After Losses, Retail Investors Flock to 3x Leverage as 2x Product Are Restricted
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Add to that, stock gains in Korea are often used to finance housing purchases (or real estate investment) so many retail investors are scared of being "locked out" of housing (which is a requisite status symbol for dating or marriage) if they're not making the same capital gains others are.
Currently Korean social media is full of stories of leveraged day traders who've gotten rich the past year, HBM employees who've made bonuses worth decades of salary (e.g. memes of Samsung employees in luxury cars), etc. Lots of comments along the lines of "everyone is getting rich except me". It's all reminiscent of the crypto frenzy in the US a few years ago but way more intense and concentrated.
no it's very possible because in an aging country people relocate to a handful of cities. 50% of South Korea's population now lives in the Seoul metropolitan area. The real estate that's getting cheaper is the one decaying in the countryside.
It's like saying Russia can't have expensive real estate because the country is big, what matters is where people are actually moving.
And for many, if the property is not within 10km of the Sydney or Melbourne city centre, it might as well be in the dusty Outback desert.
Government efforts to cool housing inflation have resulted in a 40 percent minimum down payment for a mortgage.
Housing in Seoul and much of Gyeonggi is a pipe dream for most
Population can age fast while the supply of desirable places to live still doesn't meet demand.
I get that culture is hard to change, but it still seems easier than changing the economics. There are men and women out there who presumably are interested in partnering up; at some point you'd think biology will take over irrespective of which achievements have been unlocked. What's stopping them?
So in practice 80% or so of the population is below "average social status". People who don't absolutely need to pair up (historically women can't earn, but require, money and men can't take care of a home/place to sleep, but have to), will refuse to pair up with someone below their signaled social status. In other words: there are TWO average social statuses. First, there is what people believe their own social status is. Second there is what people, on average, see as others social status.
In a "natural" human society, it's basically impossible for anyone over 25 or so to "pair up", unless they have a partner, which is not common at all. Since social status ALSO determines the distribution of food, at that point the first real period of weakness (you get sick, you hurt your leg, you ...) is the end. You can delay this by forming cliques, but not by that much.
Oh and of course, that has an analog in our society. Look how much a plumber gets paid (ie. it's pretty disappointing), despite the shortage. There are low status and high status jobs, and even where it doesn't make sense they determine pay. E.g. there are a lot of cities with a total glut of lawyers ... it makes no sense to give 7 figure wages for people when 70% of whom can't find work, but we do. By contrast there is an incredible shortage of construction workers, and still they're not paid half what a lawyer gets. Rather we'll get immigrants to do it. Why? Because a great many people would rather signal that they're above manual labor than get 7 figures a year.
In other words: I will live in destitution rather than admit I'm low social status, even if low social status would pay well.
Oh and don't forget credit cards: 80%+ of people worldwide consider feeling rich (and showing off) more important than, ironically, money. Note also the many complaints about the economy, which are never about having or not having money, the big complaint seen everywhere is that people who don't have money "feel poor". One might think it should be perfectly normal to not have money and feel poor.
Which also is the big lesson in investment that's coming up: countries will raise inflation to any level rather than cut expenditures. That's how we got to 20% inflation in the 80s. That's how Argentina or even Zimbabwe got there. Ie: when we're getting close to that point, for the love of God, don't buy government bonds.
Preventing obvious human habits from destroying us seems to me the best reason to really give developing AI your best effort. Because the whole "job destruction" argument has a hole in it you could fit a planet through: people don't want to do the destroyed jobs. What do you think is the best: AI taking jobs? Or, that we force young people into nursing, plumbing, construction, ... through more and more extreme measures and making everyone a lot poorer? That's how the system rebalances after all, make people poorer until the plumbing gets done.
Those are the choices. AI it is. At least for me.
Porn and 4B divert coupling...
But also 4B is an outsized meme especially in the west. It's like furries. We all know about them, but they are not typical people who you can draw conclusions about the civilization from.
It's not just a small number of women.
When the misfolded protein response triggers cell death, the proteins that activate the response are not, themselves, misfolded. https://en.wikipedia.org/wiki/Unfolded_protein_response
no need to start futile fights when you are in the (ideological) minority.
huh... is that really feminism? or just homosexuality / asexuality?
