00570 Investing Can Make You Rich, But What Truly Determines Your Happiness is Relationships!

I. Episode Theme

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This episode’s theme revolves around “Investing and Happiness in Life.” Teacher James points out that while investing and asset allocation can make us materially wealthy, what truly determines happiness and joy in life is “relationships” (interpersonal relationships and our relationship with things). At the same time, he explains in detail that in asset allocation, what truly mitigates risk is “cash flow” rather than simple “cash,” and shares the latest restrictions and development trends in AI technology.

II. Presentation Content

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1. Recent Current Events & AI Dynamics

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• Federal Reserve Interest Rate Policy: The Fed’s current interest rate policy has shifted to being data-driven, eliminating forward guidance. Fed Chair Jerome Powell is implementing data reforms at the central bank. His Wall Street background, along with the Treasury Secretary’s (formerly a Soros employee) hedge fund background, reflects the exceptional professional and practical capabilities of US government officials.
• Anthropic Model Restrictions: Anthropic’s latest frontier AI model was quickly restricted after release because it was too powerful. The US government restricts access to all non-US citizens (including those holding green cards or visas in the US), requiring a US passport for verification. Since Anthropic could not verify every user’s identity individually, they simply blocked the service altogether. This indicates the US’s hegemonic strategy to maintain an absolute lead in high-end technology.
• LLM Usage Costs and Chinese Open-Source Models: Due to the extremely high API costs of using US large language models (like GPT), many developers burn through millions of dollars a month. Consequently, highly cost-effective Chinese open-source models (such as DeepSeek, which costs only one-tenth of US models) have become very popular commercially. Additionally, some AI translation tools (like CC Bao), when not highly paid for, often stop translating long texts after the first few pages.
• Channel Announcement: The handouts and presentation slides for this episode can be downloaded via the PCOD (PC) link. As software backtesting models are now recommended, the “Smart Rebalancing” Excel file will no longer be provided in the future.

2. Asset Allocation: Cash Flow vs. Cash

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• Cash Flow is the Core of Risk Resistance: What truly defends against systemic risk is not how much static cash you have on hand, but a continuous stream of “cash flow.”
• The 15-Year Cash Flow Rule: Historical data shows that it took about 15 years to recover from the 2000 market peak to a new high in 2015. As long as you have cash flow (including salary, rent, interest, social security, money market funds, etc.) that can cover 15 years of living expenses, you won’t be forced to sell index funds (such as QQQ, 00662) during market troughs.
• Investment Principles: When you have money (referring to investable funds), you should buy at the market price immediately. Do not dollar-cost average in batches, and do not try to time the market. Except for term life insurance, purchasing other complex commercial insurance is not recommended; any redundant insurance should be canceled and redeemed immediately. You don’t need to know too much to invest; do not obsess over individual stocks, buying/selling timing, or predicting ups and downs. Even when facing rule changes like SpaceX joining SYQQ, there is no need to worry excessively, as 99.99% of market volatility is beyond individual control.
• Extreme Risk and Long-Term Optimism: In extreme cases, the market can drop 80% in an instant (like the 2000-2003 bear market); investors should remain rationally optimistic. Over a longer horizon, US indices have grown 27 million times over 200 years. In the future, AI technology might even extend human lifespans, at which point the biggest risk will be “running out of money.”
• Borrowing Order and Risk Control: Borrowing should be considered primarily based on risk profile. Personal loans and home equity loans (financial mortgages) have lower risk and should be prioritized. Although stock pledges (margin loans) have low interest rates, they carry a high risk of liquidation and should be considered a last resort.
• Health Share: Teacher James shared his recent experience trying grain-free, low-carb bread. Eating it with butter or milk can keep blood sugar stable around 140 for a long time, avoiding spikes and crashes.

