradiction Between Investing and Working Years: People are willing to work for 40 years but view investing with the short-sighted perspective of a few days, months, or even a year. This is extremely irrational. The teacher sharply points out that this behavior means “there’s something wrong with their eyes, or their brain is flooded.”
• The Cave Allegory: Short-term investors are like people living in a cave, satisfied with their own narrow cognition and making excuses for their poverty (such as claiming long-term investing is high-risk). No matter how you try to persuade them, it is difficult for them to step out of their cognitive cave; this is “destiny.”
• The Essence of Wealth: Wealth is a gift that comes automatically, but many people dare not accept it due to fear and a scarcity mindset.

The Power of Long-Term Compounding

#

• Longevity and Investing: In the future, the average human lifespan may exceed 100 years. For those who don’t invest, longevity is a tragedy; for those who understand investing, longevity means having more time to create enormous wealth.
• Compound Interest Calculation Examples:
  • Investing NT$10,000 (approx. US$300) per month at a 12% annualized return: Results in NT$9 million (approx. US$300k) in 20 years, NT$30 million (approx. US$1 million) in 30 years, and NT$100 million in 40 years.
  • Investing NT$20,000 (approx. US$700) per month at a 12% annualized return: Results in NT$18 million (approx. US$600k) in 20 years, NT$60 million (approx. US$2 million) in 30 years, and NT$200 million (approx. US$7 million) in 40 years.
  • Investing NT$20,000 (approx. US$700) per month at a 15% annualized return (like QQQ): Results in NT$26 million (approx. US$800k) in 20 years, NT$110 million (approx. US$3 million) in 30 years, and NT$460 million (approx. US$15 million) in 40 years.
• Conclusion: As long as one adheres to long-term investing, everyone should have a life of immense wealth. Even if you start at 40 or 50, you still have 40 years of investment time if you live to 90.

Reshaping Investment Concepts: Overcoming Human Nature and Abandoning Real Estate Worship

#

• Wrong vs. Right Investment Duration: It’s very strange that people are willing to take on a 30-year mortgage for a wrong asset (a house) yet use an extremely short timeframe to measure a right investment (an index fund).
• The Huge Risks of Real Estate: Houses face physical risks like fire, floods, earthquakes, and tornadoes, as well as quality issues like sea-sand concrete structures. Furthermore, liquidity is extremely poor, and job loss could lead to the property being auctioned off by the bank.
• Overcoming the Fear Gene in Human Nature: Our ancestors survived by running at the slightest disturbance while hunting. This DNA of “running at the sight of risk” has been passed down, causing investors to panic sell during market volatility.
• The Key to Success—Go Against Human Nature: To succeed in investing, one must overcome this genetic defect and “go against human nature,” not treating money as money. You must learn on your own; listening to the teacher is important, but without self-study and practice, you cannot succeed.
• The Correct Mentality for Buying a House: There is no risk only when you can buy a house like you buy a pair of slippers—if it breaks, you can easily get a new pair. Renting allows you to always live in the newest house, while holding on to a small, old, shabby one is meaningless.

The Mindset of the Rich: Stay Away from Politics, Use the Rules

#

• Politics is for the Poor: The rich usually don’t discuss politics; they focus more on studying and utilizing the rules of the capitalist system (like tax laws) to create wealth for themselves.
• Time Allocation: Spending time talking about politics reduces the time you have to manage your own assets. Instead of protesting on the streets, it’s better to spend time on asset planning and tax-saving strategies.

III. Q&A Session

#

Huasheng

#

• Sharing: He and his nearly 20-year-old son studied Teacher James’s course #00451 together and had in-depth discussions; the son showed great interest. He plans to open an account for his son with startup capital and set up monthly investments, allowing him to witness the miracle of compounding from a young age. He also wants to help his relatives’ children in a similar way to guide them towards financial freedom.
  • Teacher James’s Comment: This is an excellent approach. Learning and discussing with your children is the best form of education. Teaching children about investing and financial management is more important than worrying about their studies or job. Once the problem of wealth is solved, 99% of life’s difficulties are also solved.
• Question 1: Besides the 4-2-4 part of his asset allocation, he also casually invests US$1,000 in TQQQ every month. He worries that this part will become enormous in twenty or thirty years. If a major bear market like in 2000 or this year occurs, causing a 90% crash, how should he handle it? Should he just leave it there, or should he convert a portion to cash at a certain stage (e.g., upon reaching 10 or 50 million)?
  • Teacher James’s Reply: Those who hold leveraged ETFs must perform a “smart rebalancing” once a year. When a leveraged ETF rises, you must move a portion of the profits (say, one-third) to cash. When it falls, you can use this cash to buy back in, which will actually improve long-term performance. Don’t assume that holding without any action yields the highest return; one major crash can bring you back to square one. This operation is very important, or you will face the risk you’re worried about.
• Question 2 (Follow-up): Does this small monthly investment in TQQQ also need to be part of the rebalancing?
  • Teacher James’s Reply: Yes. It doesn’t matter how you invest each month. The key is to look at the total profit of the entire TQQQ account at the end of the year. Treat the monthly investments and the existing TQQQ assets as a single portfolio, calculate the total profit at year-end, and then perform the rebalancing operation.

