Topic: This why wall street are rich and you are poor - page 2. (Read 949 times)

That's true if someone is not smart and wise in managing their own finances including the loan money then it is very risky,
think carefully before making the decision so that later you don't regret it,
in crypto if you are not careful you will easily lose money

When I describe poor, I just mean lack of access to capital. Hard to have any leverage when you don't have any capital, but even then, in any free market system where the laws/regulations are followed, the leverage the whales have can dissipate if they make the wrong move, as I alluded to in my GME example.

So the risk is relative, but still proportional. Wall Street is rich because they engage in risk, while poor people generally don't.

Problem with wall street is crony capitalism, but that's another discussion.

Use borrowed money to make more money, I accept this advice but no one is talking about the possibility of losing that money and what trouble will invade your life after losing such money, wallstreet is full of smarter people if you copy wallstreet you will land in trouble, so this advice isn't for everyone, debt can take life too

The first and possibly most important point you're overlooking is the fact that "wall street" generally consists of people who are already rich, or at least managing the funds of the rich. When you have enough money to live a very expensive lifestyle and could do so many times over, then you usually have lots of spare cash. That spare cash often accumulates to more than an average person would ever earn and it can be invested without fear, as there is enough space capacity that they could lose a lot of money without a material impact. All that invested money, sitting untouched, generates both capital gains (prices go up on owned shares) and regular dividends which are usually automatically set up to buy more. Basically, the rich gets richer - a well known phrase by now.

For sure there are variations on the terms that anyone can get, when getting a loan, and the more resources that you have, the more likely you are able to negotiate more favorable loan terms.

So, the mere fact that poor people and/or normies might not be able to negotiate as many good terms as rich people, does not mean that they should not attempt to use the power of leverage in their favor.. to the extent that they can negotiate terms that are sufficiently acceptable to them and their contemplated way(s) to use the proceeds of the loan.

Regarding poor outcomes, such as your GME, example you are correct that even folks with the greatest of negotiating power and already existing capital could get burned pretty badly, and the loan or the additional leverage did not end up being sufficient from getting them out of their pickle or to show that they were advantaged in using the leverage... like you said, their use of leverage ended up causing them to be in even a worse position than they would have been if they had just left the matter alone....and not taken on the additional debt.

The premise of what OP saying isn't very logical. The more money anyone invests, whether it be an institutional investor or an ordinary person, that investment amount is directly proportional to the risk incurred, so why would anyone expect the profit structure to somehow stacked against the smaller investor? More risk means higher returns. Greater risks are also associated with greater losses. If a Wall street investor chooses to borrow money to invest, that's their prerogative. Recall during the GME squeeze, one of the investment firms responsible for shorting had to borrow millions in order to cover their losses. And of course, those millions went up in flames as the stock price continued to climb. In that instance, the wall street guys got burned, regardless of the access to capital they had.

It is not a bad thing to take a loan. Many people's lives have changed with a loan. Many people have improved their lives by investing in good deeds with loans. Although there is a record of bankruptcy in some cases, it is not correct in all cases. Such banks lend us money. And because of the opportunity to get a loan from a bank, poverty has come down a lot. But yes, investing in the shit project by taking a loan is really harmful to both investor and lender.

They borrow money right? That is also the reason some of them go seriously broke. After borrowing money and investing in the wrong assets, they lose it and then they get themselves into a heavy depth that they would find difficult in paying off.  Taking loans is really a huge risk, except maybe when you are very sure of what you’re doing with that money, and you know very well that there is the tendency that the money you are borrowing is going to yield a huge amount of profit enough for you to also pay back the amount that you have borrowed and still have more remaining.

I’m not really going to encourage anyone to take debt, for me it is best for you to raise that money for yourself. Although like I did say, except when you are at least 90% sure of what you are doing.

I will agree with you that the "haves" have the advantage, and they are able to build credit and various kinds of ways to practice with their credit that will give them further access that is not even available for normies, and also as they use their credit they build more credit and receive more favorable rates.

For sure the cards are stacked against the normies and even worse-so against those who are barely able to squeak out any kind of income that goes above and beyond their living expenses. 

Surely it is not good or healthy to gamble with your living expenses merely because you want to get ahead, so you do need to attempt to manage your money in such a way that gives you as much advantage as you can.. and for sure it can take a long time to both build wealth and also to start to obtain compounding effects that compound and compound upon themselves to cause your money to work more and more for you.

Bitcoin gives way more access than what normies might have had under a variety of traditional investment mechanisms/avenues.  Bitcoin allows for both entrance without prequalifications and abilities to invest amounts that are very small, such as $10 per week.... Historically bitcoin has allowed normies with even that low of investment amounts (such as $10 per week) to have put themselves in a much better place, and sure maybe these days it would be better to attempt to be more aggressive, such as $100 per week, if you can manage such.

