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when discussing the market last week, some friends questioned whether i was too young to talk about turning points when i saw policies. i completely understand this doubt, because if you draw the experience of investors as the abscissa, when the market surges, the it usually looks like this:

the most inexperienced and the most experienced people have surprisingly consistent opinions, as mentioned in the previous article. at this time, the strategy has no meaning at all, and it cannot be judged. if the position is full, and then does not adjust the position randomly, each one has no everything that goes up will take its turn. but this week’s review is very important and must be done during the national day.

the last trading day before national day,at the craziest time in the afternoon, i felt like the market was eating up all the circulating plates;if there were still some "rational" investors who were reducing their positions to celebrate the holidays in the morning, for a dozen minutes in the afternoon i felt that all the circulating stocks were being eaten up.

foreign capital is buying our a and hong kong stocks at a historic rate. this is normal, because as mentioned last week, this is the turning point. i think if you are a person who looks at the macro or strategy, you will not be aware of the intensity of this stimulus. there should be a deep understanding, unlimited bullets, and unlimited bullets. although i don’t know the details, there are two facts:

there is no room for short-term decline.

in the long run, a shares have finally established a link with interest rates. i think this will be the most critical variable in the second half of this round of market conditions, but it is not something to think about now. you can go back a little bit.

before looking forward to the future, there is only one place i want to review a little bit, which is the time of the turning point. i don’t think this turning point depends more on the federal reserve and is related to the domestic situation, but the relationship is not necessarily that big. on the other hand,the fed's decision-making will also depend on china's situation.

beijing has no trust in the united states. he must see the fed confirm a u-turn before stimulating the economy. if the situation hadn't been really bad, i even suspect that he wanted to wait until one month after the election to cut interest rates. this kind of stimulus from china will also constrain the fed's policies, which in turn will increase the investment value of chinese assets.

one

so when looking to the future, i think there are a few things to consider.

1. china’s own economic situation

2. market rhythm issues

3. overseas inflation situation

4. election uncertainty

but to be honest, these are not the most important things. i am a more top-down investor. the thing i know best is when the macro is useful, the volatility is low, and there is no market. look for the macro trend. macro is useful at the turning point, but what is really useful later are two things:

1. find a stock, an emerging industry that has differences in space and industry, but will be profitable in the next 2 to 3 years, and an emerging industry that is supported by the state.

2. grasp the rhythm. industry rotation does not have any alpha in the long term, but the reason why many people study the market is because it is useful in the bull market, so the rhythm must be grasped. the bull market basically means choosing two stocks. , catch the rhythm twice, and you will be very happy.

therefore, in the future, i will also focus more time and energy on researching individual stocks and rhythm. the macro content is still important but not the top priority.the macro view is helpful in looking at the industry and grasping the rhythm, but what individual stocks need is research and technical analysis.

there may be another thing to do in this round of market conditions that has not been done before, which is to find etfs, but this can be discussed later.

two

how is china's economy doing?

in fact, you don’t need to think about it to know that it will definitely not work. deflation is still spiraling and credit derivation is stalling. otherwise, how could there be such a policy? however, investment requires more than just knowledge. sometimes it also requires some rationality that goes beyond knowledge.

the past two years in china have been a combination of two problems, which we have shared before,the first is that the real interest rate is still too high, and the second is the lack of an effective department to absorb credit.in other words, what did everyone borrow the money for?

cutting interest rates and lowering reserve requirements will definitely help reduce real interest rates, but the core is still to stabilize inflation, so it is very important to cut off the cycle of falling prices. the same is true for the stock market. a good company, but it keeps falling and liquidity is increasingly exhausted, who can go catch this throwing knife. there are actually only two assets in the hands of chinese people. houses are definitely the largest part, and stocks are smaller, but they are an important investment channel for people with spare money. to be honest, the yield rate of chinese bonds is not satisfactory for anyone. for ordinary people’s pension needs, we have nothing to buy and can only preserve the value and buy fixed income. if your risk appetite comes up, you will definitely buy stocks.

china is not a developed country. if beijing wants to double its gdp, then people will naturally demand doubling their assets. in order to grow the economy, we have to keep interest rates below gdp. then bonds will not be an asset that people can use to outperform the economy in the long term. , this is a difference in underlying logic, which is different in developed countries.

i think the stabilization of real interest rates in the future still depends on inflation expectations, and the first step in inflation expectations is what it is now.cut off the downward cycle,prices, all prices, are a matter of simple words. if they cannot rise, they will fall. if they cannot fall, they will rise.

i think there will be a time when real estate prices will stabilize, especially in cities with an influx of people. with the scale and timing of stimulus in china, coupled with the current industry, i don’t think the situation will be like that in japan. in fact, the picture above should put hong kong after 1997 for comparison.

but i think real estate is no longer the best investment in the future.it’s hard to say in the long term, but the stock market may be better in the short term. a simple analogy is that the real estate holding period is longer, the rental return rate is not as good as the dividend rate, the investment volume is larger, and from the current position, if the real estate price doubles , then the stock price will most likely at least double. this is different from 2016, when chinese stocks were still relatively young, but the real estate rental return rate could make up for part of the interest rates in the mortgage market.

or simply put, there are three elements of economic development: population, credit, and technology. real estate relies on population and credit, and stocks rely on technology and credit. in the long run, china's path from population growth to technological growth is the transformation from stable real estate growth to stable stock growth.