Mike

#

• Sharing 1: His wealth recently hit a new high, and he still feels excited, unlike the teacher who remains calm. He feels he still needs to cultivate his mindset. He believes this desire to celebrate shows he hasn’t completely shed his attachment to gains and losses.
• Sharing 2: He shared his observation of tourists at a restaurant (from Ukraine, Utah) who flew in for trivial matters. They lived happily but seemed to have no concept of investing. This made him reflect on how his own mindset still fluctuates with the market index.
• Question 1: How can one cultivate a mindset like the teacher’s, remaining completely unfazed by wealth growth?
  • Teacher James’s Reply: First, you must foresee your future wealth. Your assets will have two more zeros added to them, going from 10 million to 1 billion US dollars. When you have 1 billion, what’s spending 200 million? You must learn to see your current wealth from a future perspective and learn to spend money. Second, pay attention to your health. He shared some personal dietary insights (e.g., oat milk raises blood sugar; don’t be afraid to eat healthy fats and meats, but control carbs).
• Question 2: What kind of significant changes will the bill on digital currencies passed by the US House of Representatives bring to the financial market?
  • Teacher James’s Reply: This is a crucial step for the US to seize and consolidate control in the digital currency space.
    1. Regulate Stablecoins: Stablecoins like USDT and USDC are essentially digitized US dollars. The US must bring them under regulation (e.g., KYC) to maintain the dollar’s credibility and hegemony. Otherwise, if tech companies are allowed to run wild and a collapse occurs, it will severely damage the dollar’s reputation.
    2. Control Core Digital Assets: Besides USD stablecoins, mainstream cryptocurrencies like Bitcoin and Ethereum have emerged. The US must acquire and control large reserves of them, just as it controls gold. Otherwise, in the future digital world, the dollar will lose half its influence. Trump’s push to include Bitcoin in reserves follows this logic. In the future, Real World Assets (RWA) will also be on-chain, making it even more necessary for the US to control the underlying technology and core assets.
• Question 3 (Follow-up): Would it cause chaos if other countries also issue stablecoins? If Bitcoin’s price soars to an astronomical level, will it decouple from the US dollar?
  • Teacher James’s Reply: No. Other countries’ stablecoins are like their fiat currencies; they lack international usability and mainly circulate domestically. Globally, people will still choose stablecoins pegged to the US dollar. The essence of USDT/USDC is a “digital US dollar bill,” primarily used for large, fast transfers and to help people in third-world countries avoid the devaluation of their local currency. It has little impact on the average person’s life.
• Question 4: Netflix’s recent earnings were good, but its stock price fell. The market’s interpretation is that this was due to increased overseas revenue from a depreciating dollar, not substantial growth. What is your view on the impact of this phenomenon on other global companies in QQQ?
  • Teacher James’s Reply: First, Netflix has risen nearly 90% in the past year, far outpacing QQQ, so its valuation might have been a bit high, making a pullback normal. The news interpretations are just post-hoc rationalizations; don’t take them seriously. A 5% drop is nothing; a real plunge is a 20% drop at the open.
  • Jumin’s Comment: This could be the financial circle manipulating stock prices for profit, a phenomenon of “fleecing retail investors.” The drop doesn’t need a reason.

