I. Theme of the Session#
This session revolves around the theme, “The biggest risk in life isn’t volatility, but never owning assets.” James emphasizes that in the era of rapid artificial intelligence (AI) development, the world is changing extremely fast, and the speed of personal wealth accumulation will diverge dramatically. The real risk doesn’t come from short-term market fluctuations, but from missing the opportunity to own assets due to fear, hesitation, or incorrect concepts, resulting in remaining in the labor class for a lifetime, unable to enjoy the dividends of capital growth. Investors should adopt a capitalist mindset, overcome human weaknesses, and invest early and continuously in index funds that represent the development of human technology to achieve financial freedom.
II. Briefing Content#
Pre-class Sharing and Observations#
The AI Era and Reflections on Education:
- Citing DeepMind founder Demis Hassabis as an example, James pointed out that Western education systems encourage innovation and individual development, cultivating many world-leading elites. In contrast, Asia’s exam-oriented education system, centered on joint entrance exams and college entrance exams, while raising the average level, suppresses the creativity of geniuses, producing standardized “laborers” like an assembly line. He used Morris Chang as an example, noting that Taiwan’s top talents are also mostly educated overseas, which is worth deep reflection.
- James urged parents to focus on nurturing their children’s natural talents instead of seeing “preparing for the joint entrance exam” as the sole goal, as this system is an obstacle to innovation.
Shift in the AI Value Chain and TSMC’s Pricing Strategy:
- James observed that the AI value chain is shifting from hardware manufacturers (like NVIDIA, TSMC) to downstream computing power service providers (like Anthropic). Downstream service providers can significantly raise prices due to strong market demand, while hardware manufacturers like TSMC have failed to raise prices accordingly.
- He questioned this, believing that TSMC’s conservative pricing strategy prevents the company and its employees from fully enjoying the immense value brought by the AI wave, describing it as a case of “position not matching contribution.” He argued that TSMC should be more aggressive in raising prices and returning profits to the company and its employees.
Personal Finance and Family Relationships:
- In response to a student’s dilemma about wanting to cancel an insurance policy against their mother’s wishes, James stressed that adults should be responsible for their own finances. If you are paying the premiums yourself, you have the right to make the decision and should not be bound by unreasonable traditional concepts.
- He shared the concept of “having the right to say no” that he learned in the United States, encouraging young people to bravely refuse unreasonable requests, whether from family or their company.
Health is Far More Important Than Insurance:
- Health is the greatest wealth. James emphasized that instead of buying a lot of insurance, it is better to proactively undergo preventive health screenings (like low-dose CT scans) and pay attention to parents’ health conditions (like controlling the “three highs”), which is the greatest responsibility to the family. The health of parents is the happiness of their children.
Issue with Brokerage Pledge Quotas in Taiwan:
- Regarding the tight stock pledge quotas at Taiwanese brokerages, making it difficult to borrow money, James provided two solutions: 1) Sell some assets (like 00865B) for living expenses; 2) Borrow living expenses a year in advance as a buffer and look for other brokerages with available quotas.
- He questioned the Financial Supervisory Commission’s restrictions on pledge loans, arguing that since riskier “margin financing” does not have strict quota limits, restricting lower-risk “pledges” is unreasonable. He also criticized the practice of prioritizing lending funds to foreigners.
Investment Mindset and Strategy#
Overcoming Human Weaknesses:
- The human “hunter brain” is naturally focused on short-term risks. It wants to hide at the first sign of trouble, which is fatal in investing. Financial management requires a long-term perspective, ignoring short-term fluctuations, and overcoming the fear inherent in human nature.
Principles of Leveraged Investing:
- As long as your personal free cash flow (income minus expenses) can cover the monthly repayments, you can borrow to invest. Whether it’s a personal loan or other types of loans, they should be seen as tools to accelerate asset accumulation.
The Wisdom of Interpersonal Communication:
- When communicating with others, avoid using phrases like “Let me teach you,” “Let me tell you,” “You don’t understand,” or “You’re wrong,” as they sound preachy and negative, which can cause resentment.
- One should learn to listen with empathy and support the other person’s ideas, expressing respect even if you disagree internally. Good interpersonal skills are as important as financial management abilities, but this is a common gap in school education.
Choices in Bond Investing:
- Avoid Long-Term Bonds: Long-term bonds (like 30-year Treasury bonds) are extremely risky. Their value is affected by many unpredictable factors such as future inflation, U.S. creditworthiness, and interest rate changes, making their volatility even higher than stocks.
