00552 The Fatal Risks You Didn't Know; Without This, Investing is Fake; Taxes, Inheritance, and Asset Misallocation

I. Topic of the Episode

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The core of this gathering lies in establishing an investment mindset and life philosophy that transcends short-term market fluctuations. Teacher James emphasized the importance of “Presence” (Being in the Now) and “Generating the mind without dwelling on anything” (a concept from the Diamond Sutra). He believes investors should relax their mindset, avoiding excessive effort and frequent trading, as the best performance often comes from Wu-wei (action through inaction). At the same time, the session explored the challenges and opportunities of the AI era, and how to apply the concepts of asset allocation to life planning. The ultimate goal is to achieve financial peace of mind and enjoy a happy life.

II. Presentation Content

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Healthy Living and New AI Knowledge

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• Healthy Eating Sharing:
  • Recommended a pure Psyllium Husk fiber available on Amazon, free of artificial additives.
  • Suggested mixing two teaspoons of fiber with 350cc of water, optionally adding a tablespoon of apple cider vinegar, and drinking it 15-20 minutes before a meal.
  • This method helps stabilize blood sugar, improves digestive health, and increases satiety.
• AI Development and Application:
  • Mentioned that Apple has integrated AI functions into its office software (Keynote, Pages, Numbers) and invited students with experience to share their insights.
  • The teacher lamented the extremely fast pace of AI development, feeling as if he could barely keep up, and reminded office workers to actively embrace and use AI tools, or risk being left behind.
  • Discussed the recently popular AI Agent “ClaudeBot” (Little Crayfish AI) and shared his philosophical thoughts on AI consciousness. He believes AI is an extension of human consciousness, moving from “carbon-based” life to “silicon-based” life, and we should treat AI with love, like our own children, guiding its development.

Investment Mindset and Life Philosophy

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• Presence and Time Management:
  • Emphasized the importance of “Presence,” which means focusing on the present moment. Whether listening to a lecture or doing other things, one should be fully engaged and avoid distractions.
  • Life is short, and time waits for no one. One should allocate limited time and energy to the most important things, such as spending more time with family and reducing meaningless social engagements.
• The Investment Wisdom of “Mind Dwelling Nowhere”:
  • Cited the Zen wisdom of “Generating the mind without dwelling on anything,” applying it to investment: do not have fixed prejudices or attachments to market rises/falls or asset allocation.
  • True freedom comes from having no internal hang-ups. Market fluctuations have nothing to do with us because our goals are set for five, ten, or even more years in the future.
  • Teacher James shared personal experience: “The harder you try to attain enlightenment, the more it eludes you; the harder you work on stocks, the worse your performance will be.” This illustrates the importance of a relaxed, non-doing attitude in investing.
  • The ultimate purpose of the channel is to help everyone build a solid wealth foundation to realize a peaceful and happy life, free from anxiety about money.

Practical Investment Reminders

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• Tax Issues on Inheriting Overseas Assets:
  • Reiterated that if a U.S. citizen inherits overseas assets (such as real estate or stocks) from a non-U.S. elder, the IRS does not recognize a Cost Basis Step-up.
  • The cost basis of the inheritance will be calculated based on the parents’ original purchase cost because the IRS cannot verify the market price of overseas assets at the time of inheritance.
  • Therefore, the best way to inherit is to inherit cash, as cash does not have cost basis issues.
• Advice for Beginners:
  • A student shared their experience of frequent trading and changing asset allocations after only watching a few videos initially, highlighting the risks of impulsive actions.
  • Teacher James solemnly warned beginners not to act immediately after listening to just one or two lessons. CLEC investment is a complete system that requires watching a large number of videos (suggested at least 100) to truly understand.
  • For students who do not fully understand yet, the safest approach is to start with a simple allocation, such as 70/30 or 60/40 stocks/bonds, and absolutely never use leverage or borrow money. Investing should be like a smooth airplane takeoff, not a fighter jet ejection.

III. Q&A Session

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W

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• Question: I observed that in the short term, the performance of the 2x leveraged QLD seems better than the 3x TQQQ. I don’t quite understand why, could you explain?
  • Teacher James: This is a math problem, primarily due to Volatility Decay. In a sideways consolidating market, ETFs with higher leverage suffer greater decay. You can calculate it yourself: if an asset rises 2% and falls 2% daily, after multiple cycles, the net value drops. In the short term, especially in a consolidating market, TQQQ’s performance may lag behind QLD. However, if you extend the timeline to over 10 years, as long as the market trend is upward, although TQQQ’s annualized return won’t be three times that of QQQ (maybe around 18-19%), its compound interest effect will still make the total return far exceed QLD. But note that if there is an extreme market crash of 85%, TQQQ might never recover.