3. The Key to Happiness: Relationships and the Present

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• Relationships Determine 90% of Happiness: Maintain an open-minded attitude of “it doesn’t matter, whatever, it’s fine” toward people, events, and things. Using the example of ordering chicken soup at a restaurant only to get scraps, he explained that once you understand the business’s rules, “just don’t order it next time” instead of getting angry. Keep a simple mindset of letting go.
• Stay Away from Toxic Relationships: If your partner, friends, or even relatives make you suffer, or if your work environment and the information you consume are toxic, you should bravely choose to distance yourself. Only good relationships can provide the nourishment of love. Many people are trapped in toxic relationships due to traditional ethics or concepts of filial piety. At the same time, he encourages Taiwanese workers to wake up and resist the terrible workplace culture of accepting sub-par salaries.
• Patience with the Elderly: Caring for elderly people with dementia cannot be held to normal standards. They may forget basic life skills (like turning off lights or the TV) or even wait to go out hours in advance. Do not wait until parents are completely demented to spend time with them; otherwise, sudden intervention might frighten them.
• Breathing Regulation Method: Daily breathing exercises are recommended: inhale for 5.5 seconds (hold slightly if you can’t inhale fully), exhale for 5.5 seconds. Practicing this for two minutes each morning and evening helps regulate mood and hormones.
• Recommended Spiritual Guidance Resources: Recommended channels include Rebecca (sharing US education experiences) and Qi Meng Lu Cheng (providing guidance on psychology, marriage, and domestic violence response). Mental health issues are often more severe than financial ones.
• Regret Medicine Exists in Life: The robust return systems in the US (like Costco and Amazon returns, though one must avoid abuse to prevent account suspension) and a workplace culture where one can refuse unreasonable demands from bosses show that “regret medicine” does exist in life. The key lies in being brave enough and “emotionally awake” (觉情).
• The “Guardianship” Standard for Good Friends: If you have two or three close friends in life to whom you could entrust your minor children in an emergency, or who would rush to the ER at midnight to sign paperwork for you, it is already a great blessing.
• Separation of Tasks and Self-Care: Life belongs not only to oneself but also to those who love us. When facing the departure of loved ones, understand that their tasks are finished, while your own tasks have just begun. One needs to prepare mentally in advance (get a psychological inoculation).
• Self-Protection When Promoting Rare Philosophy: Public servants, teachers, bus/Uber drivers, etc., should protect themselves when promoting Rare Philosophy to avoid being reported by peers or malicious individuals, which could lead to job loss.

III. Q&A Session

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Ian

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• Share 1: Started listening to Teacher’s lectures in late October 2022 and switched assets to Nasdaq (at that time QQQ was $281, and the domestic Nasdaq LOF 513100 was 0.811 RMB). Both have since increased by more than 2 times. After reaching alignment with his spouse, they sold a loss-making property and converted it to Nasdaq, which has now fully recovered. He manages his retired mother’s pension by buying Nasdaq, accumulating over 1 million RMB. He uses Nasdaq for his child’s financial education, investing their New Year’s red envelope money into Nasdaq, yielding about a 30% return. He has transitioned from an office worker to a free agent, making the promotion of Nasdaq his career.
  • Teacher James’s Comment: Congratulations, Ian. Ian started listening to the channel a few years ago, successfully quit his job, and became a full-time investor. His harvest has been very abundant.
• Share 2: Introduction to the latest situation in Mainland China and Hong Kong. The advantage in the Mainland is that fund companies have issued 12 exchange-traded Nasdaq funds with low entry barriers (minimum 10 RMB for OTC subscription), and brokerage margin rates have dropped to around 2.7%, with low loan rates. The disadvantage is that foreign exchange controls lead to high premiums on domestic Nasdaq funds (reaching 12% last Thursday), and the information environment is noisy, requiring strong resolve. Hong Kong’s advantage lies in the free flow of capital, allowing the purchase of HK/US Nasdaq shares, and genuine stock pledges (HSBC, CMB Wing Lung, DBS, etc.). Under the latest policies, Mainland residents can still open accounts and trade normally in Hong Kong, but when using a Mainland network in the Mainland, they can only sell and transfer out, not buy and transfer in (requiring a Hong Kong network/SIM card). Regarding taxation, the Mainland has started taxing offshore income, but if one only buys and does not sell, the impact is minimal, requiring tax only on dividends.
  • Teacher James’s Comment: Investing in Nasdaq within the Mainland is actually sufficient; there is no need to go to Hong Kong specifically for stock pledges or to buy leveraged funds. Don’t engage in complex cross-border operations just for one or two percentage points of interest in money market funds—vague correctness is enough. Increasing Beta by 10% can solve the yield gap. Emergency funds should remain where you live. Foreign exchange controls are temporary. Financial openness has pros and cons; one must know how to protect domestic assets. Financial openness is a double-edged sword (for example, TSMC is 80% foreign-owned, making it essentially no longer a purely local company; in the early days, due to insufficient domestic capital and conservative investment habits, it had to bring in foreign capital like Philips).

