I. Topic of the Session#
This session delves into the essence of dollar hegemony, revealing its intricate links with global energy, resource control, and geopolitics. James believes that the series of international actions taken by the United States ultimately aims to maintain the hegemonic status of the US dollar as the world’s primary trading currency. Additionally, the course offers specific cash flow solutions for investors who are approaching or have already retired. It provides a detailed comparison of strategies for obtaining stable income through stock pledging versus using high-dividend products (like QQQI), and emphasizes the importance of understanding market cycles and maintaining a calm investment mindset.
II. Briefing Content#
Investment Mentality and Asset Allocation#
- Ignore the Market, Focus on Allocation: Investors should disregard short-term market fluctuations, international situations, economic data, and other noise. The core task is to create an asset allocation that suits them and makes them feel comfortable.
- Long-Termism and Reasonable Expectations: Investment success lies in “surviving in the market long-term,” not in chasing short-term high performance. A stable long-term return of 8% is much better than the immense psychological pressure of striving for a 15% return. Stress can significantly affect physical health, such as causing elevated blood sugar levels.
- Cash Flow Strategy for Retirement: For retirees whose assets are less than 25 times their annual expenses, the priority should be stable cash flow, with asset growth becoming secondary. For example, if you have 13 million TWD and need a cash flow of 1.2 million TWD annually, you could invest about 10 million TWD in high-dividend products like QQQI for monthly income, with the remaining funds serving as an emergency fund and for a small amount of growth investment (like QQQ).
Stock Pledging vs. QQQI#
- Conditions for Using Stock Pledging:
- If you don’t want to use leveraged funds, you can obtain cash flow through stock pledging.
- The withdrawal rate is key:
- For a 2% withdrawal rate, an 80/20 (80% stocks / 20% cash) asset allocation can be used.
- For a 3% withdrawal rate, a 65/35 allocation can be used.
- For a 4% withdrawal rate, a 50/50 allocation can be used.
- When the withdrawal rate exceeds 4%, or when total assets are less than 25 times annual expenses, stock pledging is not recommended. This is because the proportion of core assets (stocks) becomes too low, increasing risk. In this situation, directly using high-dividend tools like QQQI is a safer bet.
Understanding and Responding to Market Cycles#
- The Importance of Studying Cycles: James emphasizes that understanding market cycles requires extensive reading and long-term market experience. He recommends books like “Why the Economy Goes Up and Down” and “A Random Walk Down Wall Street.”
- Five Core Economic Cycles:
- Consumption Cycle: When the demand for a certain product (e.g., electric vehicles, smartphones) transitions from rapid growth to saturation, the growth rate slows, forming a cycle.
- Inventory Cycle: A cycle of adjustment triggered when manufacturers overproduce or overstock due to misjudging consumer demand, leading to an inventory pile-up.
- Investment Cycle: When companies, optimistic about the future, expand their production capacity on a large scale (e.g., TSMC building new fabs). When the new capacity comes online, if demand has fallen, the investment cycle enters a trough. Typically, when emerging market stocks (like Taiwan, South Korea) outperform the US, one should be wary of the end of this cycle; when energy-producing countries (like Brazil) then outperform these emerging markets, the alert level should be even higher.
- Credit Cycle: During an economic downturn, companies face declining revenues and broken cash flows, making them unable to repay debts. This leads to a rise in default rates, forming a credit crisis. This is usually a signal of the end of a business cycle.
- Real Estate Cycle: When central banks drastically cut interest rates to rescue the economy, funds flood into the real estate market, causing irrational price increases and forming a bubble.
- The Difficulty of Judging Cycles:
- Even with theoretical knowledge, without personal experience (at least 30 years in the market), it is still very difficult to identify the current stage of a cycle.
- A bubble can last for a long time; exiting too early means missing out on gains. A bottom can also last for a long time; entering too early can lead to further losses.
- Therefore, James suggests that instead of trying to precisely predict cycles, it’s better to moderately increase your cash position when you feel the market is overheating and you’re uncomfortable. This is done to achieve peace of mind. The purpose of managing cycles is not to increase returns, but to smooth the asset curve and find mental tranquility.
The Essence of Dollar Hegemony#
- Core Objective: Maintain the Dollar’s Trading Status: The fundamental purpose of all US diplomatic and military actions is to ensure that global commodities (especially oil) must be traded in US dollars.
- Case Studies:
- Suppressing Rivals: Whether it’s the Soviet Union (Russia), Venezuela, or Iran, the common characteristic of these countries is their abundant energy resources and their attempts to bypass the dollar for trade. The US uses sanctions, political intervention, and other means to strike down these challengers.
- The Iraq War: Was also essentially about the petrodollar.
- Controlling the Global Energy Lifeline: Even though the US itself has become an energy exporter, it still needs to control the global energy supply. Only by doing so can it force other countries to hold and use dollars to buy energy, thereby supporting its continuously issued government bonds.
