To see significant growth in pharmaceutical stocks like Bayer, I believe we need to implement measures such as lowering interest rates. Today, the book we are discussing is A History of Financial Speculation written by Edward Chancellor. We are joined by Kim Hak-kyun, the head of the research center at Shin Young Securities. Hello. Yes, hello. It's been a while since you've recommended such a thick book. Yes, it was a bit challenging. It's quite an old book, about 25 years old. Oh, really? Later, I will talk about the reasons why this book was republished and its background. First of all, the author is a British journalist and economist, closely associated with The Economist. He has also worked for the Financial Times, so when you think about it, he has a strong background in finance.

There is a record written by a historian that documents the history of speculation in financial markets from the 17th century to recent years. I believe there are two perspectives on viewing the world, especially in financial markets. People tend to think, This time is different, and while the specific situations may differ, fundamentally, similar patterns keep repeating. The history of financial speculation presented in this book shows that, at that time, people also thought, This time is different, leading to an influx of money into rising asset prices, which creates a bubble. The book records the process of how these bubbles burst. It is true that even if we live with the understanding that bubbles exist in investments, we cannot predict when they will burst. The reality is that time passes, and I find that the author of this book, Edward Sluyter, is quite remarkable.

The thoughts I have are from around the end of 1999. At that time, there was a bubble in the stock market known as the dot-com bubble. I was writing this book just before that bubble ended. This person was almost at the peak of the dot-com bubble. In hindsight, the Nasdaq reached its peak in March 2000, and after that, the bubble burst significantly. I believe that it wasn't right after March 2000; it took about a year for the effects to become apparent. Immediately after that peak, people likely thought the market would rebound, clinging to the inertia of existing beliefs. Therefore, the unique history of finance, at least in the stock market, is that this book is recorded during the time when the bubble was at its largest. The journalist who wrote this book...

It's a book that has been written and translated by journalists, and it is also a topic of much debate. Many people are unsure about the difference between investment and speculation. It seems that if I do it, it's an investment, but if someone else does it, it's speculation. How do you distinguish between the two? 

Conceptually, I believe investment is when I invest in an asset and expect to gain some economic benefit from that asset. For example, in the case of a company, this could be the profits or dividends that the company will earn in the future, or the assets it holds. If I take all of these into account, I can say it represents value. Therefore, if I purchase an asset that is undervalued compared to its intrinsic value, I consider that an investment. On the other hand, I think any action that does not align with this understanding falls into the category of speculation. 

So, regarding the concept of value, why do we buy certain assets? It's often because someone else is buying them.

Living with the thought that I will raise it is, in my opinion, an investment. However, it is often unclear whether this is always speculation. Even if I believe it is an investment and have measured some value, that value does not belong to the realm of certainty; it is an estimation. For example, if I bought shares of a company that I believe is undervalued, I don’t really know that company well. So, I read analysts' reports. Those reports are estimates made by someone else. Then, I make my own estimates based on their estimates. Most of our predictive actions can be carried out independently, but the modifications of these estimates are inherently uncertain. Therefore, measuring value is a very uncertain task, which leads many investors to think, Oh, this is too complicated, and refrain from such actions.

There seems to be a tendency for people to follow the crowd mentality, where the majority believes they are right. Because of this, all speculative activities are accompanied by a kind of public worship. Yes, public worship. Historically, if we look back, there has never been a sustained increase in asset prices that didn't eventually falter, but this time it's different. People think that this time it will be different, despite the many records from hundreds of years that indicate otherwise. In hindsight, we might recognize that there was a bubble at that time, but during that period, there was a strong pull from the public, and to put it more dramatically, a kind of worship. This is what seems to create a bubble. At that time, it feels like the truth and that it will really happen, but looking back, we can only identify it as a bubble after it has passed. Yes, we are in the midst of the bursting of the IT bubble.

Not only in 2001, but also back then, the KOSDAQ experienced a significant rebound, which made things even more difficult for many people. There is a sense of idolization among the public, but very few people acknowledge that they are speculators or that they are currently engaging in speculation. I believe that if the concept of value is not involved, regardless of one's self-awareness, that behavior should be considered speculation. The title of this book in English is The Devil Takes the Last. It means that the devil ultimately catches the last person. The last person keeps buying, and in the end, that person becomes the victim. Therefore, I think investing, in the long term, should involve setting a value and making investments based on that value.