- Only Choose Short-Term Bonds: Short-term Treasury bills or money market funds (like SGOV, 00865B) are ideal for parking cash because their short duration (e.g., three months) ensures high principal safety and they are almost unaffected by market fluctuations.
Investment Strategies for Different Life Stages:
- Young People: The biggest risk is a return rate that is too low, leading to slow asset accumulation and ultimately making them relatively poorer. The goal should be to maximize assets, and investing in high-dividend products is not recommended.
- Retirees: Can consider using tools like QQQI, which pays monthly dividends, to create cash flow. The goal after retirement should shift from “asset maximization” to “maximizing life experiences and expenses.”
III. Q&A Session#
Cathy#
- Sharing (1): Meditation has been very helpful for her, especially working in the market. It helps stabilize her emotions and feel bodily changes. She recommends everyone to try it.
- Sharing (2): She shared her educational and professional journey. Starting from a vocational night school, she worked while studying all the way to graduate school. Many times, she just followed her classmates or seniors to take exams, but in the end, she was the one who persisted. She realized that everyone has their own life script; parents don’t need to plan everything for their children, as they will find their own way. The traits of successful people (like persistence) will not be buried by their environment.
- James’s Comment: James agreed with the saying “Every blade of grass has its own drop of dew,” encouraging young people to have children without worrying too much about finances, as children will “bring their own provisions.” The trait of successful people is persistence; as long as you are willing and not afraid of failure, you can succeed. He shared his own experience of making phone calls in the military when he was young, which demonstrated his persistent nature.
Sean#
- Question: The Buffett Indicator (stock market capitalization to GDP) has far exceeded the warning line, reaching 220%-230%, yet the market continues to rise. At the same time, Buffett himself seems to be investing in growth stocks like Google. Does this mean his traditional value investing strategy is no longer applicable or has changed? Also, he sold TSMC citing geopolitical risks in Taiwan, yet he is issuing bonds and investing in Japan, which seems contradictory.
- James’s Reply:
- The Buffett Indicator is Garbage: This indicator is a product of decades ago and is completely unsuitable for measuring the modern stock market, which has accumulated a century of human wisdom and technological achievements. GDP only calculates the current year’s growth, while the stock market’s value is the cumulative stock of human knowledge, technology, and assets. In the future, the stock market’s capitalization will be hundreds or thousands of times GDP.
- Don’t Box in Your Investments with Textbook Knowledge: Don’t use traditional metrics like P/E to judge a company or an investment strategy. When investing in a company, you look at its business model and industry prospects, not its past financial reports. Buffett’s success is largely due to “profiting from disaster,” i.e., using large amounts of cash to buy at the bottom during market crashes, thereby achieving returns that outperform the market. This model is not something ordinary people can replicate.
- The True Role of Cash: Much of the huge amount of cash Buffett holds is also obtained through low-cost borrowing (like insurance float). His assets are actually leveraged. This is the same principle as us using stock pledges or personal loans to hold cash while letting our assets appreciate.
- Investing is About the Business Model: When investing in a country or a company, you look at its system and business model, not its financial reports. The core of the U.S. is innovation, while some developing countries are still stuck in industrial or agricultural models, lacking investment value.
- James’s Reply:
Ray#
- Sharing: He took out a 10 million TWD personal loan in April and immediately invested it. Although the market fluctuated afterward, he recalled James’s previous teaching that “all cycles and technical analysis cannot improve returns” and held on. He found that his investment return this year has already surpassed his total salary earned since he started working, without any spending. He deeply understood that the power of capital growth far exceeds labor income.
- Question: Although he knows that long-term holding of growth stocks (like a 433 allocation) will result in the highest total assets, from the perspective of “maximizing lifetime spending,” should he increase his withdrawal rate (e.g., from 2% to 3% or use QQQI’s 12%) at a certain age or asset level to ensure he can enjoy more of his money during his lifetime?
- James’s Reply: This is an excellent question. When you’re young, you should pursue asset maximization, but after retirement, the goal should shift to “maximizing expenses” and “maximizing life experiences.” If you don’t want to leave too much of an inheritance, you can absolutely use tools like QQQI to spend a higher percentage of your assets each year, for example, 5% or even more, to enjoy life. The key is to change your mindset from accumulating wealth to using wealth.