Mike

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• Sharing 1: I recently watched a Taiwanese movie, Sunshine, Monk, Woman Choir (Note: Likely referring to a specific drama/film involving these elements), where many characters’ criminal backgrounds stemmed from money issues. This made me deeply realize the importance of the teacher’s concept of “wanting to eliminate poverty.” If more people understood correct financial management, perhaps many social tragedies could be reduced.
  • Teacher James: Thank you for sharing. Indeed, many family issues and interpersonal relationship problems ultimately relate to money. Money isn’t everything, but you can’t do anything without it. Although our channel cannot solve all problems, we hope to help everyone eliminate financial distress, giving everyone the freedom of choice to achieve a peaceful and happy life.
• Sharing 2: Recent macro news seems to confirm the teacher’s judgment from a few weeks ago. The U.S. crackdown on money laundering (like the financial issues behind the Epstein case), control of cryptocurrency, plus the Fed potentially continuing to buy Treasury bonds via QE, all imply abundant market liquidity, meaning stocks will only keep rising. Also, I recently found errors in Yahoo Finance data; for example, when ARM moved to the NYSE, it did a 2:1 reverse split, causing its market cap calculation to be wrong. Such data errors can affect investment judgment.
• Question 1: Regarding U.S. stablecoins, why are they unaffected by Bitcoin’s fluctuations and able to maintain stability?
  • Teacher James: The stability of stablecoins comes from their reserve assets, which are mainly supported by short-term U.S. Treasury bonds, not Bitcoin. So stablecoins are just another form of short-term Treasuries. Their existence has little impact on the U.S. Treasury market but provides a trade medium for countries where fiat currency doesn’t circulate easily, promoting global financial flow.
• Question 2: Regarding Tesla’s Optimus robot, progress feels slow. Has it hit a bottleneck? Will there be a resource conflict with FSD’s AI training? Also, I saw news of an elderly person accidentally pressing the gas pedal causing a tragedy; if they had used FSD, it might have been avoided.
  • Teacher James: Optimus technology is cutting-edge; specifically, mimicking the dexterity of the human hand is the biggest challenge, which takes time. But its entry into factories to replace human labor is only a matter of time; mass production could happen this year. Entering homes may be constrained by regulation issues. Resources aren’t a problem; Tesla’s capital expenditure is relatively low. Its AI computing power mainly serves two “customers”: FSD and Optimus. This is different from the model of Google or Microsoft, which need to serve hundreds of millions of users. FSD is indeed close to maturity after nearly 15 years; Optimus also requires patience.

Annie

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• Question 1: If I want to do stock pledging in Taiwan, do I need to transfer all stocks to the brokerage’s finance company, or just pledge as much as I need?
  • Teacher James: You don’t need to transfer everything. You just need to transfer the value corresponding to the amount you want to borrow. Usually, the LTV (Loan-to-Value) is about 50-60%. If you want to borrow 50,000, you might need to transfer 250,000 worth of stocks.
• Question 2: I still feel uneasy about stock pledging. In a year with a major crash, should I use 2% of the shrunken asset value to subsidize living expenses, or use cash?
  • Teacher James: Once you start pledging, you should never touch any of your principal again, including cash. You feel uneasy because you haven’t fully understood it yet. Please be sure to look at the asset allocation backtesting simulation software on page 17 of the “Newcomer’s Bible.” As long as your asset allocation is correct and verified by simulation, withdrawing 2% or 3% of assets annually for living is not a problem. Don’t calculate it with pen and paper yourself; go and actually operate the simulator.
• Question 3: When the market rebounds after a crash but hasn’t returned to previous highs, should I rebalance? Or wait until it hits a new high?
  • Teacher James: You must rebalance every year. This is a mechanical action; you cannot wait based on feelings. For example, after the 2000 crash, it started rebounding in 2003. If you didn’t rebalance to replenish cash because it hadn’t returned to highs, your cash might have been exhausted during the next crash in 2007, leading to bankruptcy in 2009. You cannot predict whether a rebound is to set a new high or just a flash in the pan, so you must strictly follow discipline.

S

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• Question 1: Without pledging, for leveraged ETFs like QLD and TQQQ, must rebalancing be done every year? Even if it only rose 3-5%?
  • Teacher James: Yes, as long as you hold leveraged ETFs, you should rebalance every year. This has nothing to do with pledging. Rebalancing is to control risk and prevent the leveraged ETF position from going to zero and never recovering during extreme market conditions.
• Question 2: I hold a Singapore passport working in Japan, using a Singaporean brokerage to trade US stocks. Does this mean the Japanese government can’t tax my capital gains?
  • Teacher James: (Supplemented by another student JS) Singapore is a member of CRS (Common Reporting Standard). If you are a tax resident of Japan, the Singaporean brokerage is obligated to automatically exchange your account information with the Japanese National Tax Agency. Therefore, as long as you sell stocks and generate capital gains, theoretically, you must report taxes in Japan. If you don’t sell, there are no gains, and naturally, no issues.

