Crash Course in Real Stock Education
Stock newbie.
The mistakes first-time investors make are almost always the same.
"Isn't the right way to invest by looking at a company's performance?"
"What, you're doing value investing?"
"Yes."
"You really don't know a damn thing, do you."
"Excuse me?"
It was practically scripted. A handful of phrases, value investing chief among them.
She thinks value investing is some easy, simple method.
"What is value investing?"
"Isn't it investing because you believe in a company's value?"
"And how exactly do you know whether that company is good or not?"
"Uh… I looked at the financial statements. And the analysts said it was good."
"Haaa~~~~."
YouTube was full of the same noise these days. Buy good stocks and diamond-hand them, and you'll make money.
They don't even know Warren Buffett gave up on the KOSPI.
The father of value investing. Famous for Buffett's own methods, too. A good company will rise eventually. Buy undervalued firms!
"You know why Grandpa Buffett succeeded?"
"Like I said earlier—because he believed in company value and invested in undervalued firms…"
"No. Because he invested in the NASDAQ."
"…"
The secret to success wasn't some impossibly hard thing. You didn't have to look far for it.
"I was able to succeed because I was born in America, beating one-in-forty odds."
— Warren Buffett
The NASDAQ had climbed steadily for the past hundred years. It was almost hard to lose money. Born with a silver spoon, plus gifted education on top of it—with a full set of buffs like that from birth, of course he could succeed.
If he'd been born in Korea, he wouldn't have been the Oracle of Omaha. He'd have been some construction-site grandpa swinging a sledgehammer.
Of course, plenty of people failed under the same conditions. Establishing value investing as a discipline was a genuine achievement in its own right.
"What makes you think you can do value investing on a KOSPI that went up twofold while the NASDAQ went up twenty? I don't get it."
"It could go up from now on…"
"God, you're dense!"
But if he hadn't invested in the NASDAQ, he would never—under any circumstances—have become as famous as he was now. No.
He never would have invested in a twenty-year sideways dogshit scam market like the KOSPI in the first place.
Warren Buffett had taken an interest in the KOSPI once. And of course he had—Sora's point wasn't wrong. Corporate value! Looking at fundamentals and future growth potential, there was no shortage of attractively undervalued companies.
"Then why do you think they get undervalued?"
"Because people aren't paying enough attention…"
"So why aren't they paying attention! It's the same reason a girl as pretty as you still can't land a guy—because her personality is trash."
"What the fuck?"
And it wasn't a day or two. If the KOSPI had been undervalued for years—for decades—there was a clear reason.
It wasn't undervalued. It was getting a fair evaluation the whole time.
Stocks aren't priced on a company's value alone. Global political, economic, social, cultural, and military currents all exert direct and indirect influence. Plus alpha. You had to dig finer than that.
The reason Korean companies' stock prices had no choice but to be undervalued—
"I'll teach you common sense every KOSPI investor needs to know. Never buy a stock with Gu or Heo fingerprints on it."
"Gu and Heo?"
"They're the same bloodline. The bloodline itself is a family of con artists."
Because they made you not want to invest. The owners of these companies did not come equipped with anything resembling a conscience. They did not see shareholders as the owners of the company. They saw them as suckers to be milked for cash.
"Isn't that… a bit of a stretch?"
"Which part, exactly?"
"I mean, Helji and KS are still recognized conglomerates in Korea."
Helji, famous for Helji Electronics. KS, the familiar twenty-four-hour convenience store chain. Both had decent public images among ordinary people.
The worse the bastard, the better they are at playing nice.
Among investors, their reputations were notorious. These were companies that had grown by fleecing retail investors every way imaginable.
1. Intentional bankruptcy, then absorption at fire-sale prices.
2. Dumping debt onto affiliates within the group.
3. Physical spin-offs that diluted shareholder value.
"You know what the average return is for long-term KOSPI investors?"
"I don't know. Around a hundred twenty percent?"
"Negative seventy-four percent. And I didn't pick seventy-four on purpose."
"What?"
Conduct like the above was everywhere. The Gu and Heo families had done it especially often, but other companies weren't far behind.
On the KOSPI, the company is the investor's enemy.
The moment a stock price ticked up a little, they scrambled to suck every last drop out of it. That was why you should never, ever long-term invest on the KOSPI.
"So I just have to watch out for the Gu and Heo families?"
"No. Hanwa's got a nasty reputation too."
"Where's Hanwa?"
"You don't know Hanwa Life? Great King Morgan! Hanta's Morgan! Iron Wall Morgan! The Hanwa that Morgan guards—you don't know it?"
"Axe-Hand Morgan, I know that one."
And it wasn't just one or two things. There were companies that deliberately refused to push their stock prices up. Doesn't a rising stock price mean good things? By ordinary common sense, of course it does. They ignored that common sense. Shockingly, Korea had plenty of companies that fought tooth and nail to keep their stock prices from rising.
Because of inheritance issues.
Inheritance tax. Exactly what it sounds like—the tax you pay when you die. For chaebols sitting on mountains of money, the amounts were truly astronomical.
"So they deliberately keep the stock price from rising."