Charles

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• Share 1: Perspective on identity. Citing the difference in Atomic Habits between “I’m trying to quit smoking” (resisting with willpower) and “I don’t smoke” (identity), and his own experience over the past two years of viewing fitness as a task rather than a passion, he emphasized the importance of identity to long-term investing. Only when you truly identify as a “long-term investor” will market fluctuations naturally become irrelevant to you.
  • Teacher James’s Comment: Agreed. Using examples such as the US airborne forces potentially arresting International Court judges, the US using cotton organization rules to protect its domestic cotton industry, and its pragmatic attitude toward climate change rules, he illustrated that the international community is essentially about “might makes right,” and rules are often made by the strong for their own benefit. Do not blindly follow rules that disadvantage you; consider your own interests.
• Share 2: Calculated that the time in life truly belonging to oneself is only about 3,000 days. Recently, his 90-something-year-old grandfather was hospitalized. The grandfather, who had been frugal all his life, started generously tipping the caregivers and complaining that his children were unfilial. During a video call, although the grandfather said he understood everyone was busy, his eyes were actually wet. This made Charles realize that everyone is working hard to make money but neglecting companionship. The most expensive thing is time; some meetings are one fewer in a lifetime, so do not wait until it’s gone to regret it.
  • Teacher James’s Comment: In CLEC, you should not lack time to accompany your parents because of money. Money will eventually become an inheritance (trash); what matters most is to cherish the present and create memories. Live in the moment and communicate more with your family.

SF

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• Share: 42 years old. Originally wanted to change jobs due to the terrible labor-management relations and shift work in the traditional Taiwanese workplace. After calculating, he found that continuing to work made little difference, so he decided to retire directly. After discovering CLEC, he changed his original stock-bond allocation (8:2) by going all-in at the June 4th peak into a 4:3 allocation and is not worried at all. He tried recommending it to people around him, but it was generally not accepted. SF mentioned that to become the “Tao” in one’s heart, the best realization is to live as the answer itself. He thanked senior classmates Chen Feng and Shi Guanzhang for their help. Today, his 70-year-old mother suggested going to Japan, and he immediately agreed and adjusted his schedule to accompany her, echoing the theme of “relationships.”
  • Teacher James’s Comment: Very glad that SF retired at 42. Take your parents out to travel early; support them in traveling more. Teacher James also shared an example of encouraging his eighty-something father to travel to Mongolia and Xinjiang with friends, emphasizing the need to support parents in going out while their health permits.

Michel

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• Share: Successfully introduced Teacher’s investment theory to a close friend of 20 years (Michel is also the godfather of the friend’s second son). This friend has the traits of a successful person: he proactively watched Teacher’s “100 Million Yuan Class” videos and only came to discuss when he encountered things he didn’t understand, rather than outsourcing responsibility. Michel has also reached a financial position where he can retire, but because his work is interesting and helps people, he chooses to continue working, but without financial pressure.
  • Teacher James’s Comment: Helping others is the source of happiness; helping others become rich is happier than becoming rich yourself. You can tell if someone will succeed in investing just by the way they ask questions. Many people don’t even watch the videos or read the handouts and just ask for answers directly. It is hard for people who do not care about their own money to achieve success.

