Chapter 176 The Great Inflation Cycle is Coming
After a long while, Li Feng brought over his laptop, opened a document, and said seriously, "Do you know what it means now that the Federal Reserve has lowered interest rates to zero?"
"You have to know that even during the 2001 global dot-com bubble and financial crisis, interest rates were only lowered to 1%. And only during the 2008 global financial crisis did they lower interest rates to zero. Now, not only have they lowered interest rates to zero, but they have also released hundreds of billions of dollars, and will even implement trillions of dollars of quantitative easing in the future..."
"Do you know what this means?"
Zhao Xinyue had never seen Li Feng so serious before. She hugged the child nervously and moved to the side.
Lin Menghan listened very carefully, but was a little confused.
Li Feng continued:
"The Federal Reserve is the world's central bank. In just two weeks, it lowered interest rates to zero and launched a quantitative easing policy. This means that a massive amount of US dollars has been injected into the global financial market. These massive amounts of US dollars, like a surging wave, will directly crash into countless assets, triggering wave after wave of inflation and a tsunami!"
"Remember the bull market of 2005-2007? The root cause was the Federal Reserve's continued low interest rates in 2001, coupled with the resonance of domestic and foreign real estate cycles, which led to a huge inflation cycle!"
"During that unprecedented bull market, I once told you that the Shanghai Composite Index soared from 998 points in 2005 to 6124 points in 2007! It literally multiplied sixfold!"
"Real estate companies like Zhaobao Jinwan saw an average increase of 40-fold! Amidst the booming coal market, Yunnan Copper's stock price soared from less than 4 yuan to 98 yuan, a 25-fold increase! Yunnan Tianhua's stock price soared from 8 yuan to 70 yuan, more than an 8-fold increase! China Shipbuilding's stock price soared from 10 yuan to 300 yuan, a 30-fold increase!"
After a brief pause, Li Feng continued, "In a super bull market, a tenfold increase is considered acceptable, a twentyfold increase is considered acceptable, and a thirty-fold increase or more is considered a bull stock."
"Compared to that super bull market, the bull market in 2015 is just a little brother."
"So, at this moment, how can we buy theme stocks, consumer stocks, or infrastructure stocks? That would be like picking up sesame seeds and losing watermelons."
"When trading stocks, we should trade in the big cycles and long periods, and not focus on those small cycles and small opportunities. A general is on the march, and cannot catch little rabbits."
Ten times, twenty times, thirty times, these words made Zhao Xinyue's heart surge with excitement. If she could really seize this opportunity, let alone ten times, even five times would be extraordinary.
"What stocks should we buy?" Zhao Xinyue asked anxiously and impatiently.
Li Feng stared at the documents he had compiled and continued to analyze:
"During a period of high inflation and excessive issuance of the US dollar, assets that are resistant to inflation mainly include precious metals, real estate, energy, resources, and food."
"But this inflation cycle is different from the last one, which was a combination of high inflation and domestic and foreign real estate cycles."
"This time, it's very strange."
"Overseas, the epidemic is out of control, life and production are in chaos, the industrial chain is directly broken, the supply of goods is insufficient, and the US dollar is flooding, which is a comprehensive inflation."
"In China, the epidemic is well under control, and production and living order have almost been restored. Crucially, we are still the world's largest industrial country, with a strong supply capacity. At the same time, real estate prices have been strictly controlled, so inflationary pressure is much smaller. Therefore, monetary policy has not been as aggressive as in 2008 and has been very restrained."
"Based on the above analysis, we should invest in precious metals, energy stocks, and resource stocks that are affected by foreign inflation and traded in US dollars, rather than domestic real estate and food stocks."
"I understand why you don't invest in real estate stocks, but why not invest in grain stocks?" Lin Menghan continued to ask.
Li Feng said seriously:
"Food is the most important thing for the people. The first document of each year is the grain issue. Moreover, this is a major issue related to the national economy and people's livelihood. If the price of grain rises, Guo Jia will definitely intervene. Let's not get involved in this muddy water when trading stocks."
"To be honest, I've never heard of the stocks you mentioned." Zhao Xinyue sighed.
"Of course you haven't paid attention. Sigh...it's been so many years. Calculating it's been thirteen years since 2007."
"In this market, there's a market trend every three to five years. One wave eliminates 70% of investors, and two waves eliminate 90% of investors. How many of the remaining veteran investors can still recognize the big inflation cycle?"
"If you take all the numbers together, there are only a handful among hundreds, or even thousands."
"Not to mention, new investors like you probably haven't even heard of many things, let alone realized them."
"Furthermore, over the years, it's either tech or blue-chip stocks that have dominated the market. Those big, dumb resource, energy, and gold stocks have long been relegated to the sidelines."
Lin Menghan took the laptop and screened out the gold sector and the resource sector.
The gold sector is not so difficult to deal with, as there are not many companies involved. However, there are too many companies in the source and resource sectors.
There are probably no less than a hundred of them, which is enough to give me a headache. It would take at least a week to study them one by one.
"With so many stocks, we can only buy three or five. Which one should we buy?" Lin Menghan frowned and thought hard.
She is serious about her work and cautious in stock trading, especially after she was trapped in a Moutai investment in 2018, she has become more careful when researching the market and looking for information.
Zhao Xinyue knew the answer and felt relieved. She held the child and coaxed him to see how the two would make the decision.
Ever since she got married, and especially after having children, she has completely stopped trading stocks and focused on taking care of her children.
"First, buy those with existing mines. Second, buy those with foreign pricing. Third, buy those with growing production," Li Feng explained.
"First, only those who own mines truly possess resources. Some companies today are not mining companies, but smelting companies. They are like wage earners, earning hard-earned money and fees. These companies are not worth choosing because they cannot pass on inflationary pressure to the lower levels."
"Secondly, during this period of hyperinflation, inflation is most severe overseas, so it is important to choose commodities priced overseas, such as oil and copper companies, because the inflationary pressure of these commodities will be directly transmitted to the domestic market, and there are not many ways to regulate it."
"Furthermore, it would be even better if the company could put new production capacity into operation. At that time, both volume and price would rise, achieving a double boost in performance."
Li Feng's words were like a guiding light, illuminating the path ahead for Lin Menghan. She busily operated the software to screen and research, and soon selected several stocks.
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