Chapter 321: Keep the Middle Way and Put Greed in a Cage
Saturday, August 31, 2024.
Jisilu temperature: 4.19, Shanghai Composite Index: 2819 points.
The past few months have been quite painful.
Not because of the torture of the bear market,
But it's because of mental division.
As we all know, the blogger's operating system and trading model have always been cautious. He only buys industry stocks at the bottom of the cycle, buys when no one is interested, and then sells them when the market is booming.
Conservatism, caution, and suspicion have helped the blogger survive one bear market after another, and are also the operating philosophy that the blogger has been adhering to for more than ten years.
However, all this was broken in June.
Because, the concept stocks of smart cars, with their extraordinary macro concepts, unparalleled prospects in the industry, and huge traffic on individual stocks, have drawn bloggers in.
Just like an old house on fire, the siren's song makes the blogger unable to stop,
This has led to some operational distortions and investment concepts going to the other extreme.
It's like another thought suddenly enters a normal person's head.
This is a contest between two investment styles and two investment ideas.
One is a defensive investment system that prioritizes conservatism and prudence.
One is an offensive investment system that prioritizes offense and growth.
The two systems fought each other in the blogger's head for more than two months.
This is reflected in the sudden change in style and frequent adjustments to positions.
In life, it manifests as anxiety and contradiction, hesitation and indecision.
This situation is like a kind of fate.
It suddenly appeared, suddenly breaking the tranquility in my mind and causing an uproar.
This struggle and hesitation lasted for so long.
As a result, the blogger finally recalled an investment experience more than ten years ago.
That was around 2011.
Similarly, it is a choice between defense and offense.
That year, the blogger carefully selected two stocks.
One is China Merchants Bank and the other is Ping An of China.
It's the same similar situation,
China Merchants Bank is a defensive investment, with a PE ratio of only about 8 times, a high dividend, about 5 points in my impression, and high performance growth.
Ping An of China is an offensive investment, with a PE ratio of 15 times and a very low dividend, but its performance growth is very high and it is very popular.
It's almost exactly the same as the situation today.
A few years later,
The trend of China Merchants Bank is neither hot nor cold, but slowly climbing up, which makes people very anxious.
Ping An of China's performance was very sharp, doubling its value within a few years.
Once upon a time, the blogger was very sad. Why did he only give China Ping An a 20% chance of growth? Why didn’t he give it more positions?
This feeling of regret and reflection even lasted for several years.
So much so that in 2007, Ping An of China doubled in one year and reached its peak.
However, several years have passed and it is now 2020-2021.
Ping An of China began to stagnate, while China Merchants Bank began to significantly outperform Ping An of China, so much so that the blogger began to reflect on why he did not allocate more positions to China Merchants Bank.
This is the most obvious change in people's hearts.
Looking at the trend over the past decade (2011-2020), the two stocks ended up in the same place, achieving a four-fold increase.
However, the risks and mentality in the process of holding shares are completely different.
The former is defensive, cautious, low-risk, and high-dividend, so it is safe and secure to hold.
The latter, however, due to its high PE, low dividend, high popularity, and high volatility, often leads to a slow mood when the stock soars, and pessimism when it plummets...
Even during the period of 2020-2021, China Merchants Bank, a defensive investment, significantly outperformed Ping An of China.
Another example happened a few years ago.
Another contradiction between defense and offense, another big lesson...
After deeply recalling this journey,
The blogger decided to end this battle between defense and offense, value and growth.
In holding positions, one should stick to the middle ground and put greed into a cage.
Most of the positions are still placed in defensive, cautious, and large-cap non-ferrous metals stocks with good growth potential, while a small portion of the positions are placed in high-profile, high-concept, and high-growth smart car stocks.
Although the growth is good, the performance is high, and the prospects are great,
But fireworks fade away quickly, prosperity fades quickly,
We still need to lock this irresistible and extremely tempting temptation and greed firmly in a cage.
Whenever a thought comes to mind, repeat this sentence.
Whenever I think of something, I recall the past experience.
Whenever a thought arises in my mind, I will actively and fiercely lock this greed into a cage.
Investing is a long-term race. Winning is not losing money. Defense comes first.
Repeat again.
Of course, there is actually another very important factor when making this decision.
That is, when the Fed starts its interest rate cut cycle,
If commodity prices start to rise, or even soar sharply,
Can the blogger accept that he did not put most of his holdings in bulk nonferrous metals, thus missing out on this investment opportunity?
Absolutely not allowed!
This is my answer.
Because, in order to wait for this moment, I have been waiting, or rather suffering in the bear market, for three whole years.
For three years, the torture and pain I endured, the dawn I waited and expected, is just a moment.
I will never allow it.
When the opportunity came, the dawn arrived, and the lightning struck, I was not standing where I should be, and I did not hold the position I should hold!
Absolutely not allowed!
The seeds I planted must bloom and bear fruit.
I must persevere through the pain and suffering until the harvest!
This is the decision that I cannot go against deep in my heart.
A special chapter is opened to record the journey of the past few months, which is both an end and a beginning.
About recent market conditions:
1. Dawn is approaching.
It is almost a foregone conclusion that the Federal Reserve will cut interest rates.
In the past two weeks, the US dollar index has fallen sharply, the RMB has appreciated significantly, and a large amount of funds have begun to flow into the country.
This is just the beginning.
The real moment of opening was in mid-September when the Federal Reserve officially announced an interest rate cut.
It is foreseeable that a new round of market, or even a century-long market, is about to emerge.
Who will stand out, take the lead, and dominate the market in this wave is a matter of opinion.
2. About updates.
There are too many things to do during the summer vacation, so I can only update intermittently. After September, the mythical beast will return and I will be able to update normally.
3. About risks.
Global capital flows are shifting again. This is a larger financial and monetary cycle, and many prerequisite investment factors will reverse.
Of course, many investment opportunities will also come.
We must pay attention to the risks of dollar depreciation and falling US stocks.
In addition, we must also be vigilant about the inflation risk brought about by the depreciation of the US dollar, the rise in commodity prices, and the rise in prices of various domestic factors.
Stay away from those low-end foundries that have no technical content and are sensitive to bulk prices.
Because the profit margins as thin as a razor blade are likely to be swallowed up by the future inflation.
Similarly, for various consumer stocks, including liquor stocks, real estate stocks, etc.,
Although, in the past six months, it has plummeted again.
In fact, the PE of many stocks has dropped to 10 times, or even 8 times, and the dividend rate is also very attractive.
However, the blogger remains pessimistic.
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