Chapter 190 Waiting for the Rabbit, Being a Friend of Time
Wednesday, January 31, 2024.
This week, the Shanghai Composite Index fell for three consecutive days after rebounding for three consecutive days last week.
On Monday, the Shanghai Composite Index fell 0.92%, on Tuesday it fell another 1.83%, and on Wednesday it continued to fall 1.48%.
After three days of decline, the Shanghai Composite Index dropped from 2910 points to 2788 points, not far from the previous low of 2724 points.
Even worse are the Shenzhen Component Index and ChiNext stocks.
The former has fallen to 8212 points, setting a new low in four years, and the latter has fallen to 1573 points, also setting a new low in four years.
They are two brothers in distress.
Amidst the wailing, the performance of Pien Tze Huang was particularly heartbreaking.
This star stock, which was once surrounded by countless halos, opened at a gap down at 198 yuan, a drop of as much as 9%. Half an hour later, it was directly blocked at the lower limit!
Countless funds fled in a hurry.
In order to stop the stock price from plummeting, Pianzihuang issued an announcement at noon, stating that its first-quarter performance is expected to increase by 25%!
Looking at this announcement, even Zhao Xinyue, who was not very smart, was amused and said:
"The month hasn't even ended yet, and they're already predicting an increase in first-quarter earnings? That's too good to be true!!"
"It has to be announced..." Li Feng also said with a smile, "Look at its stock price, it has fallen from the highest point of 491 points in 2021 to the current 199 yuan. It has been cut in half, and then it was discounted by 20%... If there is no announcement, it may be discounted by 50% again..."
"But even so, its dividend yield is only 0.63%, and its price-to-earnings ratio is still around 40 times... Compared with high-dividend stocks, the dividend yield is far lower, and its resilience is even worse than that of strong cyclical stocks!"
"In this bear market, who else can be killed if not it? In essence, it is no different from the soy sauce stocks and liquor stocks I mentioned before. They are all the result of extreme institutional buying. It's just that it has a different concept and a secret recipe..."
"When we invest in stocks, we must first ensure that we do not buy those stocks that are extremely crowded together. The prices of these stocks are basically inflated, and the price and value are extremely separated, and the risk-reward ratio is already very low..."
"These stocks often fluctuate at high levels for months or even years. Even after being cut in half, they are still not cheap... You must not get involved lightly..."
Zhao Xinyue heard this and asked again:
"What do you think of the recent market manipulation of state-owned enterprises and the collective surge in the market with Chinese characters in their names? Especially the coal companies with Chinese characters in their names, like China Shenhua and China Coal Energy. Look at their performance, they're completely indifferent. They rise when the market goes up, and they rise when the market goes down, but they not only continue to rise, but they're setting new highs!"
Li Feng opened the K-line charts of the two stocks and showed an envious look, saying:
"Yes, look at the trend of these two coal stocks. They have already drawn four consecutive annual lines. From the lowest point, they have tripled!"
"Their growth can be traced back to the 'three cuts and one supplement' policy in 2016. It was the continuous supply-side reforms over the years that completely reversed the fundamentals of the coal industry."
"Right now, the coal sector is a high-interest sector, a low price-to-earnings ratio sector, and an inflation hedge. There's also the concept of market capitalization management for state-owned enterprises with Chinese characters in their names... It's truly the darling of the land. Its rise is only natural. It's a shame we didn't spot it sooner due to our limited circle of competence."
"However, with such a sharp rise this year, we have to worry about whether big-ticket funds are buying in and whether the risk-reward ratio is gradually declining, so I don't recommend buying heavily."
Zhao Xinyue turned her eyes away from the monitor and sighed, "The market is a bit too scary these days. The fluctuations are too big."
"It's not just the market that's fluctuating, it's your heart that's moving," Li Feng said with a smile. "When there's buying and selling in the stock market, there are fluctuations. That's normal. If you feel scared and worried, it's because you're either filled with fear or greed in your heart."
“It’s like a question in Zen practice: it’s not the wind that moves, nor the flag, but your mind that moves.”
"The same is true for investing. As long as we grasp the big picture and achieve vague accuracy, we can ignore these small fluctuations, thus ensuring that we invest correctly while also managing our emotions properly."
"Vaguely correct?" Zhao Xinyue asked doubtfully.
Li Feng explained: "The correctness of ambiguity is to trust common sense and thus grasp the macro investment direction."
"I'm asking you now, should we continue to ease the policy in 2024?"
"Yes." Zhao Xinyue nodded and said.
After these years of exposure, she has also gained some knowledge of these policy changes and is even familiar with them.
"Will the Federal Reserve cut interest rates in 2024?" Li Feng asked again.
"Yes." Zhao Xinyue responded again.
"Since this is certain, then why are you still worried? Just hold on to your shares and wait patiently for the wind to come. We must be friends with time!"
"As soon as this time point arrives, the market will naturally come!"
Li Feng drank a cup of tea and said.
"This is also..." Zhao Xinyue wanted to say something.
Li Feng shook his head and pointed to the calendar next to him:
"Look, it's already the 21st day of the lunar year, and there are only ten days left until the New Year. There are only a few trading days left before the New Year, and it's already the junk trading period. If there is any market, it will be after the New Year. Let's go buy some New Year's goods."
"Chicken, duck, fish, meat, couplets with Chinese characters for blessing, snacks, vegetables, fruits..."
"By the way, where are we going to celebrate the New Year this year?"
"This year?" Zhao Xinyue thought for a moment and said, "Let's go to your house on the first day of the 30th, and then go to my house when we come back. Let's buy some more meat and some gifts..."
"Oh..." Li Feng said.
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Fellow stockholders, please give me one for free to generate electricity for love.
Your support is my latest motivation
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