Ola

#

• Sharing 1: He has been through two bear markets. The first time, he had no cash reserves, panic-sold at the bottom, and suffered heavy losses. The second time, he learned his lesson, held on, and his assets have now reached a new high. He has also started to build a 20% cash reserve. He emphasized the gap between theory and practice and the importance of overcoming bad habits.
• Sharing 2: Using the Morningstar tool, he analyzed that from the beginning of 2005 to the present day, including dividend reinvestment, QQQ returned 16.5x, SPY 6.79x, and gold 6.3x. This data powerfully demonstrates that investing in technology (QQQ) is far superior to investing in the S&P 500 and gold.
• Sharing 3: He warmly invited Teacher James and classmates to visit Point Reyes National Seashore, north of San Francisco, offering to be their guide.
• Question: Regarding rebalancing, suppose the initial allocation is 70% QQQ, 10% QLD, and 20% cash. After a bull market, it becomes 75% QQQ, 17% QLD. At this point, if you only sell one-third of the profits, the cash percentage will not return to the initial 20%. How should this be handled?
  • Teacher James’s Reply: For retirees, the core focus is the absolute amount of your cash reserve, not its percentage of total assets. Your goal is to have enough cash to cover 15 years of living expenses. As your total assets grow, even if the cash percentage drops from 30% to 25%, it’s fine as long as its absolute amount is sufficient to cover 15 years of expenses (or even more). Therefore, the purpose of rebalancing is to ensure you have a sufficient cash “moat,” not to mechanically maintain a fixed percentage. For young people, it is advisable to try to maintain a 30% cash allocation from the beginning.

CC

#

• Sharing: She feels very relaxed after adjusting her asset allocation to 80% invested + 20% cash.
• Question: Her husband’s (Angel’s) account makes up 1/5 of their total assets. She wants to configure this account with 50% vanilla ETFs + 50% leveraged ETFs. Is this advisable?
  • Teacher James’s Reply: It is not advisable to look at it separately; you should treat the family’s assets as a single entity. Her current overall allocation is approximately 74% vanilla, 10% leveraged, and 16% cash. If they plan to retire, 16% cash may not be enough to cover 15 years of expenses. The correct approach is: first, set aside enough cash from the total assets to cover 15 years of expenses. Then, allocate the remaining funds to vanilla and leveraged ETFs proportionally. The cash reserve is the first priority.

J

#

• Sharing: She detailed her emotional journey following the teacher’s investment advice, from individual stocks to QQQ, and then to trying TQQQ. She feels confused and dissatisfied with the Federal Reserve’s policies, believing they have caused unnecessary market volatility that has affected her TQQQ investment.
• Question: With limited funds and in the wealth accumulation phase, how should one correctly handle TQQQ? She is unsure if TQQQ can truly outperform QQQ in the early stages and is confused about when to add more funds and how to rebalance.
  • Teacher James’s Reply:
    1. Ignore Macro Noise: The Federal Reserve’s policies, the economic situation, etc., are all irrelevant to our investments. Don’t worry about them.
    2. Cash and Leverage Are Not Contradictory: Holding cash and rebalancing does not result in a worse long-term rate of return. By allocating a certain percentage to leveraged ETFs (like TQQQ/QLD), your total portfolio’s Beta value (risk exposure) can still reach or even exceed 1.0, even while holding 30% cash.
    3. Discipline is Key: Don’t try to time the market. When you have money, buy according to your predetermined allocation. Rebalance once at the end or beginning of the year. If TQQQ is profitable, sell a portion of the profits and convert it to cash. If it’s at a loss, you can use a small portion of cash to add to your position (but be extremely cautious not to deplete your cash).
    4. The Risk of TQQQ: TQQQ takes longer to recover after a bear market. The risk is extremely high without sufficient cash and discipline.

Jason

#

• Sharing: He reviewed the teacher’s “The Unfallen Palace” course and deeply understood that while the teacher’s principles must be followed, their application needs to be flexible. He thanked the teacher for raising everyone’s “Financial Quotient” (FQ) and believes that a person’s wealth can hardly exceed their FQ.

T

#

• Question: A philosophical question. After becoming a multimillionaire in the future, what kind of mindset should one have to preserve that wealth? He mentioned the “theory of karmic blessings” and the examples of lottery winners who end up bankrupt.
  • Teacher James’s Reply: This is an excellent question. The key to preserving wealth is to enhance your “spiritual energy.”
    1. Understand: You must personally learn and understand how wealth is generated; you cannot entrust your money to others to manage.
    2. Nourish the Mind: Supplement your soul’s nourishment by reading (philosophy, classics), meditating, etc., to keep your mind stable and not trapped by greed, anger, and ignorance.
    3. Health: Take care of your body. Without health, no amount of money is useful.
    4. Know How to Spend Money: Learn to spend money and enjoy life. The more you spend, the better your spirit becomes.
    5. Reflect: Reflect daily on whether your spiritual energy has grown. Don’t trust the superficial phenomena perceived by your eyes, ears, nose, and tongue; trust your inner thoughts.