Personally, I do not recommend investing in shitcoins.. or the variations..and sure it could take 10 years or longer for normies who are investing small amounts into bitcoin - even as high as $100 per week to really start to feel that they are receiving compounding effects on the capital that they have put into bitcoin (and hopefully they are not putting so much into bitcoin that they are tempted to withdraw it too soon and before really starting to get compounding effects... it's not guaranteed either, even though it is an asymmetric bet).

The percentage rate of what you are gaining is the same, and considering if you are poor, the amount you are getting into is the amount you can afford. The problem with the difference is that whales do not have living cost worries, so they live like nothing has happened if they invest a million dollars, or 2 million, they are the same for them. Whereas we save from our daily lives and put that aside and send money accordingly.

This is what gets me, I mean if we can't even pay for our regular life, how could we invest, how could we get better? Liberals will say "pull yourself up by the bootstraps" and all, but as long as there are population crisis, too many educated people, very little pay for the same job, can't even afford a house and many other stuff, then I am sorry but we are going to end up seeing these type of problems all the time. It is not going to change any time soon.

I think what the OP is trying to say here is that when you have more money to invest in an asset, then the return you are likely to gain from the asset will be more than when the capital you are investing is less. He is right, because when you invest less money in all these types of assets, the profit you are gaining wouldn’t be as much as those who invest bigger amount of money (the whales).

So, the problem for an investor can be finance; when you don’t have enough money to invest in an asset, then you will be unable to make better profit. He then pointed out that Wall St. investors would usually borrow money to invest in the stocks or assets of their choice for them to be able to multiply their profits.

By definition, people who do not have enough money to meet their family's daily needs do not seem to be in a place to invest.
 
On the other hand, if such a person is able to get their finances  in order sufficiently to build an emergency fund, then thereafter s/he may be able to start to invest after that... so even $1 per day.. or some other modest amount could be put into BTC.. so long as s/he is not going to need the money for several years 4-10 years or more.

Also, seems to me that the use of debt has to be employed strategically too.. so most of the time, servicing debt costs money, so if a person is either not meeting his/her needs, or barely meeting his/her needs, s/he might not be in a position to try to use debt.  From my consideration, there needs to be some realistic calculations about whether the amount of extra cost for the debt is going to pay for itself.. so if the money has considerable assurances to return more than it costs to service the debt, then it may well be a strategically beneficial move to take on the debt, and for sure, I had already mentioned that there should be some ability to pay back the debt, even if the investment does not play out in an advantageous direction.. .. and yeah, figuring out ways to meet basic needs by increasing income or decreasing expenses are fundamental starting points too... and surely if income can be increased or expenses can be decreased, then there might end up being more money to set aside an emergency fund and then be in a position to invest and/or to take on a loan/debt for such purposes.

But what if the income that you have monthly is not even enough for your family's daily needs and you want to invest in order to gain more income? The only way is to borrow but you should use or invest it wisely. Knowledge is very important and your strategy to gain profit.

n order to get rich in the cryptocurrency market, you need to learn how to properly analyze all projects and cryptocurrency assets in order to find the best pearls that will give a good profit. in my opinion every cryptocurrency trader is much more likely to become rich than a wall street official. Today I am studying the defi platform for finance very much. Anyway, all blockchain money transfers will take the market to another level and projects like AccoinCrypto can make everyone rich.

Wawa2013's description of what happened to him, shows that none of us should be borrowing to invest in something that is uncertain, unless we also have funds (cashflow) in which we are able to pay back the loan in the event that our investment does not go in the direction that we had hoped. 

Let me be clear, I do agree with the overall power of using debt to leverage getting rich faster than you might otherwise be able to, as OP is proposing, but if we are attempting to apply this question to crypto for sure, I would not recommend to invest in any kinds of shitcoins or various crypto projects whether by loan or otherwise, unless you are really clear about the value proposition in the various shitcoins.. in other words, I see every single project other than bitcoin to have too many risks, so I would not invest in them.

On the other hand, I recommend to invest in bitcoin.. especially on at least a 4 year timeline or greater.. sure 10 years or longer would even be better.

For sure, in the short-term there can be some uncertainties regarding BTC's price direction, so that is a risk that anyone using leverage (debt) would need to be willing to take.  In that regard, there would be a need and ability to be able to ride out potential ups and downs of the BTC price along the way, even though it seems quite likely that BTC prices are going to be up 4 years from now, but not so certain on shorter time horizons.. even possible that we will never be able to get BTC for these low $40k prices ever again... ..