Diana

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• Question: Currently living in the UK pursuing a PhD, with income mainly coming from China. Unsure whether she will stay in the UK, return to China, or go to another country in the future, and doesn’t know where to place her assets. Currently, she invests in the UK using the annual £20,000 tax-free investment allowance (ISA) and the annual £9,000 allowance for children (Junior ISA), with floating profits reaching 40%, while her domestic assets of less than 100,000 RMB have lower floating profits. She wants to know if she should move her funds to one country or to Hong Kong for future stock pledges or financing?
  • Teacher James’s Reply: Tax-free investment accounts in the UK (like ISA) are excellent. If you are sure there is no tax upon withdrawal, you should try to max them out; you can buy Nasdaq 100 index funds. Keep the remaining money in China for investment; there is no need to move it frequently. If you have stock pledge needs in the future, you can gradually move funds to Hong Kong. Multinational banks like HSBC also provide global financial services, which can be used in both the UK and Hong Kong.

Peter

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• Share: Has been learning investment from Teacher for five years and fully implemented Teacher’s method four years ago; he is now close to financial freedom. Teacher’s upgrade of the concept from “safety cushion/cash” to “cash flow” is a major leap. In the past, he used stock pledges heavily and kept thinking about how to make his account safer; the concept of cash flow completely opened up his thinking.
  • Teacher James’s Comment: Once your understanding reaches a certain height, you can stand on your own. In financial management, cash, stocks, and real estate are assets, while cash flow is the blood. Among the M7 (tech giants), some companies have unhealthy free cash flow due to massive investments in data centers, and their stock performance is inferior to companies with abundant free cash flow like Apple. For example, Microsoft has to invest hundreds of billions in future cloud construction, leading to a drain on free cash flow, which has dragged down its stock performance. Individuals must also have sufficient free cash flow (able to survive 15 years) for their assets to be effective.

David

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• Question: Preparing to do a Roth Conversion (converting $200,000 to a Roth IRA). Currently holds BOX (Treasuries/cash) and QQQ in a Rollover IRA. When converting to Roth, should he convert BOX in and then switch to QQQ, or convert to QQQM/QQQI? If converting to QQQI, and using the monthly dividends to buy QLD, which of these two options is better?
  • Teacher James’s Reply: Assets entering a Roth IRA should be as aggressive as possible (such as QLD/QQQ), while Traditional IRAs or regular taxable accounts can hold conservative assets like BOX. Cash/BOX should not be kept in a Roth unless the Roth’s fund size far exceeds the Traditional IRA.

April

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• Question: Didn’t quite understand the difference between “cash” and “cash flow.” If one allocates to BOX or Treasuries after retirement, does that count as cash or cash flow? If cash is only enough for 10 years, how does one survive 15 years?
  • Teacher James’s Reply: Cash flow means you have money to spend at any time, and this money does not necessarily come from cash; it can come from stock pledges, high dividends, pensions, social security, or selling part of your stocks when the market rises. Even if you only have 10 years of cash, through asset allocation and a reasonable withdrawal strategy (such as a 2% withdrawal rate), your overall assets can continue to provide the funds you need over 15 years, which constitutes cash flow. Cash flow is dynamic blood, while cash is just a static asset. Teacher James mentioned that the essence of Warren Buffett’s investing lies in the “discounting of future cash flows.” Even if giants like Microsoft and Google hold massive amounts of cash, they still issue tens of billions in corporate bonds to ensure their free cash flow is foolproof, because “no matter how many assets you have, if your cash flow can’t clear by 3:30 PM, you will go bankrupt.” Retaining cash is to guard against this fatal risk.