L

#

• Question 1: In Canada, there are multiple ETF versions of QQQ. In a tax-free account (TFSA), is there still a point in investing in a non-distributing version like HXQ?
  • Teacher James’s Reply: Yes, HXQ is a good choice in any account due to its fee and tax structure advantages.
• Question 2: If my company provides a Defined Benefit Pension, can I consider it as part of my cash allocation in retirement, thereby eliminating the need to hold a large amount of cash?
  • Teacher James’s Reply: Absolutely not. A pension is a cash flow, not a large sum of cash you can withdraw at any time. If you face an emergency (like your house collapsing and needing US$500,000 to rebuild), the pension cannot meet that need. You must maintain a sufficient cash reserve.
• Question 3: I’m confused about Beta calculation. Why does Yahoo Finance show QQQ’s Beta as 1.41, while the teacher’s system uses 1.0? How do I convert it?
  • Teacher James’s Reply: Don’t look at external data. Different systems use different reference points. Yahoo Finance usually uses the S&P 500 (SPY) as the reference (Beta=1.0), whereas our system uses QQQ as the reference (Beta=1.0). It’s just like using meters versus feet as units of measurement; the standard is different. Please use our calculation method: QQQ=1, QLD=2, TQQQ=3, Cash=0.
• Question 4: What is the order of the “4-3-3” allocation the teacher mentioned?
  • Teacher James’s Reply: The order is: 40% vanilla ETF (QQQ), 30% leveraged ETF (like QLD), and 30% cash. He pointed out that this question indicates the student has not watched the videos carefully.

IV. Key Quotes

#

You will only succeed in investing when you are not human. – Teacher James

Context: This statement was made by Teacher James when explaining why investing requires overcoming human weaknesses. He believes that the innate fear gene in humans (like the instinct to avoid risk while hunting in ancient times) is the main cause of investment failure. Therefore, one must “go against human nature” to remain rational during market fluctuations.

If I write a prescription for Lucy or someone else, you can’t take it; you’ll be poisoned. – Teacher James

Context: At the end of the course, Teacher James sternly warned students that asset allocation is highly personal. He emphasized that one cannot blindly copy the allocation ratios he suggests for a particular student (like 4-3-3 or 6-1-3). Everyone’s situation is different and requires a customized plan; otherwise, it’s as dangerous as taking someone else’s prescription medicine.

You should have this kind of capability when buying a house… if the house collapses, I’ll just buy a new one… If you would be ruined if the house collapsed, then why would you buy a house? – Teacher James

Context: When comparing real estate and stock investments, the teacher used this vivid example to illustrate risk tolerance. He believes that you are only truly capable of holding an asset when its loss would not cause a devastating blow to your financial situation.

Politics is for the poor… The rich don’t talk about politics; they only use policies to get rich. – Teacher James

Context: This point aims to illustrate that energy and time should be invested where they are most effective. The teacher believes that instead of spending time on political issues that one cannot change, it is better to study and utilize the existing economic and legal rules to create wealth for oneself.

Your wealth can only be as great as your spiritual energy is high. – Teacher James

Context: When answering a philosophical question about how to preserve immense wealth, the teacher presented this core idea. He believes that the capacity to hold wealth is directly related to one’s inner cultivation and spiritual realm, which needs to be continuously enhanced through learning, meditation, and other practices.

Slow is fast. – Jumin

Context: A student used this philosophical phrase in the comment section in response to the discussion about TQQQ, emphasizing that moving forward steadily and not taking shortcuts in investing is ultimately the faster way to reach the destination.

V. Summary

#

This session was a deep “baptism” into the investment mindset and discipline. With his characteristically sharp and direct style, Teacher James condemned the irrationality of short-term speculation and repeatedly demonstrated the necessity and superiority of long-termism from the perspectives of human nature, history, and mathematics. The “Cave Allegory” vividly depicts how cognitive limitations lead to poverty, while overcoming human fear and establishing a correct view of assets are necessary steps on the path to wealth. The Q&A session was exceptionally active, addressing core investor pain points from the risk control of leveraged ETFs and the dynamic adjustment of asset allocation to cash requirements for retirement planning and the philosophical considerations of managing immense wealth. Ultimately, all discussions converged on a single core idea: Investment success is not just a victory of technique and strategy, but a comprehensive victory of cognition, mindset, and discipline.