It’s just a short-cut. The most ostentatious courtships of bird species are found in populations without significant predators. Evolution has granted this as advantage, because they don’t need to screech and squawk and hide from predators.
Take the Birds-of-paradise from New Guinea as the archetype.
Of course signaling is a short cut. You cant transmit your entire lifes experiences to another people in an instant. You signal and read signals.
It’s not the extreme outcome that’s the offered exception to your rule. It’s the absence of predators.
Humans, of course, can make choices and cycle faster.
Lease that expensive truck you can't afford to signal your virility? But now you have to work like a dog to keep it from being repossessed. How's your work-life? How's your marriage? Do you see? Trade-offs. Choices. Our predators are algorithms processing your debt data in the hands of your employer.
It doesn't have to be that way. You can make different choices. You can take the bus.
It could be demand rather than leisure: "I survived" doesn't work to signal fitness, so they develop something else to fill the need.
Just a few decades ago, the average person had very limited exposure to people outside of their immediate town (outside of celebrities and public figures), which really grounds your standards and expectations of other people. Spend 5 minutes in any social media or dating app today and average people around you will start to look severely below average.
There was also stronger cultural pressure to settle down by a certain age, which again, forces you to be more realistic with your options. The tldr is that Our Paleolithic biology has only so much capacity to adapt to today’s rapidly changing culture and environment.
It's not just the gambling of people, but the systematic use of bots to squeeze leveraged vehicles.
The turn towards financial nihilism will continue.
Governments have only managed to slow, not stop or reverse this trend.
Kind of like pathological gambling: Sure, some people are susceptible, but there's also an entire industry around finding them and making them succumb.
Laboring in a capitalist economy is a loser's strategy because your capital is you body's ability to produce value and that has a maximum physical limit. Why participate in an economy using a strategy that has a natural upper bound? It makes no sense. You're not even playing the game poorly - you're not playing the game at all.
It's not sustainable, capitalist societies always degenerate into a society of owners who get the majority of the wealth while workers get scraps. This is what's to blame for the social unrest the West is experimenting.
While the pie is growing due to increasing productivity for the most part it’s still zero sum.
Realistically, it's nearly impossible for high income young people in their 20s and 30s to buy a house in Seoul. That forces them to move to the provinces, but then there's almost no infrastructure. No companies either.
So many people turn to leverage in hopes of a life changing reversal.
The recent rise in the KOSPI index happened because some of the loopholes that Korean conglomerates used to make inheritance easier were blocked by revisions to the Commercial Act. One of the uncertainties that had been called 'Korean risk' was removed, and the market went up.
For a Korean man, the moment you leave Seoul, not just the outskirts, but out of Seoul entirely, there's no one to talk to about IT jobs. I live outside Seoul, and the infrastructure gap is about 10 to 20 years behind. On top of that, there are no IT companies, just mostly low income manual labor jobs.
The median monthly income for Korean men is about 3 million KRW, while the average Seoul apartment price is 1.3 billion KRW and the median price is 997 million KRW. That means you'd need to work for about 25~30 years just to buy a home, but job tenure is getting shorter, so that's not realistic.
So people gamble on leverage, hoping for a life changing win. Everyone around me knows it's gambling, but they figure they're already in a dead end situation anyway, so they have nothing to lose.
I live and work in IT outside Seoul, but the IT business has already matured, and there are many well established companies. The Korean market itself is small, so early movers have already taken the lead. There's no room for latecomers like me. That's why I take on work from the West, China, and Japan regardless, but even that's hard without a reputation.
The moment you leave Seoul, a Korean's chances of success drop to nearly zero. That's why people cling to the city so desperately.
And honestly, I've hardly gambled on my life. But I'm drowning in debt, and sometimes I feel like a fool for working so hard.
Korean and English have very different grammatical structures. I can read English in real time, but writing, listening, and speaking are difficult. (Maybe it'd be different if I were more proficient, but I've never lived abroad, so that's how it is.)
Because of that, remote work usually requires speaking, so most interviews end in rejection. I can communicate through chat, but the vast majority of employers want interviews.