Because the market fluctuates, I believe that the assets we invest in have intrinsic value that can support them. If their value falls below that level, they will eventually recover. However, the ironic thing is that the recovery of undervalued assets tends to happen in an instant. After struggling for a long time, it can suddenly change, so you might be stuck for about a year, and then it could take just a week, or it could even take longer than a year. When viewed from a long-term perspective, investing this way is actually too short for just one year. I believe this enhances long-term winning probabilities, but it will certainly test one's patience. However, when investors favor something, the public tends to rally around it, causing prices to rise. The great economist Keynes once said this.

In the short term, stock prices are like a beauty contest; they tend to go towards what people prefer. It's a beauty pageant. Ah, this sounds like something Warren Buffett would say. In the long term, stock prices are like a scale, right? They converge to the weight one actually has. However, in the stock market, the term weight seems to be similar to the concept of value that I mentioned. Converging to value requires quite a bit of patience, and there are stocks that rise immediately, which makes it really hard to wait. So, young Buffett also said something similar: investing in stocks is a process where money moves from those who have it to those who have patience. I don't really think there's a definitive answer to which is correct. For example, about three years ago, when the market was heating up, Alan Greenspan, who was the chairman of the Federal Reserve at the time...

In December 1996, Greenspan mentioned that the stock market was too overvalued due to non-productive exuberance. As a result, stocks continued to rise for about four more years. Looking back, one might wonder if not participating in that market was the right answer. I believe there is no definitive answer, but we must acknowledge that an endlessly strong market does not exist; there are always cycles. When the public enthusiasm becomes excessive, it can lead to a reversal in asset prices. When enthusiasm is excessive, it intuitively feels great, and everyone wants to buy those assets. When there are no more buyers left, stock prices will undergo a correction. So while there may not be a right answer, when we observe a crowding effect, it's worth questioning it. Additionally, we should be cautious not to take on too much position out of greed.

I think I should have at least these kinds of norms, such as not investing with leverage through debt. As Warren Buffett mentioned, money is designed to move from the impatient to the patient. The title of this book is also about how the devil takes the last person at the end. However, people always try to maintain a psychological advantage for themselves. There is a bit of optimism bias, thinking, It won't happen to me; I can find someone who will pay more than I will. There is a lot of overestimation of oneself. Additionally, the future cannot be verified at this moment. What will happen in the future is not a matter of right or wrong but will only be verified over time. Therefore, the outlook for the future is very vague and always uncertain.

People tend to place the most weight on current phenomena when forecasting the future. There is a bias that leads us to believe that what we see now, or what we have experienced in the recent past, will continue into the future. Recently, when I look at real estate prices, I have this thought. I don't have any qualifications to criticize real estate experts; the same criticism applies to me as well. If you look at the real estate market conditions from about seven or eight months ago, you will see predictions of a correction in the second half of the year. However, if house prices rise, it leads to an upward trend. This tendency is not limited to real estate market forecasts but applies to all predictive behaviors. Consequently, when people act according to their cognitive inclinations, they become fearless when prices are rising. On the other hand, I believe that the behavior that drives this is a sense of greed or deprivation when prices go up.

I wasn't able to participate, so in this process, the regrets and desires I have become the reasons for my late involvement. As you mentioned, the last person to jump in becomes the victim of the bubble. However, I don't know where that last point is. I think there will be others who will be in that position. Investment is not an exact science; I am not saying that there is one correct answer. However, it's important to remember that asset prices that rise sharply cannot continue indefinitely. The sharper the rise, the sharper the potential fall, and this is something we must always consider. This fundamentally doesn't relate to whether an asset is good or bad. What I mean is that when we invest, particularly in stocks, there are two main ways to suffer significant losses.

There is a case to consider. The first is buying bad assets. I bought this stock, but it failed. We have over 2,000 different stocks, and you might think, How could I possibly buy a failing stock? However, in the past ten years, about 200 companies have gone bankrupt. You can end up with one of those. That's a wrong choice. 

The second scenario is buying very good assets. But if you buy those good assets at too high a price, you could struggle for a long time. If you pay too much, the stock price may not recover well. In our country, the peak for construction stocks was in 1978. At that time, during the Middle East construction boom, the stock index was at its highest, and even though 40 years have passed, it has not recovered. In a way, construction stocks in 1978 were the most thrilling growth industry of the time, but as we can see with AI, that growth industry can come to an end.

어떤 너무 높은 가치를 보여 하니까 그 건설주의 고점은 78년이었고, 한국의 해외 건설 붐이 종결된 것은 80년대 중반까지입니다. 우리가 열사의 땅에 가서 우리 선배들이 열심히 일했지만, 주가는 미래에 좋아질 것까지도 한꺼번에 투영할 수 있는 것입니다. 예를 들어서 이 회사가 30년 동안 벌어들일 것까지 한꺼번에 투영을 한다고 하면, 그 기업은 본질적으로 30년 동안 성장을 하더라도 주식 가격은 굉장히 어려울 수가 있습니다. 한꺼번에 올랐다가, 이건 우리가 욕심이나 실물 경제 활동, 즉 제품을 만들고 하는 것과는 다른 것입니다. 주식을 사는 순간에 가격은 한꺼번에 반영이 되니까요. 우리나라에서도 건설주가 풍일 때, 광풍이 불던 시절에 건설 화학이라는 화학 회사까지 함께 급등했다는 우스갯소리도 있습니다.