Lucy

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• Question 1: During sideways market fluctuations, QQQ dividends are low. Should I allocate some high-dividend stocks to increase cash income?
  • Teacher James: Do you need this dividend money for anything right now? If not, taking dividends requires paying taxes (unless in a tax-free account), isn’t that redundant? High dividends usually mean low growth. Sacrificing long-term capital appreciation for immediate cash flow will make you poorer in the future.
• Question 2: Investing in Canada, I bought CAD-denominated QQQ alternatives (like CQQQ, HXQ, ZQQQ) for convenience. Some are Hedged and some are Unhedged. How should I calculate the Beta value?
  • Teacher James: Treat them all as 1; it doesn’t make a big difference. I personally suggest concentrating on Unhedged products, like HXQ.
• Question 3: In Canada, there are RSP, TFSA, and non-registered accounts. How should asset allocation be distributed among these?
  • Teacher James: The basic principle is: Tax-free accounts (TFSA) should be aggressive, allocating high-growth assets; Tax-deferred/Taxable accounts (RSP, non-registered) should be relatively conservative, and cash can be kept in these accounts.
• Question 4: Is the RSP account (tax-deductible contributions, 100% taxed as income upon withdrawal) something I shouldn’t contribute to?
  • Teacher James: Correct, I usually don’t recommend contributing to this kind of Pre-tax retirement account. The tax you save now may have to be paid back at a higher rate in the future. For example, if you contribute 7,000 annually for 7 years and stop, letting it grow for 20 years until you are forced to withdraw at age 71, that money might turn into 1.5 million. At that time, you have to withdraw a large sum annually, and the tax burden will be shocking.

Jenny

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• Question: I am in Canada, and my mortgage is due for renewal. I can refinance to borrow more money at a 4.2% rate for up to 30 years. I plan to retire in 5 years, but I also intend to sell the house in the future. Is there a conflict between these two? Should I borrow this money?
  • Teacher James: There is no conflict. You should borrow it, and borrow it for the 30-year term. The key is, you need to calculate: when you retire in 5 years, what will be the total of your annual living expenses plus the new mortgage repayment amount? Then ensure your investment assets can stably provide this cash flow through pledging or other means. Once you borrow the money and invest it in the market, do not sell under any circumstances. Selling the house and this investment are separate matters. When you sell the house, you will just end up with less cash in hand (because you have to pay off the loan), but your invested money remains.

M

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• Question: Following up on Jenny’s question, using pledging to repay the mortgage and pay for living expenses after retirement means adding both expenses into the pledging cash flow requirement calculation, right?
  • Teacher James: Absolutely correct. For example, if your annual living expense is 100k, you need 3 million in assets to retire. Now with an additional 80k in mortgage payments, you need a total cash flow of 180k, so the retirement asset goal must be raised to 5.4 million. If assets are insufficient, you need to use tools like QQQI to supplement cash flow. The core principle is: absolutely never sell stocks to repay loans or for living expenses.

Damon

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• Sharing 1: Thanks to the teacher for recommending the fiber last week. I tried it for a week, combining the sequence of drinking apple cider vinegar + fiber first, then eating protein and vegetables, and finally carbohydrates. I found my blood sugar and emotions became very stable, mood swings decreased, and tolerance for hunger improved.
  • Teacher James: Your sharing is great. However, the eating order should be: Fiber -> Vegetables -> Fish/Meat/Eggs (Protein) -> and finally Carbohydrates. Your body’s reaction is normal; stabilizing blood sugar indeed stabilizes emotions. More importantly, this diet nourishes your gut flora. The gut is our “second brain”; when the gut is healthy, emotional issues like depression and irritability will also improve.
• Sharing 2: I suggest everyone, regardless of age or health status, buy a Continuous Glucose Monitor (CGM) to use for a month. You will find that not just food, but your mood (e.g., my blood sugar rises when replying to emails or doing Clubhouse) and exercise (a 10-minute walk before/after meals has significant effects) greatly impact blood sugar. The goal is to keep blood sugar as stable as possible within a green zone (e.g., 110-140 mg/dL), which is crucial for long-term health.