And as the IT industry has grown and become more established, Korea has developed its own standards that diverge from global norms. This makes Korean IT hard to sell globally. I try to follow global standards, but in Korea, I'm told I'm using 'wrong technology' or doing 'over-engineering.'
Either way, the technology you learn or implement is often quite different—because the market leaders set the technical standards.
So independent developers in Korea have to learn both Korean IT standards and global standards—on top of English. (This is extremely painful.)
So if I could do remote work for a foreign company, it would be really, really great. But in reality, English is usually where things fall apart. Koreans often praise Korean as a 'scientific' language, but for most Koreans, it actually acts as a shackle. On the other hand, it's also because of this language that the domestic market is able to maintain at least a minimum level of viability.
That actually sounds like a business opportunity, if there is a steady stream of people moving out if Seoul.
> On top of that, there are no IT companies
Why don't Korean companies embrace WFH? Again sounds like a huge competitive advantage on the job market
They aren't. That's why those areas are falling behind.
The core problem with 'sacrificing one region to save another' is that you need a market to consume what you're saving. But there is no market to consume it. Most regions are organized around subcontractors for specific large conglomerates.
The typical structure is: large conglomerate (prime contractor) -> powerful local subcontractor -> sub->subcontractor. Often, the powerful local subcontractors are companies founded by former executives from the prime contractor.
In other words, it's a subcontractor-of-subcontractor structure—and the state doesn't block it; it actually encourages it. To survive, independent developers have to work as sub-subcontractors. Because starting a business requires capital.
I've worked across a wide range of fields: finance, drones, factory machinery, tax SaaS, and more. I've worked in over 20 domains. Why? Because while developers are scarce in regional areas and needed, when project budgets shrink, developer labor costs are the first to be cut. Since there's no other work, developers accept poor conditions. And once you get on the wrong side of a powerful local company, finding the next job becomes difficult.
Most independent developers can't succeed unless they can handle this wide range of domains.
Suppose you make an app that 1 in 10,000 people use. In the US, with 340 million people, that's 34,000 users. Add in the English-speaking world, and the potential user base is even larger. And since the global UI/UX standards are based on US standards, it's easier for apps to scale globally.
But if you release an app in Korean, and 1 in 10,000 people use it, that's only about 5,000 users out of 50 million. The scale gap is enormous.
That's why Korea has concentrated everything into one region to maintain global competitiveness. This is the side effect.
But I think this is becoming a global problem. Just as the fertility crisis isn't unique to Korea, Korea is just a more visible case because its landmass is small. I'm convinced that all countries will eventually go through similar pains
(Which is not to imply that these are smart men).
However, I found that if the bar of doing business is high enough, "investing" in stock market maybe safer than start a proper business. Because if a business failed, you likely lost a huge amount wealth, including everything you put into the business and maybe more. Whereas if you buy stock responsibly (for example, DCA VOO/&QQQ), there's a high chance you'll eventually bounce back.
Maybe that's one reason the young Koreans invested so much in their stock markets. Their country failed them by restricting them from opportunities, the only way they can save themselves is by gambling.
Leveraged funds are the safest way for the average investor to get access to leverage because unlike margin there is no risk of margin calls, and your money generally won't go to zero unlike options which are vastly more complicated and can expire.
The reality is that using leveraged funds (or any leverage) is a completely rational move because the average person will never retire wealthy unless they're already making a tech salary or similar.
Investing has always been gambling, even Warren Buffet made his biggest early wins on all-in bets.
And just because it's available doesn't mean it should be your only ETF/ETP. Not a recommendation or advice, but something like 50% TQQQ, and 50% risk-off asset (gold, bonds, whatever); rebalanced regularly isn't crazy, and might even have alpha.
I... do not agree that leveraged funds are somehow a safest way to access leverage.
Every product including leverage has inherently a non-linear P&L. And from my experience, non sophisticated investors always struggle to grasp the implications of that. It makes returns (on capital) very path dependent, and very nasty during volatile regimes. It breaks the naive assumption of "well I could always hold and wait for the dust to settle".
> unlike margin there is no risk of margin calls
This is a bit of a weird statement. Leverage implies margin, you cannot make it disappear, the funding and associated risk has to come from somewhere, it's just that it is continuously applied, instead of fixed timings.