The first keyword is blind faith in the government. People started speculating based on their belief in the government, which led to the creation of a bubble. This book discusses the South Sea Company, which is often translated as Namhae Company in our context, but the book simply refers to it as the South Sea Company. This company was primarily created under the government's initiative. The South Sea Company and France's Mississippi Company share a similar context. As we moved into the 18th century, the government had more control than before. The British government would borrow money when engaging in wars, and most financial activities were handled by Jews. So, they borrowed money from Jewish financial capital without much concern, and taxes were also levied at their discretion.

I used to post whatever I wanted, but now with the Glorious Revolution, it has become difficult for the government to act freely. A new era is opening up. The company you mentioned, South Sea Company, was established with the obligation to purchase government bonds, lending money to the government. In return, it granted the privilege to conduct business in the British colonies in the Americas. Therefore, investors basically thought that the government wouldn't fail. In that process, the stock prices rose significantly. However, as I mentioned earlier, a bubble requires an object of absolute adoration. That object of worship is ultimately the government, which holds the most powerful authority in the community.

There are cases where bubbles were created under government leadership. It's a bit difficult to call this a bubble, but I certainly don't want to doubt the good intentions of our country's policymakers. In Korea, various policy-driven funds are being established, such as the Small and Medium Enterprises and Material Funds, the New Deal Fund, and in the past, the Green Fund. When making decisions about these funds, many people often misuse the idea that one should not go against the central bank or wealth. However, I believe that it's not so much that the government caused failure, but rather that it's become difficult for anyone to succeed. It's challenging for the government, and it's also difficult for the private sector. Nevertheless, when the government takes action, it sends a very strong signaling effect.

Because of this, a lot of money has flowed towards that direction. Similar to the period when the South Sea Company in England and the French East India Company appeared, the basic structures of these companies are very similar. In our country, during the early 2000s, there was a tremendous craze for theme stocks like bicycle path themes and renewable energy, which were also similar. In a way, bubbles and theme stocks can be created by riding on government policy directions. This is true in any country. On the one hand, these can be well-utilized or considered as a type of investment strategy. However, as the English title of this book suggests, in the end, it all falls on the individual. As George Soros also mentions, while everyone jumps on the bandwagon, it is crucial to be aware before that bandwagon leaves.

Jumping off in the middle, it seems quite difficult from an experiential perspective. As you go higher, it feels like the end of this journey is becoming more solid, as if there is a clear path ahead. Initially, you start earning small amounts of money, but as others see more, I jumped off in the middle, and then with larger sums, I got back on in the middle and faced misfortune again. Experiences of personal success and self-confidence emerge, but at the very least, I believe we need to be cautious about rising asset prices. This caution could lead us to miss good opportunities. However, in our asset market, to put it extremely, the journey of investment often leads to failure. I can only end my investment journey if I fail; if I keep making money through investments, I will continue.

How can I quit? Yes, that's it. Then, when it comes to investing, while earning is important, it is crucial not to incur fatal damage. As long as you are alive, I believe there will always be opportunities. Just as Buffett always says, people don't want to become wealthy slowly like I do. It's a paradoxical expression that the end of investment is failure. However, when talking about South Sea companies, there is always a figure that comes to mind: even Newton, the genius physicist, suffered enormous losses here. Yes, that's right. So, even if I understand the overall operating principles, I cannot comprehend people's madness. This is something that is passed down. Therefore, when society shows signs of a certain tendency at one moment, in my opinion, it can become a kind of game. For example, the dot-com bubble.

When bubbles or stock prices rise, there are people who think differently. The rules of the game change. Some people believe that since stock prices are rising, they can expect to make a profit of around 10% or 15%. Others, like the person I mentioned earlier, Soros, may hope that the company will ultimately make money and succeed, which is why they invest. People's goals vary widely. However, when stock prices rise, optimism strengthens, and historically, this has always led to a reinforcing upward trend. 

But isn't it interesting that the British South Sea Company and the French Mississippi Company are quite similar? They are indeed very similar. Fundamentally, France also had colonies in the Americas, specifically in Louisiana, where they granted monopoly trading rights. This was essentially to benefit certain companies.