Doris#
- Sharing: To open a Hong Kong bank account, she had previously put her funds in a USD time deposit. But seeing the market rally, she realized the huge opportunity cost. After listening to James’s class, she decisively withdrew the time deposit early, forgoing over $200 in interest, and immediately invested in a 433 portfolio. In just one day, the market’s gains far exceeded that bit of interest. She used this experience to advise everyone to invest immediately and not lock up their “bullets” in time deposits for petty gains.
- Question: After setting up her 433 portfolio, she still has 30% in cash that she won’t need for over ten years. Can she increase her Beta, for example, to a 55 or 451 allocation?
- James’s Reply: The proportion of asset allocation is a personal matter, like deciding how much chili to add to your beef noodle soup; you have to decide for yourself. James cannot give specific advice because everyone’s risk tolerance is different. Allocating too high a Beta might lead to wrong moves if you can’t bear it during a major market downturn. The key is to find a configuration that lets you “sleep at night.”
Lucy#
- Question: She is in a semi-retired state in the U.S. and has already established a position in QQQI last year to supplement her living expenses. Now she is preparing to apply for a Pledge Loan. She wants to know if QQQI can be put into the Pledge account to lower the overall borrowing interest rate.
- James’s Reply: All eligible assets, including QQQI and cash, should be placed in the Pledge account to maximize the total collateral amount, thereby obtaining a lower interest rate. However, when calculating the borrowable amount (e.g., borrowing 3% based on a 7030 allocation), the market value of QQQI needs to be excluded from the total assets, because it cannot be used as a basis for borrowing like QQQ can.
Rosemary#
- Sharing: Having followed James for over twenty years, she has transformed from someone with no financial concepts to someone who deeply understands the importance of investing and has benefited greatly from it. She is very grateful for James’s teaching and has shared the course with her relatives and friends.
- James’s Comment: Thanks to Rosemary for her long-term following and support.
Ann#
- Sharing (1): She was deeply inspired by James’s sharing about “rituals.” She believes that even if her parents are very frugal, on days like Mother’s Day, taking them out for a meal and giving them a red envelope creates a sense of ritual that brings great joy.
- Sharing (2): She had read classic books like “A Random Walk Down Wall Street” and “Rich Dad Poor Dad” but still felt fear and hesitation. After listening to James’s podcast and combining it with the books she had read, she finally made up her mind, prepared to sign an “I will never sell” investment agreement, and execute it immediately.
- Question: Taiwan’s semiconductor industry (the “shovel”) is thriving now, but it faces a future of declining birth rates and labor shortages. Moreover, TSMC’s expansion is taking up a lot of land resources. Considering these long-term factors, should she convert all the 0050 in her portfolio to 00662 (QQQ)?
- James’s Reply:
- Uniting Knowledge and Action: Reading books is “action,” but only what is internalized and put into practice becomes the “Way” (Tao). The ultimate state of investing is when your heart is no longer in turmoil when the market falls. Signing a “never sell” agreement is excellent practice.
- Taiwan’s Industrial Predicament: As the world’s number one company, TSMC’s employee compensation and benefits are not number one in the world, which is a “disgrace.” The company should raise its prices and share the profits with its employees. No matter how good a country’s economy is, if its people dare not have children, it is a national disgrace.
- 0050 vs. 00662: The AI wave may last for 20 years, but the glory of hardware (TSMC) may only last for 5 to 10 years. Holding 0050 is not wrong, but its growth prospects are limited. Because hardware capacity will saturate, and TSMC doesn’t raise prices, its growth will be constrained. In the long run, investing in 00662, which represents American technological innovation, is a better choice. It is recommended to transfer funds invested in the Taiwanese market back to 00662.
- James’s Reply:
Frank#
- Sharing (1): He thanked James for his guidance. He not only learns himself but also watches the videos, learns about financial management, and takes out personal loans with his 26-year-old daughter, achieving an intergenerational transfer of investment concepts.
- Sharing (2): He shared his experience of indecision in investing. When the market was rising in April, he listened to his wife’s decisive advice but only bought a portion, then ended up chasing the price higher. When James hinted at a cycle trade, he hesitated before selling, but at a low point; when James instructed to buy back, he decisively went all-in, experiencing the importance of “immediately, right now.”
- Question: He has a matured insurance policy worth about 9.5 million TWD with a 5% interest rate, which he previously intended to use as an emergency fund. Should he cancel it immediately and invest it in 00865B or 00662?