- Conclusion: Dollar hegemony is the foundation that allows the US to continuously print money and shift its economic problems onto others. So-called justifications like “human rights” and “democracy” are often just “window dressing” to conceal its true strategic intentions.
III. Q&A Session#
Floyd#
- Sharing: He only discovered the teacher’s channel at the beginning of this year and feels very lucky, yet also feels it was “inevitable.” As his understanding has grown, he increasingly believes in fate and karma. As a child, he always felt he would become wealthy. After learning the teacher’s investment method, he discovered that financial freedom can be achieved through mathematical calculation, which resonated with his childhood premonition. He sees the teacher and the host as “wise Givers” who share selflessly and adjust their teaching methods according to the students’ growth. He believes this model of teaching and learning from each other is a way of helping others and oneself.
- James’s Comment: He shared his “I do” philosophy of life. In relationships (including teacher-student, friends, spouses), giving should be willing and without regret (“I do”), with no expectation of return. If one constantly keeps score of giving and receiving, the relationship will eventually break. Only by achieving a state of “being strong through having no desires” can one maintain inner peace and happiness amidst any external turmoil.
Helen#
- Sharing: She recently spoke with a financial planner and realized she could retire early, but she wasn’t mentally ready. Recalling that the teacher had also previously told her she could retire, she gradually understood the importance of “working less.” Stress is invisible and affects health (e.g., raising blood sugar). She shared her experience of selling in a panic during the 2022 market downturn and then buying back in near the bottom. After learning from the teacher, she transferred her company’s pension funds to manage them herself, achieving better growth. She believes that once basic expenses are covered, more money doesn’t bring more happiness; instead, unnecessary stress is harmful to health, making early retirement a wise choice.
- James’s Comment: Many of life’s truths require personal experience and the passage of time to be truly understood. As a teacher, he merely plants a seed in the students’ minds, believing that this seed will eventually blossom and bear fruit.
Jason (formerly Zong DNG)#
- Question 1: Regarding the backtesting software configuration files in the course materials, he thinks beginners might be confused by seeing the code directly. He suggested it might be better not to provide the files, forcing students to generate their own by watching the instructional videos and performing the steps themselves, which would lead to better learning.
- James’s Response: The purpose of providing the configuration files is to give students a baseline for “comparison” and “verification.” After students perform the steps themselves, if their simulation results don’t match what the teacher said (for example, a withdrawal rate that should have failed passes the simulation), they can compare it with the teacher’s configuration file to check if their parameters are set correctly. It’s a tool for verification and debugging, not a template to be used directly.
- Question 2: He and a friend debated an issue: with a 40% stocks / 30% pledged / 30% cash allocation, one person argues for living only on the cash, while the other argues for living on the pledged money. In the extreme scenario of a ten-year market crash, which method is safer?
- James’s Response: This question is like comparing whether “taking a high-speed train” or “driving yourself” is safer. Neither method is absolutely superior; the key is the “driver”—that is, the investor’s actions and discipline. If cash reserves are sufficient and rules are followed (e.g., proper withdrawal rate, rebalancing strategy), both methods are safe. If the asset allocation is improper and cash is insufficient, both methods are dangerous. It’s a comparison of apples and oranges; they can’t be directly compared. The core issues are whether the assets are sufficient and whether there is an adequate safety margin.
Jason (JASON)#
- Question: He currently has a high income and plans to dollar-cost average 70% QQQ and 30% TQQQ monthly in his personal investment account over the next ten years, without touching it. He would like the teacher’s evaluation of this strategy. He has other retirement accounts, rental income, and an emergency fund.
- James’s Response: This strategy is not high-risk because the questioner has a continuous high income as a backstop. However, one must consider a low-probability but high-impact “black swan” event: if he were to suddenly become unable to work and simultaneously need a huge sum for medical expenses (e.g., $500,000), and the emergency fund was unavailable for some reason, he would be forced to sell stocks at a low point. Investing requires considering not just normal situations but also insuring against such small-probability catastrophic events. As long as he has thought through this risk and can bear it, the strategy is fine.
Austin#
- Sharing and Question:
- Sharing: Hearing the previous student share the thought of “feeling like I’ll become rich,” he recalled a funny story about himself and his wife and felt the positive energy transmitted by the channel.
- Question: He observed that on Thursday, oil prices surged, but the US stock market opened low and then rallied. He connected this to the teacher’s talk on dollar hegemony and proposed a view: in an environment of war and inflation expectations, while dollar holders won’t sell dollars due to safe-haven demand, would they be more inclined to sell dollars to buy high-quality dollar-denominated assets, like US stocks or physical assets (like crude oil), to hedge against inflation? He cited the history of the 1980s when Volcker raised interest rates to fight inflation, where the stock market briefly dipped before rising steadily, and asked for the teacher’s opinion.
- James’s Response:
- When a disaster occurs, the dollar rises due to its safe-haven status and liquidity. This is correct.
- Inflation is beneficial for asset prices, but if inflation triggers central bank interest rate hikes, it will be a blow to asset prices. It’s an interconnected relationship.