Xia

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• Question: 55-year-old housewife, green card holder, child going to college next year. Sold a house in Mainland China and has 6 million RMB in a domestic bank (1% interest). Currently has no job or income in the US, no cash on hand (all invested in QQQ), and transfers $50,000 from China annually for living expenses. She is debating whether to apply for US citizenship (since she needs to return to China to care for her 80-year-old mother) and whether to transfer all the money from the house sale in China to the US to buy QQQ?
  • Teacher James’s Reply: Since your child is attending college in the US, it is recommended to naturalize as a US citizen as soon as possible. During your time back in China accompanying your mother, you can rent out your US house to obtain stable rental cash flow. If possible, it is recommended to transfer the money from the house sale in China to the US in one lump sum through legal channels (China has a once-in-a-lifetime “immigrant property transfer” policy for those who have emigrated overseas, allowing them to apply to wire all domestic assets out in a single transaction) for investment. If the money remains in China, you should still invest 70% in Nasdaq LOF and put 30% in money market funds, rather than just taking the 1% time deposit interest.

Tony

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• Question: Currently making monthly dollar-cost averaging investments into 513100. At what stage does he need to convert part of the funds into cash? When can he reach the retirement standard?
  • Teacher James’s Reply: There is no need to actively convert Nasdaq into cash; just keep one year of emergency funds on hand. The retirement standard is typically 15 times annual expenses (if the withdrawal rate is low and combined with high dividends). In China, because high-dividend yields are relatively low (around 8%) and there are no ultra-high-dividend tools like QQQI, you need to combine high-dividend assets with Nasdaq. Specific calculation: If your annual expenses are 100,000 RMB, with a high-dividend yield of about 8%, you can allocate 1.25 million RMB to high-dividend assets to generate 100,000 RMB in cash flow, allocate another 300,000 RMB to 513100, and keep 200,000 RMB as cash. A total of 1.75 million RMB (about 17.5 times annual expenses) will allow for a safe retirement.

IV. Key Perspectives

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The asset allocation that can truly resist risk is not about how much cash you have on hand, but about your cash flow. – Teacher James

Teacher James emphasized in his posts and presentations that many people mistakenly believe retirement requires retaining a large amount of static cash. However, history shows that as long as you have dynamic cash flow (including salary, rent, interest, social security, etc.) that can support 15 years of expenses, you can safely weather the market’s longest bear cycles.

The key to happiness lies in relationships. Keep things simple regarding people, events, and objects, and learn to say “it doesn’t matter, whatever, it’s fine.” – Teacher James

Teacher James believes that investing can make people rich, but relationships determine happiness. Maintaining an open-minded attitude and staying away from toxic relationships and information environments is the key to true happiness.

The most important thing in long-term investing is not endurance, but first clarifying your identity. When you identify as a long-term investor, market fluctuations naturally have nothing to do with you. – Charles

Student Charles shared his views on identity, pointing out that using willpower to “persist” in holding long-term is often painful, whereas fundamentally identifying as a long-term investor allows for true peace of mind.

The most expensive things in life are never houses, cars, or money, but whether you are willing to give your limited time to limited people. – Charles

Combining his grandfather’s hospitalization experience, Charles lamented that people often neglect companionship to make money, urging everyone not to wait until it’s lost to regret it.

Helping others become rich is much happier than becoming rich yourself. – Teacher James

Teacher James praised student Michel’s share about “helping a close brother get on the right investment path,” pointing out that helping others succeed is the source of happiness.

V. Summary

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In this session, Teacher James and several students delved into the essence of asset allocation—cash flow management—and extended the discussion from AI development and international situations to the ultimate pursuit of life: healthy relationships and companionship. Investing is merely a means to achieve wealth, while cherishing the present, caring for family, and staying away from toxic relationships are the true keys to determining life’s happiness and joy.