The government grants merits regarding this matter. At that time, companies like BCCP were issuing stocks, while in the UK, the Bank of England was established in 1994, allowing only it to produce banknotes. Similarly, the MCCP company in France was allowed to issue currency in exchange for purchasing government bonds. In the past, before the establishment of central banks, there were multiple forms of currency. For example, if you brought currency to our bank during the gold standard, I would provide you with banknotes in return. This was a form of exclusive privilege granted by the government, akin to a type of operating license, which can be seen as a form of monopoly. The expectation surrounding licenses created a significant bubble. However, speculative bubbles and similar phenomena have repeated over time.

Of course, there is some fault on the part of the government, but laws are being created to eradicate speculation. For example, I heard that there were anti-speculation laws in the UK, but did those not have any effect? Over time, people tend to forget. In our country, I think there has been a lot of controversy over ELS, which became a major issue last year, especially with those based on Chinese assets. However, there was also a similar situation in 2009. The key issue is fundamentally the same, and recently, the covered call strategy has a similar structure. They all operate through selling options. Therefore, even regarding the derivative products that have become issues in Korea, over time, people tend to forget. If we look at the history of speculation in humanity, we can see that government policies tend to be strengthened when certain issues arise, but...

When the public manages to escape from that pain, regulations gradually weaken, or other misunderstandings about regulations lead to various policies emerging. Therefore, while there are various regulations, their effects seem to be very temporary. After tightening regulations, the market shrinks, and when investors or the industry call for revitalization of the market, regulations are relaxed again. This cycle continues. The victims of the bubble are the investors themselves. Over time, investors tend to forget, and similar situations occur again. Humans are said to be creatures of forgetfulness, right? So, it seems that way. It is not history that repeats itself, but rather humans who repeat it. Indeed, it is a matter of the human heart. Edward Chancellor wrote about finance.

We are reading about the history of speculation together. The next keyword is blind faith in resources. There seems to be a lot of mention of blind faith. Following the South Sea Company law in England, speculators began to divert their money overseas, particularly towards South America. Recently, we have seen many cases of countries in Latin America, such as Argentina, defaulting on their debts. The instances of debt defaults in Latin America have been occurring repeatedly since the 19th century. Many people in South America ultimately have expectations tied to the immense resources available there and the control that certain South American countries can exert over these resources. In a way, the expectations regarding the countries and the resources are intertwined, leading to the formation of a bubble.

It seems that it was due to the resources available that we jumped in, but the expectations became too high, leading to a kind of blind faith. Among the resource-rich countries, there is Brazil, a South American country where our country invested a lot. I remember that Brazilian bonds in the early 2010s were quite popular. At that time, Korean financial companies were aggressively selling them, claiming annual returns of over 10%, which created enormous expectations. A representative example often discussed in the market is the Olympic narrative. The Olympics are held, and the country improves—Brazil hosted the Olympics. However, this is not always a case of cause and effect. For instance, Tokyo had a long period of prosperity after hosting the Olympics in 1964, and our country experienced something similar after the 1988 Olympics.

직후의 자선 시장이 안 좋았죠. 그 올림픽 시기가 이제 정점인 경우가 되게 많았고, 중국도 정확히 2008년도 베이징 올림픽이 이제 정점이었던 그런 것들이 다 어떻게 보면 제가 앞서서 숭배라고 말씀드렸지만, 관념적으로 사람들에게 권위를 부여하는 하나의 이벤트들이었습니다. 예를 들어, 이제 브라질도 사실 중남미 국가로서, 중남미 지역은 여러 가지 제도가 잘 정비되어 있지 않은 상대적으로 그런 지역이었는데, 이제 브라질이 올림픽을 개최하면서 라틴 아메리카가 바뀔 거야라고 기대를 걸었는데, 그때가 상당히 주가와 채권 가격의 고점이었던 시기였습니다. 그 당시 브라질 채권이 두 자리를 기록할 때 이자율이 매우 높았거든요. 그런데 이건 정말 강력한 신호였습니다. 엄청나게 많이 밀리더라도, 정말 최고점에 가까운 상황이었습니다.

Even if they didn't enter, there were people who suffered losses as the prices of Brazilian bonds dropped by about 30 to 40%. If they had held onto 10-year international bonds, I believe they would have recovered everything by now. However, the important thing is that at the time of investment, there was a significant overconcentration, especially since bonds are products that yield interest but are also paid in the local currency, making the value of the currency very important. In Brazil, the issue was not that the Brazilian government failed to pay back the principal and interest on the bonds, but rather that the Brazilian real weakened significantly. As a result, investors suffered substantial losses due to currency fluctuations. At that time, there might have been various beliefs regarding resources, but Brazil's current account balance was chronically in deficit. In such countries, they rely on their own strength.