I do agree that it simplifies planning and reserve management though.
> even Warren Buffet made his biggest early wins on all-in bets.
This is a bit disingenious, note that Buffet did not use leverage...
In a way, but Buffet wasn't making those investments exclusively using his own money. Effectively there's a degree of implied leverage when you get a performance reward from investing other people's money.
- A significant health issue that also drains them economically
- A broken marriage that cuts their savings in half (or less)
- A low point in their life where saving for retirement just doesn't make sense in their heads anymore because they feel they'd rather die tomorrow.
- A streak of bad events longer than they planned for (the car breaks down, they got fired and their mother-in-law needs financial assistance all at the same time)
- Etc, etc...
The point is: nobody is retiring a millionare through the process you described. Either you save signfiicantly more at certain points (because you earn more) and get lucky enough with the above where you make it there, or you don't retire a millionare even after having saved consistently for many periods in your life.
I work with clients of all financial levels and almost all of them have upwards of $600 a month to put toward retirement/investments once they get on a proper budget and develop the discipline to stick to it.
Yes, emergencies happen but not as often as you'd think and most incidents are manageable, especially if you plan for them. Saving ahead of time for car maintenance or AC replacement, having a bucket for medical expenses or family, getting a prenuptial agreement, etc.
I've been a financial coach for over 20 years and almost all my clients who have reached retirement age have done so as millionaires using this exact method.
https://www.reutersconnect.com/item/south-korean-retail-inve...
But it seems there's still a lot in their FA phase in the FAFO cycle.
In Germany the consensus is MSCI World or FTSE All-World ETFs.
I believe in the US most advice goes to VTSAX (US Total Market), VOO (S&P500) and maybe QQQ (NASDAQ100) which means only US stocks.
What gets recommended in other countries?
e.g. Fidelity's fund for people planning to retire around 2050 https://fundresearch.fidelity.com/mutual-funds/summary/31579...
My IRA/401(k) actually has close to 100% cash/bonds to minimize annual taxable impact and the rest of my portfolio is equities.
Assuming a portfolio with $100k in 401k and $100k in taxable and targeting 80/20 stock/bonds, your 401k should be 60/40k and taxable should be 100/0.
Target date funds would have 80/20 in both 401k and taxable accounts.
Target date funds assume your 401k is your only retirement savings vehicle.
When I say cash, I meant value stored in money market and $SGOV. I'm actually experimenting with using my 401k/ira to invest in private equity (VC) funds, so I am holding cash (money market and $SGOV) in those accounts to ensure I have the capital for capital calls.
This of course if you're doing by yourself, banks definitely won't recommend that but some other bullshit fund with high costs and poor performances
Also you might painting too wide a brush with “the West”. I wouldn’t assume that Americans and, say, Austrians have similar exposure to public markets.
That said, there's no question that US households have grown fat on the massive expansion of the tech giants. A one trillion $ market cap was shocking not long ago, now you've got Apple and Nvidia at $4-$5 trillion, each about as valuable as China's top 25-30 stocks combined. The US wealth base is highly exposed to a PE multiple compression event, which is likely whenever the bubbly valuations centered around the AI boom reduce.
Also to put a reference figure on it, China's top 500 stocks are roughly worth $11.5 trillion. Nvidia + Apple are worth a combined ~$9.6 trillion.
If China decides to take over Taiwan and nationalises TMSC, redirecting their top tier silicon to 100% Chinese companies then what are the American firms worth?
China is not going to sabotage themselves like that.
By whom?
China would be mad to destroy the most valuable building on that island.
I doubt Taiwain would bomb themselves.
I can't see anyone in the US acting like this either.
That is what Jane Street (IIRC) was accused of. Some of its traders then went to another hedge fund and did the same trick there, reducing Jane Street's profit, and ended up being sued by Jane Street. (BTW, Jane Street claims it was not manipulation, but basis trade arbitrage.)
Of course, 9 out of 10 gambler end up in the red.
> It is also used despite many developed countries or regions not being culturally Western (e.g. Japan, Singapore, South Korea, Taiwan, Hong Kong, and Macao)