Let's say for example, we were able to get a loan for $22k with a 5 year payback horizon and a 6% interest rate.  That would allow us to buy right around 0.5 BTC right now, and our servicing of such $22k debt would cost $432 per month (and by the way, a 5-year loan for $22k at 6% per annum that is serviced over the full-term would end up costing $3,459 - so the total payback would be $25,459). 

Even if we might not be clear about the short term price direction of BTC, we might still believe that it is better to buy 0.5 bitcoin and pay 6% per year on that debt for the next five years instead of taking a chance that we are not able to buy BTC as cheap because we believe that BTC prices might go up by more than 6% per year.. perhaps even 12% or 50% per year.

So, if we have resources to be able to pay back the loan at $432 per month, we feel that we may well be able to get more bitcoin by getting such $22k loan now rather than to buy BTC at $432 per month for the next 5 years with that same money. Our bet pays off if BTC performs greater than the amount of our loan over that same period of time, so if BTC performs at equal to or less than 6% per year, then we would not have gotten any extra value out of locking in the purchase of 0.5 BTC right away rather than just buying $108 of BTC per week with our loan payment amounts. 

Of course, if  BTC were to end up performing better than 6% per year over that time, then we end up getting surplus value out of the loan and we were able to get more BTC than we would have otherwise been able to get if we had not relied upon the loan.

Even though I am NOT against using debt to finance various kinds of speculation (or investment in something like BTC), the calculation that each person needs to take would be to calculate and account for would be what are the odds that the loan could make you better off than if you had not taken the loan, and surely if you do not take the loan, you still could dedicate that money to investing in bitcoin, but the investment ends up getting spread over 5 years rather than being able to invest to buy 0.5 BTC (as in the example) right now.  Of course, I do not believe in relying on the proceeds of the investment to be able to pay off the loan, even though that could be a benefit if a greater than expected (or at least way higher than 6% per year) upside scenario were to play out... which also does happen from time to time and front loading your investment with 0.5 BTC extra now may well put you in a better position to benefit from any exponential upside scenario that could take place within the terms of the loan rather the slower investment style that would end up causing you to not be able to get as many BTC because they end up costing potentially exponentially more later.

By the way, another thing with BTC is that I tend to recommend that newbie normies do not even need to be taking a lot of risk when they get into BTC, so sure if they can get a loan, they might consider doing that, but if it is too burdensome and complicated or stressful for them, they can just do what they can and invest as much as they reasonably can over 4-10 years or longer, and even if it ONLY ends up being $10 per week, or even as aggressively as $108 per week, like in the hypothetical payments, you likely are still going to benefit stupendously over a longer timeframe such as 4-10 years because bitcoin remains an asymmetrical bet to the upside that is likely going to continue to even benefit people of modest means who are persistent and longer term with their investment.

Wall street banks at setup from the very beginning to make money in markets whether they are good or bad. However, as we saw from the sub prime mortgage crisis in 2008 - sometimes they get too greedy and they manage to wipe themselves out. Low interest rates have actually been a menace to the traditional banking sector which relies on deposits and giving mortgages with a fixed balance between the two. However investment banks are able to go wild and borrow money at very cheap rates, that then get flipped into even more money. The worst part is - they often make a margin with almost zero risk because they'll use all sorts of beneficial leverage or put their customers money in the danger zone before their own.

"Always use someone else's money."

It's been said for ages now. Using someone else's capital to fund investments is always the safest way to go. This is nothing new and people will continue to do this as long as there is money to lend. (Which there always will be.)

This is not completely correct, some capital is needed, that is true, but many businesses have began with almost no investment coming from their owners and they still became incredibly rich as they found ways against that limitation.

After all the most important thing that moves a business is innovation, if you can innovate and you have a good idea then you do not need to have a huge amount of capital to start your business, and even in the case that what you are planning to do requires large amounts of cash you can always get investors to back you up if the idea is good enough, so this idea that you need to have a lot of capital to become rich is not necessarily true.

And what is "passive income" in your understanding? Passive income is often an investment in a working project / production / business, on favorable terms, with the subsequent regular receipt of a part of the profit generated by this investment object. Or so - an object that generates profit, without your participation, and without your efforts.
If this is the case, all that remains is to "find" the right investment object. But you should always remember - "nothing lasts forever under the moon", well, external factors can have a very negative effect on such projects. In any case, I wish you success. But I also recommend thinking about diversifying the channels for making a profit, especially more than $ 100 per month is an absolutely small amount. That same bitcointalk subscription campaign - here's a semi-passive income, albeit it requires some involvement and little work.

It is about good planning if properly invested that will generate profit like buying the right time, that is the lows. Borrowing for the right reason is a nice means to wealth, it helps to get someone to riches faster. In the financial teaching, it is a means to raise more funds than saving.