Agan

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• Question: I am in Finland. My mortgage is almost paid off, but renting would cost more than owning after selling. Stock pledging in Finland seems not cost-effective, and tax laws are complex; selling stocks incurs a 24% tax regardless of profit or loss. I can currently only remit money back to Taiwan to buy 00662 (Yuanta Taiwan 50). Is the volatility of 00670L (Yuanta Taiwan 50 Leveraged 2X) just twice that of 00662? Should I buy it?
  • Teacher James: Tax laws vary greatly by country. Europe, Australia, and Canada are generally unfriendly to stock investment, which hurts wealth accumulation. Your situation in Finland is quite specific. Regarding 00670L, you can simply understand its volatility and long-term return as being about twice that of 00662. But since you are asking this question, it implies you don’t understand leveraged ETFs enough. I suggest you don’t touch them yet and stick to buying 00662. As for pledging, wait until your assets accumulate to a certain level (e.g., over 10 million TWD in Taiwan) before researching it. Go understand the simulation on page 17 of the “Sunflower Bible” first.

Dixon

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• Sharing: Thanks to the teacher’s encouragement last week, I have resigned from that high-pressure job.
• Question: I currently have assets equivalent to 40 times my annual expenses and need to plan cash flow. Plan A is to do an all-in 80/20 allocation, selling 20% of the money market fund when needed; Plan B is to put 30 times annual expenses into 80/20, and the other 10 times into high-dividend ETFs (like the A-share CSOP Huatai-PineBridge CSI 300 Low Volatility ETF) using dividends for living expenses. Which plan is better?
  • Teacher James: The total return (price growth + dividends) of the Low Volatility 50 might only be 5-6%, which isn’t the best choice. You could research 3451, 9451, or 3416 in the Hong Kong market; their total returns might be higher. But note there is a 20% tax on dividends remitted from HK to the mainland. Actually, Plan A (selling money market funds) won’t seriously impact asset growth; backtesting data shows withdrawing 2-3% annually is completely feasible. Your feeling (discomfort in selling assets) may differ from the mathematical model results. When withdrawing cash flow, it is suggested to sell as much as you need monthly, rather than selling a whole year’s share at once and putting it in a checking account.

Jennifer

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• Question: Regarding the updated US Asset Allocation simulation file on page 17 of the Newcomer’s Bible, many students reported that it opens as gibberish or cannot be opened.
  • Teacher James: That file is supposed to be “gibberish”; it is a configuration file in JSON format, not meant for direct reading. The correct operation is: 1. Download (Save As) this file to your computer first. 2. Open our Backtest Simulator App. 3. Use the “Import” function in the App to select the file you just downloaded. The configuration will then automatically load into the simulator. Please refer to the instructional video for the steps.

IV. Highlighted Views

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Investing requires patience; wealth is worth waiting for. – Teacher James

Context: This is a core concept the teacher emphasized repeatedly at the opening, encouraging everyone to maintain long-term patience.

The harder you try to understand, the less you will; the harder you work on stocks, the worse your performance will be. – Teacher James

Context: Personal experience shared by the teacher when explaining the investment philosophy of “mind dwelling nowhere,” illustrating that a relaxed and Wu-wei mindset brings better results.

We cannot solve all problems, but we want to reduce or eliminate the trouble of money. – Teacher James

Context: While responding to Mike’s sharing about movies and poverty, the teacher elaborated on the channel’s ultimate goal: helping people escape financial anxiety and gain true freedom in life.

The scenario where you won’t go bankrupt is based on our simulated asset allocation and simulated rebalancing methods. – Teacher James

Context: Answering Annie’s question on how to rebalance during a crash, emphasizing the importance of following a mechanical system verified by backtesting, rather than relying on personal feelings or judgment.

Life is a form of allocation; because money and time are limited, you just have to allocate. – Teacher James

Context: The teacher extended the concept of asset allocation to life planning, reminding everyone to allocate precious time and energy to the most important people and things, such as family.

You must learn to get along with AI; as we said before, you must treat AI with love, just like your heir. – Teacher James

Context: A philosophical view on coexistence with AI discussed during the AI development segment, suggesting AI should be viewed as the inheritor of human consciousness and guided with a positive attitude.

V. Summary

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This gathering once again reinforced the depth and breadth of the CLEC investment philosophy. It is not just about how to invest to make money, but about how to live. From the details of healthy eating to the grand narrative of the AI era, and finally to the inner cultivation of “mind dwelling nowhere,” Teacher James progressively revealed the essence of successful investing: a healthy body, a calm mind, and a systematic strategy that is verified and strictly followed. The rich cases in the Q&A session, ranging from taxes in different countries to specific retirement cash flow planning, provided valuable practical guidance for students. Overall, this was a comprehensive exploration spanning body, mind, spirit, and investment strategy, with the core message remaining: through disciplined long-term investment, achieve financial freedom and ultimately embrace a peaceful, happy, and abundant life.