I’ve never formally learned or studied economics or investment in depth, but I’m writing about what I’ve felt in the capital market. Therefore, this article reveals in advance that it’s entirely brain personal.

In a capitalist world, values can be thought of in two ways
value in use and speculative value
This is not a story that makes a value judgment that the value of use is right and the value of speculation is bad, or that investment is right and speculation is bad.

The value in use is actually the goods or assets that are useful to an individual. So you can think of eating, wearing, living, or making cash from dividends or rent.

Speculative value is the value generated by the goods or assets being able to earn profits from the sale. If you buy anything cheaply and sell it at a high price, it becomes valuable. Also called bubble, it’s a negative term and I don’t agree with it.

The price traded in the market consists of the value in use + speculative value, and jajangmyeon and cryptocurrency are at both extremes. Each has a price almost entirely based on the value in use and the value in speculation.

Jajangmyeon cannot be speculated, and the price of such jajangmyeon only rises and falls due to inflation. Labor costs and other things that cannot be resold are usually the cases.

The higher the proportion of speculative value, the more extreme the price fluctuates, and in many cases, the value becomes 0 won.

The share of speculative value is overwhelmingly higher than the value in use. Tesla’s market capitalization is three times higher than Toyota’s, but its net profit is one-quarter of Toyota’s. Dividend? Not a penny. Although it is said that Tesla invests based on its future value, it is uncertain whether the day will come when Tesla will triple Toyota’s net profit, and the stock price may fall by then. Rather, I think the expectation that I can buy it and sell it to others at a high price has raised the stock price like this.

What is important is that investment does not fail only when you have an eye to understand the proportion of value in use and value in speculation in current prices. Speculative value can fall in an instant when there are no expectations (it does not mean that we should just look at the value in use). In particular, monetary policy plays the biggest role in this expectation. This is because the leverage of low-interest rates is an irresistible temptation to the basic human psychology to seek cash.

It is a must-win path to lose by mistaking the price that has risen to the fullest due to the expectation of others for its own value in use and riding on that price, especially in the real estate market. Arguments that mistake speculative value for value in use are claims that say something will happen and that you will not regret it if you buy it unconditionally. Of course, real estate has a higher proportion of value in use than other assets, but if the money line is tightened, there will be no business.

It is difficult to predict when housing prices will fall and rise in the future, but as it is often said, let’s not believe the saying, ‘I can’t buy a house because I work anymore’. Opportunities will definitely come if you keep your eyes wide open and watch the market. However, if you become a Fire tribe just because you earned a little, or if you run without knowing how to stop and fall down in one shot, you won’t be able to take that opportunity.