- James’s Reply: You must cancel it immediately and invest it in the market. If this money is invested now, it could become 130 million in 40 years. For the sake of this huge future wealth, you must act immediately. James reiterated that he will not do cycle trading anymore because most people cannot keep up, execute at the wrong time, and end up with losses. The best strategy is “buy, hold, and never sell.” The AI era is the fastest period of wealth growth in human history. The window of opportunity is closing. The next one or two years are crucial in determining whether you become rich or poor. You must get on board as soon as possible.
IV. Insightful Quotes#
The joint entrance exam is garbage. Letting children be innovative like Hassabis, Steve Jobs, and Bill Gates, and follow their own path is the way (for Asians to win). – James
Background: When comparing Eastern and Western education, James harshly criticized Asia’s exam-centric education system, believing it stifles innovation and cultivates “laborers” rather than “elites.”
The ones feasting and celebrating are the people in those Western industries, popping champagne, while you are still doing manual labor, still at a servant’s price. – James
Background: When commenting on the conservative pricing of hardware manufacturers like TSMC in the AI wave, James vividly described the uneven distribution of profits in the value chain, believing that Taiwan’s hardware industry has not received the returns it deserves.
You still need to discuss canceling your insurance policy with your mother? I don’t even know if you’re a grown adult yet… You have the right to refuse unreasonable things. – James
Background: When answering a student’s confusion about family financial decisions, James emphasized the independent thinking and decision-making abilities that adults should have, encouraging everyone to break free from the shackles of unreasonable traditional concepts.
The stock market will always be higher than GDP, and increasingly so. In the future, it could be 100 times, 1,000 times, 10,000 times GDP, because this thing is cumulative. – James
Background: In refuting the “Buffett Indicator,” James explained the fundamental difference between GDP as a flow indicator and the stock market as a stock of value, pointing out that using GDP to measure the stock market’s value is completely wrong.
For retirees, if you’re thinking, ‘I just want to spend 5%, I want to spend 5% of my assets,’ then you can use QQQI… After retirement, the goal is to maximize expenses, not to maximize assets. – James
Background: When answering a student’s question about withdrawal rates after retirement, James clearly pointed out the fundamental difference in financial goals between young people and retirees: the former pursue asset growth, while the latter should pursue quality of life and life experiences.
I really don’t get it. I have more money than I can spend, and I only have one year left to live. Why am I still haggling with the airline over $200? – James, recounting the final thoughts of a hedge fund manager
Background: James used this story to remind everyone to learn how to spend money and not be constrained by a money-saving mindset after achieving financial freedom, thereby sacrificing precious life experiences.
Investing is the top priority, so don’t delay investing for any other reason like status… You cannot lock up your bullets. – James
Background: When commenting on a student’s action of putting funds into a time deposit to qualify for a bank account, James emphasized the immediacy of investing. At no time should funds available for investment (bullets) be locked in inefficient time deposits.
I probably won’t do it in the future, and the reason is situations like Frank’s… Whether I’m accurate or not doesn’t matter; it’s the person executing who is not accurate, so the whole operation is in vain. – James
Background: After hearing a student share their turbulent experience of following his trades, James explained why he no longer engages in short-term cycle trading. It’s because it’s difficult for ordinary investors to execute precisely, and the final result is often counterproductive.
This is the fastest growth in human history, at least recorded history. Don’t miss out. This door to wealth is closing. Whether you are poor or rich, this window is getting smaller and smaller. – James
Background: At the end of the class, James once again emphasized the historic opportunity of the current AI era, urging everyone not to hesitate because of short-term fluctuations. You must get on board as soon as possible, or you will miss the last chance to become rich.
V. Summary#
This session was rich and profound. From the macro trends of AI development and the comparison of Eastern and Western education to the micro aspects of personal finance, family relationships, and investment mentality, James painted a blueprint for how to navigate the monumental changes of our time. The core viewpoint is that in the face of the disruptive changes brought by AI, individuals must shift their mindset from that of a “laborer” to a “capitalist,” making asset accumulation the top priority in life. Through his critique of the Buffett Indicator, analysis of the risks of long-term and short-term bonds, and explanation of investment goals for different life stages, James reinforced the correctness of the core strategy of long-term holding of quality index funds (like QQQ). The students’ sharing and questions were also highly representative, covering various aspects from hesitation in investment execution and struggles with family finances to thoughts on retirement planning. The entire session was not just an investment class but a philosophical discussion on life, wealth, and how to find one’s place in a new era, inspiring every listener to take immediate action and seize this historic wealth opportunity.