Even if a country has abundant resources, if it does not have the ability to earn a reserve currency on its own, the value of its currency will always be unstable. I think that rather than a blind faith in resources, just a little economic common sense or intuition would have sufficed to prevent such a situation. However, once a certain inertia is formed, it seems that people tend to believe they are smarter than average and attribute great significance to their decisions. Additionally, when they do not follow the majority, they experience a sense of deprivation, which contributes to crowd psychology. Moreover, both animals and humans feel more comfortable when they are in a crowd. Even when a lion appears, within that group...

If there is an opportunity, I don't think I would consume it. It can't be helped. Humans, as a species, are also affected by this; for example, the Argentine stock market and the Turkish stock market have reported increases of one or two times. However, if the value of the currency in those countries drops significantly, it becomes meaningless. Recently, Japanese stock prices have risen a lot, but the yen has weakened considerably. In fact, from the perspective of foreign investors, they haven't made as much money from Japanese stocks compared to Japanese people recently. However, there always seem to be more opportunities in emerging markets. Countries that are on the rise, like India, Vietnam, and Thailand, could be among them. But is there a moment or signal where investing in emerging markets could turn from investment into speculation? Well, let's reflect on that. Basically...

The market is, in a way, similar to a species in that the meanings of words are also significant. It's very much about rising, about growth. When a country experiences high growth, the idea is to invest my money there and witness the benefits of that growth. However, when our country was experiencing much higher growth, such as before the foreign exchange crisis, the asset market in Korea was not particularly good. If you look at the long term, the stock market only performed well during the boom from 1986 to 1988, while for the rest of the time, it fluctuated between 500 and 1,000, remaining in a box range. So, when growth is so high, why does the asset market seem to betray this? I believe there are two reasons. The first is the significant lack of legal and institutional infrastructure regarding property rights. When an economy experiences high growth, while the likelihood of businesses making money increases, we often discuss governance structures. Governance structures refer to...

Companies need to ensure that the money they earn flows well to their shareholders because they have invested. However, if the owner engages in unethical practices, such as cooking the books or even having political power that is far more influential than the market, it poses a problem. For instance, in the 1980s in our country, a large shoe manufacturing company called International Trading was simply swept away by the regime. In a similar manner, looking at China, although Jack Ma of Alibaba is making a comeback, that innovator was pushed out. Therefore, the first issue is that the legal and institutional infrastructure to protect investors' property rights is weak. Secondly, in the case of stocks, as the economy grows, companies continue to issue more shares. There are many opportunities to make money, so through methods like capital increases, the supply of shares continues to grow, allowing them to keep raising capital.

The supply and demand dynamics in the stock market often lead to an imbalance. When supply exceeds demand, prices tend to be suppressed. Therefore, emerging markets can experience growth that may contradict asset price increases. Investing in emerging markets often requires entering when others are not, sometimes through a bit of a hit-and-run strategy, but this is difficult to predict. By that logic, our country can also be seen as an emerging market rather than a developed one. In terms of the capital market, this is true for the KOSDAQ. The reason the KOSDAQ struggles is that new stocks keep entering the market. However, the KOSPI seems to have a slightly lighter supply burden. Another point to be cautious about when investing in emerging markets is the institutional infrastructure, which I mentioned earlier.

The lack of social trust capital in underdeveloped countries and excessive supply issues are significant challenges. Emerging markets tend to be highly volatile, so I suggest a strategy I call hit handling, which means buying low and selling high. However, that approach is inherently uncertain. I think investing through a systematic investment plan could be beneficial, especially given the volatility. When prices drop, you can purchase more shares. Instead of trying to follow market trends, if you invest in volatility, after about three years, you likely won’t face severe setbacks in emerging markets. However, holding onto investments can be quite challenging. Earlier, I discussed blind faith in countries and resources, and the next keyword is blind faith in new technologies, which is indeed the most powerful form of blind faith. Whenever something new emerges, there is always a tendency to believe in it wholeheartedly.

When the world is amazed, money starts to flow in. Of course, we cannot overlook the dot-com bubble; historically, that was one of the largest bubbles. But before that, in the 1920s, radio, cars, and airplanes were the cutting-edge industries of the time. As I mentioned earlier, this was not just about technological innovation. In Korea, during the late 1970s, the construction industry was seen as a new technology, but it was more about the opportunities in the Middle East, where we believed we could continuously reap oil money. This expectation of growth was reflected in our aspirations. Generally, the most stimulating factor for expectations of growth is new technology. New technology, along with the fundamental expectations of growth, seems to continually entice investors.

