Professor Ahn Yu-hwa Diagnoses Vietnam's Economic Crisis

Yen carry trade is creating global financial risks, and the U.S. Federal Reserve's decision to cut interest rates further complicates these risks. This is because lowering interest rates increases the value of the yen, raising the risk of yen carry trade liquidation, which could act as a significant bombshell for global financial markets.

Currently, the U.S. Treasury market is heavily dependent on yen carry trade. If the yen carry trade is rapidly liquidated, U.S. Treasury prices could fall and interest rates could surge, delivering a severe shock to the global financial system. Professor Ahn Yu-hwa emphasized the seriousness of the current situation, stating, "For this to happen, that increase, what kind of problem is it? Funds are liquidated again. Then another bombshell explodes worldwide."

Governments act as the 'visible hand' in the economy, but they cannot fully control the 'invisible hand' of economic principles. This limitation is an inherent characteristic of a capitalist economy; no matter how strong government policies are, they cannot override the fundamental principles of the market.

Professor Ahn Yu-hwa explained, "The government's visible hand is gathering the invisible hand of economic principles. This is capitalism." She analyzed that policymakers in the U.S. and Japan are increasingly finding their policy options constrained in the face of these economic principles.

Unlike South Korea, Vietnam's economy is excessively dependent on foreign companies, failing to secure independent growth engines. This contrasts with South Korea's early economic growth, which fostered self-reliance through indigenous technology development and a domestic market.

Furthermore, Vietnam differs significantly from China in its early opening-up phase. China actively attracted foreign companies while also creating an environment for its domestic companies to enhance competitiveness, whereas Vietnam lacks such strategic depth. Professor Ahn Yu-hwa thus declared, "Vietnam can absolutely not become a second Korea."

From the beginning of its opening, China implemented non-discriminatory treatment and exceptional preferential policies for foreign companies for about 20-30 years, driving manufacturing growth. These policies became a key driver for actively attracting foreign investment, facilitating technology transfer and industrial development.

In contrast, Vietnam experienced strong demands for labor rights from the outset of its opening, increasing uncertainty for foreign companies. Rather than providing long-term preferential treatment and a stable investment environment like China, Vietnam tended to focus on short-term gains, limiting its ability to attract investment.

Professor Ahn Yu-hwa explained, "China actually treated foreign companies non-discriminatorily like domestic companies, and only gave preferential treatment to foreign companies for about 20 or 30 years." She analyzed that these policy differences significantly diverged the economic development paths of the two countries.

After the 2008 global financial crisis, China secured independent technological capabilities through massive R&D investments, fostering domestic companies that could replace foreign companies like Samsung Electronics if they left. This allowed China to reduce its reliance on overseas markets and strengthen its own competitiveness.

However, Vietnam still depends on foreign companies for 70-80% of its exports and has very limited R&D capabilities. Professor Ahn Yu-hwa pointed out, "It was after 2008 that Chinese domestic companies began to grow and could replace Samsung Electronics even if Samsung Electronics left." She emphasized that Vietnam currently lacks preparations for such a situation.

In the AI era, the value of cheap, young, unskilled labor decreases, and the importance of skilled laborers who hold the most on-site data significantly increases. While cheap labor was a competitive advantage in the past manufacturing-based economy, now productivity and innovation based on data are the core competencies.

Professor Ahn Yu-hwa emphasized, "Now it's not cheap young labor that's needed, but laborers who have the most on-site data. Those countries will be the winners in the future." She predicted that countries capable of accumulating and utilizing on-site data, such as Korea, China, Japan, and Germany, will be the winners in the AI era.

Economic development requires not only material capital but also 'trust capital'. In the early stages of capitalism, during its opening, China, though not perfect, gradually formed a basic culture of trust, such as adhering to contracts, laying the foundation for a market economy.

However, Professor Ahn Yu-hwa noted, "It wasn't a trusting society. Vietnam wasn't China." She pointed out that in Vietnam, breach of contract is commonplace, leading to a lack of basic trust capital necessary for business activities. This lack of trust acts as a major impediment to attracting investment and achieving sustainable economic growth.

In the past, Vietnam expanded its role as a global production base by directly exporting products labeled 'Made in Vietnam' that were previously exported via China. This was one of the main drivers of Vietnam's economic growth.

However, during the Trump administration, the U.S. imposed high tariffs of 46% on Vietnamese products, significantly eroding this advantage. Professor Ahn Yu-hwa explained, "In the past, what was directly exported was exported as 'Made in Vietnam.' But even that advantage has largely disappeared with the Trump administration hitting Vietnamese tariffs at 46%." She analyzed that this greatly reduced Vietnam's attractiveness as a global production base.

The AI era is a battle of AI infrastructure, data, and massive capital. This is why U.S. big tech companies are pouring astronomical sums into building AI infrastructure.

Professor Ahn Yu-hwa stated, "The AI era is a battle of infrastructure. AI infrastructure. It's a battle of data, and ultimately, a battle of money. That's why U.S. big tech companies are pouring astronomical money into it now. Can Global South countries, especially those with small capital like Vietnam, compete in this battle? No, they can't." She emphasized that capital-poor Global South countries like Vietnam will inevitably be pushed out of this competition and lose their growth momentum.

Professor Ahn Yu-hwa suggested that drastic tax reduction policies are necessary for Vietnam's economy to overcome its current crisis and secure new growth engines. Specifically, she advocated for a complete exemption of corporate and income taxes for a considerable period to attract large-scale foreign investment and secure talent.

Professor Ahn stated, "For a considerable period, I would exempt all corporate taxes and income taxes. If I were to propose to the Vietnamese Prime Minister, I would do that. I would exempt all corporate taxes and income taxes for a considerable period." She emphasized that only such bold policies would provide new opportunities for Vietnam.