if the real interest rate goes down, then the chinese economy will start a process of slowly recovering credit (consumer loans, financing to buy stocks, real estate loans). from this process, it will take time to spread to economic growth, but because the united states is also interest rate cuts are stimulating, so next year's h2 should be when china's economic data starts to be good, and inflation will start to rebound from the current low. it is even possible to see overheating of some commodities in h2 next year or later. considering the situation in the united states, the probability of secondary inflation is increasing.

so when you say whether the economy is good or not, i think it is definitely not good now. will it get better in the next few months? i think it will take time and it will be difficult to deal with in the short term. but does this have anything to do with the stock price? i don’t think so.stocks are never an immediate response to the economy; stocks are an expected response to the economy.

this also means that i think that on the one hand, the short-term stock market will have an expected correction, and on the other hand, in the next 1 to 3 quarters, its overall rhythm is that it is expected to be full first, then correction, then structural differentiation, and then you have to i'm looking for three things:

to repair overly pessimistic expectations, for some good companies that have broken the net, you don’t know whether the economy will help them later, but their broken parts will be repaired. now that beijing has changed its thinking, all domestic debts can be resolved with inflation. therefore, many of the first waves of bull markets in the past were financial real estate, which was the source of china's credit stimulus. this round may be a little different, but if some outstanding companies here are mistakenly killed, the rhythm of this wave will not be different.

a friend asked before what the cost of doing this is. the cost of inflation is all those who hold currency... this is the secret of china's development in the past 20 years. it is to create an economy where everyone must invest something, but the investment in the past 20 years has been the best thing is real estate. stocks are actually good too but you need to choose them carefully. the future will not be different, except that the pace will be slower and the varieties will be changed, but inflation will resolve debts, and the price will be borne by currency holders.

some companies in government-supported industries that are willing to lend money will have more resources in the future if they are willing to receive loans under the current low interest rates. this is the same as the us stock market in 2021 to 2022. enterprises that are enterprising under low interest rates pull the lever full. then engage in brutal competition. what is very attractive about this game is that it is a game of growth stocks. a company that is supported by the government and then uses leverage to finally make profits in a new industry has huge flexibility. i'm thinking about this issue myself, so i'll put it aside for now.

inflation benefits from things, and the recovery of inflation expectations is good for many cyclical companies. china is not afraid of inflation at all now. it wants inflation, so in the end the inflation will be too high, and the black cash flow will be repaired (i don’t knowing where this end point is), non-ferrous metals range from cheap to overheated, and price increases for some agricultural products are expected. in fact, consumption can also be included in this. china's demographic structure determines that the opportunity for consumption expansion is not as good as the opportunity for price increases.

so the short term is the restoration of inflation expectations, pessimistic expectations and growth expectations. then there will be a correction in the market, and everyone will start to discuss whether this wave is an inflation bull market, a growth bull market, or whether it will end after the pessimistic expectations are repaired.

my own experience is,no bull market ends when pessimistic expectations are restored.financial markets always move from one extreme to another. we are rational when volatility is low, but we don’t need to be rational when volatility is high. therefore, i have always felt that i am conditionally rational. in the financial industry, i feel that without passion, one cannot make money, and without rationality, one cannot take home the money earned. in fact, both are indispensable.

three

so this transitions to the next topic, this round of bull market, whether we see inflation going further, or lower interest rates going further.

i think this is the importance of elections and overseas. if it is a democratic party, i am more optimistic about the persistence of inflation. if it is a republican, i will see an interest rate cut that exceeds expectations. if the interest rate cut exceeds expectations, the chinese market as a whole will be better, and some products will also be good.therefore, the nonferrous industry is worth watching in this bull market.

it's that simple. the issue of geopolitics and iran was discussed in the previous article, so i won't go into details again.

in addition, china's stimulus has also led to an increase in the probability of a soft landing. the federal reserve may be able to achieve a soft landing with less interest rate cuts. this can also be kept in mind. in a sense, this is a more painful situation for the united states. china's as the economy stabilizes, the pressure on the u.s. dollar increases, china's inflation recovers, and the number of interest rate cuts is limited. in fact, the pressure on the u.s. economy has increased.

four

the last thing i want to say is,at this time, the market is ever-changing, and it is important to retain respect for the market.

if this article wants to summarize a few key points, they are as follows:

i think there will be a correction. after the correction, there is a high probability of divergence. when the divergence occurs, it is the time to buy. don’t doubt this round of policies. it will take time for its effect on the economy, but these policies are effective. this is also the benefit of believing early. the earlier you believe, the more rational you will be in viewing this callback...

after differentiation, whether to look at global secondary inflation or to look at u.s. interest rate cuts that exceed expectations depends on the election results in one month. these two points will be mapped to the style of the chinese market.

the choice of individual stocks is extremely important at this time. if the interest rate is cut more than expected, it will be more in line with china's technology + credit development route. in a sense, i think the outcome of the us interest rate cut is more friendly to the chinese market. this is what i have always felt the election of the republican party may be a reason for the bull market in the chinese market (god knows how many people who are short of japan and china will close their positions by then), but as long as china starts to stimulate, even if the democratic party continues to start raising interest rates, and chinese asset prices stabilize, the worst thing will be china-u.s. fiercely fighting against global inflation, what kind of inflation is a manufacturing country afraid of?

i also wish everyone a happy national day. i have talked too much about the market in the past, and i can chat more leisurely in the next few days.

finally, i believe that most readers are happy this national day, and i hope that everyone can take more care of their families and people around them. in many cases, without the help and silent support of family and friends, it is difficult for everyone to persist to this low point of asset prices. . so when you make money, you must send more red envelopes to your family.