Many of you may remember the dot-com bubble, where money suddenly poured in. The capital market generally favors new technologies, and when investments are made, it seems that those industries will grow. However, the most recent example is undoubtedly artificial intelligence (AI) technology. In a way, we are currently at the forefront of the advancement of AI technology. 

However, in the capital market, when we look at AI technology, there are some legal controversies surrounding it. It's hard to make a blanket statement. Recently, there have been debates about whether this is a bubble or not. It seems that when the bubble bursts, even those who initially doubted it will eventually raise their hands in agreement. Ultimately, everyone tends to jump in late, thinking that it’s all good. Because of this, in cases where there is caution, experience shows that it is still too early.

The end of the bubble is not here, or so one might think. Therefore, as I mentioned earlier, I honestly don't know. However, there are many expectations for the future projected in this situation. It's not a matter of whether it will succeed or fail; it's a matter of possibilities and probabilities. The future may allow certain companies to carve out a successful path. But the current stock prices reflect a lot of expectations for that future. While we cannot know exactly how the future will unfold, we can predict how the market will react if those expectations go awry. I believe there is no definitive answer to this. However, someone like Warren Buffett does not engage in such investments. He doesn't buy expensive stocks, right? During the dot-com bubble, he was also greatly underestimated and faced a lot of criticism.

I heard people say that Buffett is now out of touch and being ignored, but he has always adhered to his own philosophy when making investments. Since the COVID-19 pandemic, those who have invested have likely had a holding period of about three to four years. Essentially, I differentiate between investment and speculation based on whether there is a concept of value involved. However, the idea that someone will buy it from me at a higher price reflects the direction in which stock prices move. It’s about seeing that prices keep going up, so I decide to buy because someone else will pay more for it. To generalize this a bit more, this is called momentum investing. When we talk about momentum investing, it’s often associated with technical analysis and charts.

Looking at the trend, it seems that the momentum is strong. I believe that 90% of investors in the world are momentum investors. It's not a matter of good or bad, but the challenge with momentum investing is that we can't gauge where the end is. As it goes up, there tends to be a self-reinforcing tendency. If we think about the past three to four years, there have been various cases, such as the COVID-related stocks. If I chased after stocks like that and made stable profits, then that's great; it fits your style. However, when we go up, the relative sense of deprivation is important, but ultimately, the damage is always greater when you buy at a high price. So, how about considering a more patient investment approach, even if it feels a bit boring?

I think it is worth considering the value of each option. It’s not possible to say that one is absolutely right. What I need to do is to find the things I can repeatedly do well. Nevertheless, value investing can be boring, and on the other hand, I might have misjudged the value. I believe that certain stocks are undervalued, but the market might be correct. Some companies are naturally undervalued, which means that value investing does not guarantee 100% certainty. On the other hand, investing in growth stocks and technology stocks is exciting, but if something goes wrong, the damage can be significant. After some time, we may realize that we were at a peak, but it is actually very difficult to exit such investments. Historically, this has been a characteristic of such investments. New technologies are not limited to IT or AI; they can vary depending on the era. In a way, there have been many bubble events in the capital markets in the UK.

먼저, 이제 발달한 것답게 철도 버블도 영국에서 있었던 거죠. 철도가 아마 이제 맨체스터 이쪽에 먼저 산업혁명이 이루어졌겠지요. 그래서 1845년에 이 책이 자세하게 나와 있는데요. 철도는 그 당시 가장 혁신적인 기술이었고, 물리적인 거리를 좁혀 주는 철도가 생기면서 사람들의 시간 관념도 생겼다고 하더라고요. 예전의 농경 사회에서는 정확한 시간이 없었어요. 그냥 때가 되면 나가서 뭔가를 했죠. 철도가 생기고 공장 노동이 시작되면서 모두가 함께 일해야 하니까, 기차 오는 시간에 대한 사람들의 시간 관념들이 생겼다고 합니다. 어쨌든 기술은 이제 세상을 많이 바꾸는데, 투자자들은 그런 신기술에 대해서도 굉장히 열광하는 것 같고요. 특히 철도 버블은 이제

In the 19th century, a significant portion of the economic crises in both the United States and the United Kingdom stemmed from overinvestment in industries. This overinvestment itself is a product of prosperity, born from optimism and resulting in bubbles. Money continues to flow because it seems like these industries will keep doing well. However, when the investment becomes excessive, it ultimately leads to some form of surplus and the emergence of a downward cycle. 