Professor Ahn Yu-hwa emphasized that the presence or absence of 'choice' is a crucial factor determining success not only in investment but also in human relationships. She stated that if one is in a situation where choice is impossible, one will inevitably become a 'loser,' which directly impacts the stability of relationships and the success of investments.

For example, she explained that no matter how good a stock is, even if it's a 'world-class moat company,' if an investor has no other options—that is, if it becomes an 'all-in' investment where everything is staked—they cannot make money. She warned about the dangers of investment without choice, saying, "If I can't choose, I become a loser. The same goes for our relationship. For my relationship with this person to be secure, I need to have other options. But if I go all-in on this person, it's the same with investment. No matter how good a world-class moat company I have, do I think I'll make money? You can't make money when you have no choice. Absolutely."

Professor Ahn Yu-hwa recommended 'regular investment' for sound investing and stressed the importance of clearly distinguishing the nature of money to be used for investment. Investment funds must be separate from living expenses or fixed expenditures, representing surplus funds not immediately needed.

If living expenses or fixed costs are used for investment, a situation may arise where forced selling is necessary due to unexpected circumstances, inevitably leading to losses. Professor Ahn explained, "That money should be invested as money meant for investment. The most important thing in investment is the role of money. If I have 100 million won, what kind of money that 100 million won is, is important. If it's truly money that can be invested, time will yield compound interest, and you don't need to worry. If you pull money from living expenses or fixed costs, you won't make money no matter at what point you enter." She emphasized that the role of money determines the success of an investment.

In her book "The Curve of Wealth," Professor Ahn Yu-hwa proposes a method for managing one's salary by dividing it into six roles. This is a systematic budgeting method aimed at maximizing asset income.

Specifically, taking an annual salary of 100 million won as an example, it is categorized into envelopes for living expenses, fixed expenses, future education, relationships, and the most crucial, asset income. She particularly suggests allocating 50% of the total annual salary to asset income, explaining that this can help achieve long-term financial goals.

NVIDIA went public in 1999, but its stock price only began to rise significantly in 2020. For more than a decade before that, the chart was almost horizontal, indicating a period of stagnation.

Professor Ahn Yu-hwa explained, "NVIDIA went public in 1999. The price of that company started to go up in 2020. If we draw the entire chart, it was flat from 1999 to 2020. It was flat for 10 years. When I bought it in '99, it was less than $0.01. But could I have held it for 10 years? Stock investing means you can't make money by buying and selling, and you can't make money without letting time give you compound interest." She emphasized that short-term trading cannot yield compound interest effects, and true investment returns can only be obtained over time.

SoftBank Chairman Son Masayoshi's investment in NVIDIA and his timing of selling are prime examples illustrating the reality of investment. This suggests that investment is not merely about buying low and selling high, but rather about maintaining a flexible state with options available at all times.

Professor Ahn Yu-hwa explained, "That's a typical example with Son Masayoshi. What I mean is, this is investment. So, investment means you should always make investments where you have choices. That's when the price being low or high has meaning." She emphasized that understanding the fundamental principles of investment and securing choices is more important than trying to precisely pinpoint lows and highs. This implies flexibility to actively respond to changes in market conditions.

Long-term investing goes beyond merely choosing good stocks; it demands strong psychological endurance and a philosophy from the investor. Even NVIDIA experienced a stock price plummet of up to -80% in one year in the past, and most individual investors find it extremely difficult to withstand such severe downturns.

Professor Ahn Yu-hwa pointed out, "If you cut time at 1:00, even NVIDIA's stock dropped by -80% in a single year. Can most individual investors endure that? No, they can't. If it drops by -80%, everyone sells. Without a philosophy, you can't endure 10 years." She emphasized that without a firm investment philosophy, it's impossible to sustain long-term investments for over 10 years. Furthermore, if investments are made with funds that offer no choices, this psychological pressure intensifies, increasing the likelihood of failure.

Professor Ahn Yu-hwa explained that the true criterion for being wealthy is not merely the size of one's assets, but rather the ability to have 'choice' in times of crisis. For example, she compares a person who owns a 2 billion won house but has no fixed cash flow, with a person who lives in a 500 million won house but has a fixed monthly cash flow of 3 million won.

Most people consider the 2 billion won asset owner wealthy, but if that person suddenly needs 5 million won for surgery and has no cash, they would be forced to sell their 2 billion won house. Even with significant assets, a lack of cash flow can eliminate choices.

Professor Ahn emphasized, "Some people have a 2 billion won house, but they don't have a fixed cash flow. But person B lives in a 500 million won house and consistently receives 3 million won per month. Who is wealthy? Most people would say the person with the 2 billion won is wealthy. That's a mistaken concept. If the person with 2 billion won suddenly needs 5 million won for surgery, and they have no cash, what do they have to do? They have no choice but to sell their 2 billion won house. The person who lives a life with choices is wealthy." She defined a truly wealthy person as someone who can proactively choose their life, even in a crisis.

The 'cost curve' of life represents expenses that naturally occur over time from age 0 to 100. These are essential costs that come regardless of whether an individual is prepared.

In contrast, the 'asset income curve' is not drawn automatically without an individual's proactive effort and investment. This curve represents the cash flow generated from assets and is a crucial factor determining future financial stability.

Professor Ahn Yu-hwa explained, "The cost curve from age 0 to 100 is just given. The cost curve comes regardless of whether I'm prepared or not. But the asset income curve is drawn only through my efforts. You have to look at it together with costs, otherwise, it becomes a life without choices. The ultimate wealthy life is creating a point where the cash flow earned from the asset income curve covers the costs." She emphasized that understanding and managing these two curves together to create a point where asset income covers costs is the ultimate wealthy life and key to a 'life with choices'.