- While rising oil prices affect the US, the impact on the rest of the world is much greater. This is a case of “a scratch for the US, a serious injury for the world,” which in turn highlights the relative safety of US assets.
- History does not simply repeat itself. The 1973 oil crisis stemmed from Middle Eastern countries’ boycott against US support for Israel, while 1980 was the tail end of that inflationary period. The historical context and geopolitical landscape are different. One needs a deep understanding of the underlying interests to make a judgment. For example, the US supports Israel because Israel is its “arsenal” and strategic pivot in the Middle East.
Doris#
- Question: She observed that on April 1st, while most stocks rebounded, the price of BOXS (a short-term Treasury bond ETF) dropped slightly by 0.07%. She was confused by this because she understood that the price of BOXS should rise steadily and slightly as interest accrues.
- James’s Response: This is completely normal. BOXS is an ETF. When the selling pressure on a given day is greater than the buying pressure, the price will fall, just like the matching mechanism for stocks. An ETF’s price fluctuates around its Net Asset Value (NAV) and can experience brief periods of being overbought or oversold. Investors should not focus on a single day’s tiny fluctuation but should look at a longer time frame (e.g., a month or a year), where its long-term trend will align with the pattern of its interest accrual.
饼干 (Biscuit)#
- Sharing: He emphasized the importance of “not frequently changing investment methods.” Every investment strategy has its periods of profit and loss. If an investor cannot accept a strategy’s temporary losses, they will fall into a cycle of “chasing highs and selling lows”: they chase a method when it’s making money, give up as soon as it incurs a loss, and then look for the next seemingly profitable method. The result is that they always experience the losing phase of each method, leading to a constant erosion of their principal. Investors must learn to accept the inherent volatility of their chosen method to ultimately enjoy the long-term returns it can provide.
- James’s Comment: He strongly agreed. Buffett also said that if you can’t accept losses, you shouldn’t be in the stock market. The strategy advocated by our channel is to set up your asset allocation and then “set it and forget it,” without frequent trading. Changing asset allocation is a long-term decision based on life stages or major financial changes, not a reaction to short-term market fluctuations. It’s very difficult for ordinary people to beat the market through trading, so “holding on for dear life” and accepting a reasonable long-term return (like 8%-12%) is a more prudent strategy.
IV. Insightful Quotes#
In any relationship, your contributions are not worth anything, and you should not expect any return. … You have the right not to be good to them, but if you are willing to give, you just say ‘I do’. – James
In response to a student’s sharing about being a “Giver,” James explained his view on relationships. He believes that whether in family, friendship, or love, giving should come from the heart, without seeking anything in return. Once you start keeping score, the relationship is prone to breaking down. This “I do” mentality allows one to achieve inner peace and freedom.
We manage cycles only to sacrifice a bit of return in exchange for some peace of mind. … You lower your returns in exchange for peace of mind, that’s a given. – James
When discussing complex market cycles, James pointed out that it’s nearly impossible for ordinary investors to increase returns by timing cycles. The main purpose of making cyclical adjustments (like increasing cash) is not to get higher returns, but to feel at ease when the market might experience severe volatility. It’s a strategy of trading a small amount of potential return for psychological certainty.
Although the US dollar is America’s currency, it is the world’s problem. Now it’s on a higher level: America’s wars are the world’s problem. The world has to clean up the shit America makes. – James
In analyzing dollar hegemony, James used a vivid metaphor to point out the reality of how the United States uses its hegemonic position to pass its domestic problems and policy costs onto the rest of the world.
If you can’t accept losses, you’ve come to the wrong place. You will lose money in the stock market. – 饼干 (Biscuit) & James
The student “饼干” shared that accepting losses is part of investing, and James agreed, quoting Buffett. This statement emphasizes the inherent risks of investing, warning investors that they must be psychologically prepared for volatility and not easily change their established long-term strategy due to short-term losses.
Both (strategies) are very safe, assuming you follow the rules. … Both are also very dangerous, assuming your asset allocation is wrong. – James
When answering the question about whether stock pledging or living purely on cash is safer, James pointed out that the strategies themselves have no absolute superiority or inferiority. The key is whether the executor is disciplined and has a sufficient safety margin. This reveals that in investing, the “human” factor is more important than the “tool” itself.
V. Summary#
This session constructed a multi-dimensional cognitive framework for investors, ranging from the macro-level geopolitics of dollar hegemony to the micro-level planning of personal retirement cash flow. James emphasized that understanding the underlying logic of how the world works (like dollar hegemony) helps us see through the surface phenomena of market fluctuations. In personal investment practice, the most important thing is not to pursue extreme returns or precise market timing, but to establish a sustainable asset allocation that fits one’s own risk tolerance and financial goals, and to execute it with a calm, long-term mindset. Whether choosing stock pledging or QQQI, or dealing with market cycles, the core lies in “knowing yourself” and “maintaining discipline,” ultimately achieving financial stability and peace of mind.