In a way, the 19th century, particularly the 1800s, can be characterized by the formation and collapse of bubbles in the Anglo-American nations. This is one of the key concepts that explain the economies of Britain and America during the 19th century. For instance, there was the railway speculation in Britain during the 1840s. As you briefly mentioned earlier, there were also discussions about radio and automobiles, which followed the railways in the 1920s, marking a significant historical progression in the United States.

It was indeed a very prosperous era, especially during World War I, when they suffered no damage at all. Europe benefited greatly from the war, and it was the era depicted in The Great Gatsby, often referred to as the Jazz Age. For society to indulge in such extravagance, there needs to be a strong belief in the advancement of technology, a conviction that technology will change the world. At that time, with the popularization of Ford's Model T, I believe that from the 1920s, they produced over a million units. With automation, cars became widespread. In fact, there was talk in the 1980s in Korea about the arrival of the My Car era. Owning a car fundamentally changed the concept of physical distance for each household, which was 60 years ahead of Korea.

First, there were automobiles, and there was also something called the radio. This was in the 1920s. The important thing is that the bigger the bubble, the greater the damage seems to be. In a way, if we look closely, the technologies that emerged in the 1920s, such as the radio and automobiles, were actually much larger than the railroad bubble when viewed through the lens of the stock market. Historically, the most expensive stock was the dot-com bubble, followed by the recent times, and third was the Great Depression when looking at U.S. stock standards. Generally, if I buy individual stocks incorrectly, I could lose everything, and my assets could become worthless. However, stock indices do include some failing companies, but also many successful ones. Notably, when a company fails, it is excluded from the calculation of the stock index, which is why there haven't been many instances of continuous declines in stock prices. Historically, looking at the S&P 500 index...

There have only been two instances of consecutive declines in the stock market since World War II. However, during the Great Depression, the market fell for about four years in a row. Right before that, U.S. stocks were very expensive. Although it is difficult to say that the Great Depression was solely caused by a stock bubble, there were many complex factors involved. After experiencing the Roaring Twenties, the market hit a snag and fell for about three to four years in a row. Additionally, there was a period when stock prices fell for three consecutive years, which was from 2000 to 2002, coinciding with the collapse of the dot-com bubble, one of the largest bubbles in history. There was also a two-year consecutive decline in 1973 and 1974, during which the oil shock occurred. At that time, strong companies, particularly growth stocks like Lyft, had gained significant popularity before stock prices dropped. Therefore, I believe this mechanism...

To emphasize once again, during the dot-com bubble, there were scams, and many companies went bankrupt despite their efforts, but there were also great companies. Microsoft, for example, is a very great company, but if it is traded at too high a price, its stock may stagnate for a long time. Nevertheless, the enthusiasm for technology and the worship of it brought about significant profits for investors at that time. However, after a decline, there was also a record drop. These memories of speculation and the struggles that followed left a significant mark. But is the aftermath of a bubble always just scars? While all bubbles are generally bad, there are still relatively less harmful bubbles, like those in technology.

This is a bubble. Yes, there has been some investment in the railway sector, but the rails still remain, right? They are not disappearing. The railway industry has developed, yes. Even during the dot-com bubble, although it eventually passed, the internet itself remains. Therefore, what we call a technology bubble, in a way, leaves behind some positive remnants after it has passed. However, the tragedy lies with the investors. Yes, the investors suffer the most damage during the process of the bubble bursting, and they end up with the biggest wounds. Recently, if we recall, the pharmaceutical and bio stocks have been quite strong, right? Yes, yes. In 2015, Hanmi Pharmaceutical, and in 2017, companies like Shinlajen and Helix surged dramatically, creating a bio craze. However, after that, those stocks also faced significant downturns.

생겨났는데, 따지고 보면 그때가 또 약간 버블이 있었던 것도 있고, 그때 제약 산업이 그 이후로 많이 발전을 했더라고요. 투자도 많이 일어났고, 좋은 인재들이 제약 산업으로 많이 가기도 했고요. 그러면서 지금 우리나라의 제약 바이오 체질이 또 달라지기도 하는 거죠. 뭔가 그래도 남기는 남죠. 그럼요, 그 산업이 제대로 성장하려면 예, 또 버블이 있어야 그 산업으로 돈이 많이 가거든요. 그래서 들어간 돈이 낭비되는 돈도 있지만, 뭔가 이제 기업에게 그 돈을 잘 활용할 수 있는 기업에게 돈이 가서 뭔가 잘 활용이 될 수 있죠. 제가 다컴 버블 때 자주 드리는데, 다컴 버블 때 우리가 인터넷 세상이 올 거라고 생각했는데, 그 당시에는 파스나 야후, 라이코스 같은 게 인터넷 세상의 주인이 될 거라고 생각했지만, 그 당시에 상장된.

