Chapter 83 Rare Species: Grade A
"The opportunity lies in the bond market." Li Feng said it in one sentence.
"Bond market?" Zhao Xinyue was a little confused. "Why the bond market?"
Lin Menghan also felt a little dizzy.
The bond market is somewhat unfamiliar to the two of them. They only know about national bonds, local bonds, and corporate bonds, and they don’t know much more about them in detail.
Compared to stocks, it is another world, and a completely different set of rules applies.
Li Feng patiently persuaded, saying:
"Let's start with the super bull market of 2005-2007. That bull market was driven by the resonance of domestic and international markets. All sectors and stocks in the A-share market increased several times, even dozens of times."
"In fact, when the bull market entered the second half of 2007, the domestic economy showed signs of overheating. That year's Central Economic Work Conference prioritized caution against overheating economic growth and significant inflation, and in December, the central bank raised interest rates for the sixth time. Smart money fled the market, and the bull and bear positions in the market instantly reversed. A bear market descended on countless retail investors, with the index plummeting from over 5,000 points to 1,664 points."
"During this nearly year-long bear market, countless stocks have been halved or even slashed, but one market has experienced an unprecedented bull market: the bond market!"
"The 2001 Book-Entry (Seventh Issue) Treasury Bond 010107 soared from its lowest point of 96.97 yuan to 113.45 yuan in November 2008! It was the only winner in that year's bear market!"
Zhao Xinyue calculated silently in her mind, but said with some disdain, "It's only increased by 16%."
Li Feng smiled bitterly and said:
"Xinyue, these are government bonds. And don't you see the market conditions in 2008? Wang Yawei lost 35 points that year, yet his fund still ranked second. If you didn't lose money, you'd be a stock god. If you didn't lose money and even made a profit, you'd be a stock saint!"
"Don't be dissatisfied."
Lin Menghan thought more deeply and asked, "Why are long-term government bonds the only winners?"
Li Feng nodded and said:
"Because the 2008 global economic crisis was suddenly approaching, countless funds poured into the government bond market for risk aversion and value preservation. At the same time, due to massive money printing and interest rate cuts both domestically and internationally, the risk-free rate of return in the market dropped rapidly, causing the price of long-term government bonds to soar!"
"This is also the origin of the stock-bond rebalancing strategy in the market."
Zhao Xinyue understood a little and said, "Now that the bear market has arrived, should we also buy long-term government bonds?"
Li Feng shook his head and denied it:
"Xinyue, the stock and bond markets are like a seesaw, with funds flowing back and forth for arbitrage. In 2008, interest rates rose and then fell rapidly, leading to a surge in government bond prices. But the situation is different now. As early as the middle of last year, the interbank risk-free interest rate had been falling, and at the end of last year, the interest rate was cut again. The price of long-term government bonds has risen from around 100 yuan to around 106 yuan today. The best days of the market are over. If you enter now, the risk-reward ratio is no longer equal."
"Then what do you want to buy? You, you've been talking about bonds for so long, isn't it just a bunch of nonsense?" Zhao Xinyue pouted.
Li Feng smiled and said:
"There's no chance for long-term government bonds, but there are still Class A bond-like assets. If my predictions are correct, ZJH will soon stop IPOs to save the market. By then, after we've repaid the loan, we can choose the right time to enter Class A."
“Suspend the IPO?”
"Grade A?!"
Zhao Xinyue and Lin Menghan looked at each other, neither of them knowing what this asset was.
Today, what Li Feng said contained too much information. It talked about how to invest, rebalancing stocks and bonds, and suspending new IPOs. Now there is a Grade A. It is really confusing and difficult to digest.
Li Feng drank a sip of tea and continued:
"Suspending IPOs is a common practice during a stock market crash. During the 2008 bear market, IPOs were suspended in September. This time, the Shanghai Composite Index fell nearly 30 points in just over a dozen trading days. Market rescue measures are almost reaching the point of suspending IPOs."
After a pause, Li Feng continued:
"As for Tier A, it's the Class A sub-fund of the tiered fund. This is a very special fund. You can think of the parent fund as an ordinary fund, but it can be split into two sub-funds, A and B. These two sub-funds are very different. The Class A shares are equivalent to a bond, and the Class B shares are equivalent to a leveraged fund. The leverage comes from financing from the Class A fund."
Then, Li Feng came to the computer, tapped the keyboard lightly, and called up the information of the tiered funds. He said:
"The tiered funds currently being issued are very popular, including media, Belt and Road, entrepreneurship, CSI, securities, etc. Among them, the implied yield of Tier A has reached an annualized rate of about 6%, which is worthy of our attention."
"Only 6%, not even as high as the daily limit..." Zhao Xinyue said disappointedly.
Li Feng smiled and said, "Yes, 6% is no different from 3% to you, it's just a few thousand yuan difference. But for Menghan, it's tens of thousands of yuan difference, and for me, it's hundreds of thousands of yuan difference! Although the profit may be small, it can't be underestimated. Only by accumulating a lot can we achieve great success."
Zhao Xinyue silently calculated in her mind that her current funds plus savings were only 90,000 yuan. Even at a 6% return, she could only make a profit of more than 5,000 yuan. She instantly lost interest.
Li Feng stopped talking.
This is the difference between small capital and large capital, and it is also a portrayal of many new stock investors.
When the amount of capital is small, people don’t care about the gains of a few points or a dozen points. With the mentality of getting rich overnight, they chase various hot spots. The final result is that they are like moths to a flame and are harvested by various dealers in turn.
Little do people know that although the profit is small, if you can make stable profits, you will be able to get the blessing of compound interest. As long as you persevere, sooner or later you will turn small funds into large funds or huge funds.
The three of them chatted, and before they knew it, it was six o'clock.
Li Feng looked at the time and changed the subject, saying, "Today is Friday and the market will be closed tomorrow. You two should stop looking. A La Po Po restaurant just opened across the street. Let's go try it." Li Feng changed the subject.
"this……"
Zhao Xinyue was a little obsessed, refreshing the stock forum and looking at various news.
Li Feng advised, "Alternating between tension and relaxation is the key to investing. You're so nervous watching the market when it's open, and so anxiously checking news when it's closed. If you keep doing this, your body will eventually give out. Look, your face has been sallow these past few days. If you don't get enough rest, you'll start losing your hair."
"Besides, less than 10% of the information in the stock market is truly useful. Most of the news is junk. That junk news doesn't appear out of thin air, but has various purposes. Some are market makers calling for buyers, some are black mouths raising pigs, some are brokerages recruiting customers, and most are just trying to create various stock god personas so they can sell courses and make money."
"It's better not to look at it."
Zhao Xinyue was displeased and retorted, "Only by knowing yourself and the enemy can you win every battle. How can you see through their disguise if you don't observe them?"
Li Feng shook his head and smiled, "If you want to read, just buy a few books and enrich yourself and improve your knowledge. It's much better than reading these fragmented knowledge on the Internet. Many of these articles are nonsense, and some are even generated by AI."
"What book are you reading?" Lin Menghan asked with a blink of her beautiful eyes.
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