"Ah…"
"The higher the stock price, the more tax they pay. There are a bunch of companies on the KOSPI whose stock prices are bizarrely low relative to the money they make, and most of them are inheritance problems."
The prime example was Hanwa. A company ranked seventh in the business world with a market cap of only two trillion won. Operating profit alone cleared two trillion. Even accounting for holding-company discounts, the price made no sense.
They crush the stock price with shareholder-hostile policies—paying dividends that amount to pocket lint, and so on.
"There's also funneling of business opportunities."
"What's that supposed to mean… I'm almost scared to hear it."
"They hand the juicy contracts to companies owned by the chairman's three sons, and dump the leftover scrap work on everyone else so those companies take the losses. It's a loophole to grow the sons' companies and cut gift-tax exposure."
Every method under the sun. Screwing over shareholders was as old a tradition on the KOSPI as the market itself.
Sora's expression was not good. She seemed disappointed in the stock market world she had dreamed of.
"Still…"
"What."
"Aren't there normal companies too? Is Mirae Auto a bad company as well?"
Her voice was on the edge of tears. Watching that tough, foul-mouthed kid make a face like she was about to cry was oddly satisfying.
Reality is always three times worse than you imagine.
Sometimes you were better off not knowing. But if you were going to invest in stocks, you had to face it. Reality. Even in sensitive areas, you needed analysis grounded in clear judgment and evidence.
"Mirae's a saint compared to the first two."
"Whew…"
"But they're breeding parasites inside the company."
"Parasites?"
"Yeah. There's a movie about it that gets famous in a few years—remember that."
"?"
Militant labor unions. The phrase Aristocratic Labor Union had turned up in the news and elsewhere at least once.
And the final boss of that whole species lives at Mirae.
The kind of lunatics who treated Molotov cocktails as a baseline, built homemade guns and flamethrowers, and illegally occupied company buildings. The damage they inflicted on the company was enormous. And they knew it—and used it deliberately.
"The moment the company starts doing a little well, they stage a protest. The stock price can't rise even if it wants to."
"Still…"
"Still what!"
"Isn't it for improving workers' rights? The purpose of forming a union isn't inherently bad…"
Of course, workers' right to organize independently was legitimate. A society where people could voice grievances openly was a good society.
The problem was that it was too good a society.
An inelastic employment structure. Korea had made it extremely difficult for companies to fire employees. They were abusing a system designed to protect workers—so they could monopolize the benefits for themselves. From the company's perspective, parasites they wanted to cut loose immediately were taking every advantage they could while also blocking the company's growth.
No—sometimes the company simply went under. Every strike racked up astronomical losses. Competitive companies could still limp along; the ones that weren't competitive couldn't hold out.
"The KOSPI is full of incidents you'd never know about until you actually start trading stocks. If you don't know all of them and apply them, you can't call it real investing."
"I see…"
"Yeah, you little scrub."
The institutions knew it too. They knew the KOSPI was structurally incapable of sustained stock-price growth.
So the moment prices tick up a little, they fill short positions first and ask questions later.
The reason steel stocks had fallen. Nothing special. Prices went up, so they shorted them. That was all.
"Does that even make sense?"
"It makes sense."
"I thought short selling has unlimited downside, so you can't do it casually."
"Haaa~~~~~~~~!!!"
KOSPI short selling was a special animal. Naked shorts, no time limit, uptick-rule exemptions, non-electronic manual processing, low interest rates—institutions had been handed every advantageous weapon in a neat little bundle.
The win rate on Korean short selling is 97.5%.
Not because the institutions were skilled. The market itself was a tilted playing field. Short selling that was dangerous on other exchanges was practically risk-free on the Korean market.
"Is that true?"
"Why are you about to cry!"
"But—but… that doesn't make any sense. Then who would invest?"
"That's why ninety-five percent of retail investors lose money. Haven't you seen the stats?"
A face on the verge of tears. She may have learned a little early how far the trader's world she had dreamed of was from reality. The bigger the dream, the bigger the disappointment.
Once you know this, you never touch Korean stocks.
Going to Kangwon Land and playing baccarat would give you better odds. Stock investing—Korean stocks in particular—was nothing like what ordinary people imagined.
"By that logic, it feels like there's nothing left to buy…"
"That's exactly the charm of the KOSPI."
"What?"
"Where there are disadvantages, there are advantages too. That's how the world works, isn't it?"
If you charged into the stock market on vague preconceptions alone, you were almost guaranteed to get burned. The apex predators would eat you alive.
That's the kind of world it is.
The worm game. A newborn pup that doesn't know to fear the tiger runs straight into it and gets smashed to pieces. But if you used your head? If you knew how to use it?
"We know the winning formula for the worm game."
"I know what game that is…"
"The smaller the worm, the quicker it is, right? Same with retail. If you use that quick footwork, you can play for a win."
Her eyes were shining, bright and sharp. Raw ore. What shape would come out once it was cut, he couldn't yet say.
She's got drive, at least.
The most important part. She had the basic attitude down. But there was still something to settle first.
"That's the explanation. Does it make sense?"
"Yes. Listening to you, I think I get it."
"If it makes sense, we had something we agreed to do, didn't we?"
"…"
There was something he very much wanted to try with that body of hers.