구글이 지금 생태계를 장악하고 있죠. 저는 라이코스와 야후가 없었으면 구글도 자금 조달을 하지 못했을 거라고 생각해요. 그러면 자금이 다른 곳으로 흘러가고, 애초에 구글이 잘 될 거라고 누군가 점지해 주는 것이 아니에요. 야후도 잘하려고 노력하고 라이코스도 잘하려고 노력했지만, 결과적으로 구글이 된 거죠. 결국 기업이 성공하는 데는 운도 많이 작용하는데, 본질적으로 사람이 그걸 잘 알기 어렵다고 생각해요. 전문적으로 투자하는 벤처 캐피탈리스트들도 열심히 하려고 하지만, 그들도 실패를 하니까요. 벤처 투자라는 것이 열 개 중에 아홉 개가 실패하더라도 한 개가 성공하면서 생태계를 바꾸는 것이니까요. 어떻게 보면 우리가 사는 자본주의는 버블이 내재되어 있고, 그 산업이 크기 위해서는 버블이 필요하고, 버블이 꺼지더라도 그 사회가...

Something remains. In that process, those who have invested a lot of their assets are the ones who suffer significant damage. Indeed, there is something left from the bubble. Technology, yes. We are currently living in an era of rising interest rates, and recently we have entered a period of lowering the benchmark interest rate, haven't we? Now, do we see any signs of bubbles around us? Ultimately, I previously mentioned our reverence for national resources and technology. In a way, the ignition of this reverence is fueled by liquidity. When central banks inject a lot of money, for instance, the loans people take out in our country—many nations have total debts exceeding 100% of GDP. If I assume that I am going into debt, it means I am doing it for a purpose, doesn't it?

When we try to invest or consume, if we only consider the real economic activities, the amount cannot exceed GDP. The moment it exceeds GDP, there is nothing to buy, even if I incur debt. So, where does the debt that exceeds GDP go? It all gets absorbed by the asset market. Historically, when central banks have injected a lot of money, it has always shifted towards the asset market. In a way, the world after 2008 has provided a favorable environment for those who invest in assets, especially for risk-seeking individuals. Ultimately, from a broader perspective, it has been the investors who have won, and to some extent, the current world is very advantageous for investors. For example, recently in the U.S., there has been tightening.

When the Federal Reserve increases the money supply, it has an effect on the GDP. Recently, the assets of the Federal Reserve have been about 24% of GDP. This has decreased from over 30% in recent years due to tightening measures. However, before 2008, this ratio was only 6%. Although they have been reducing it, compared to the world before the 2008 financial crisis, four times more money has been injected into the economy. Before the pandemic, this ratio was at 18%. They have tried to reduce it, but there is still more money circulating than before the pandemic. This means that a considerable amount of money has been injected into the economy compared to the real economy, leading to a ballooning effect in the asset markets. I see this as a very favorable environment for investors. Even if they tighten, they cannot shrink it back to the previous levels, nor can they afford to do so. Therefore, the Federal Reserve's balance sheet remains a significant factor.

Assets can be money that is released into the market, but when viewed from a larger perspective, it is constantly increasing. Therefore, it is an environment where one cannot avoid investing. Today, we are reading The History of Financial Speculation written by Edward Chancellor, along with Director Kim Hak. I would like to ask for one key phrase that runs through this book. Please share it directly.

In the stock market, the future is uncertain, so stock prices are absolutely determined by the beliefs of the investors themselves and the collective psychology of many naive individuals. If there is a reason you chose this structure, I believe it is not different from the basic mechanism that operates when there is a concentration in all asset prices and people's behaviors. However, I must add one phrase: nothing is eternal, and the only thing that can be said to be eternal in the asset market is the average of assets.

Ultimately, assets that have risen significantly will sink, and while it can be very boring, undervalued assets will find their true worth. This is what I mentioned in the phrase, and historically, this has unfolded, and I believe it will continue to do so in the future. In this book, the title is The Devil Eats the Last Person. Yes, and on one hand, people might think, It won't be me; this time will be different. However, historically, the phrase This time will be different, spoken by John Templeton, has led the most people into danger. This is a story often told. Thanks to Kim Hak-kyun, the director, I was able to read about the history of financial speculation more beneficially. Thank you. Thank you. For a representative growth stock like Bayer, I thought it would need to be introduced with a rate cut. But at that time, once again...

저는 뛸 수 있는 것이 제학이라고 생각합니다.

버블과 투기를 가르는 3가지 조건, 이걸 알면 투자 전략이 됩니다 / 김학균 센터장 / 금융투기의 역사 / 성공예감 별책부록 [풀버전]

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