Written by | Yijia
Observer | Black Bread
“Do you think investing is science or art?”
Tanuki from the other side of the ocean paused for a moment and said, “Well… I think it’s art.”
1
Melvin Capital, the top hedge fund in the United States, never dreamed that one day it would be harvested by retail investors.
On January 11, 2021, the ancient American game company Game Station (GME) suddenly exploded, and its stock price rose by 12.72% that day.
Previously, due to poor management and bleak prospects, GameStop was looked down upon and shorted by many institutions. Among them, the short representative is Melvin Capital.
However, this game company has grown up with many young and middle-aged people. At its peak, it had nearly 7,000 stores around the world, which can be said to carry the youthful memories of many people. Soon, DeepFuXXingValue, the opinion leader DeepFuXXingValue of the stock section “WallStreetBets” of the Reddit community in the United States, rose up and called for doing more, and the friends responded one after another.
Fueled by the Internet, retail bulls unexpectedly formed a joint force. Not only trading players, but also professional gamblers, housewives, and even rappers are gone. Many American retail investors are fighting with hedge funds in a way that Wall Street cannot understand.
After that, combined with the strong promotion of former Facebook executive Chamas and Iron Man Musk and other big Vs, GameStop skyrocketed by more than 20 times in just one month. In the end, the shorts were defeated, and Melvin Capital lost a huge $6 billion that month, making it the most wronged short.
This case of retail investors fighting against Wall Street was reported by many media and sparked heated discussions around the world.
As a retail investor, Brother Li, who is engaged in design work in the United States, also entered the market.
Mentioning this experience last year, Brother Li looked relaxed.
On a Saturday in October, I video-connected with Brother Li in Atlanta. At 11:00 p.m. local time, Brother Li and his family had just returned home from eating outside, and we had a conversation according to the agreed time.
At this time, the country is sunny and sunny, but it is already late at night in Atlanta. However, I can’t see the situation outside the window in the video, the indoor light is very strong, Brother Li is smiling, and it doesn’t feel like it’s dark at all.
Brother Li, who lives in the United States, wears a light blue coat and no glasses. He speaks in a leisurely manner, without any major emotional ups and downs.
Recalling that battle, although the market was frenzied, Brother Li did not take the lead.
Brother Li feels that the volatility is so high that there will definitely be trading opportunities. However, it is dangerous to be short because there are anti-aircraft guns everywhere. It is also very dangerous to chase the rise, if you are not careful, you will be set at a high position. After calming down, he decided to participate in long positions by selling puts, quietly digging out a small piece of the market feast.
For Brother Li, this kind of extreme operation is already familiar.
In many years of trading, Brother Li has always maintained a special type of position, which he positions as a lottery position.
In Li Ge’s view, lottery positions are mainly used to catch flying knives against the trend when a black swan occurs, or to pick up cigarette butts when the selling conditions are set in advance when it is extremely underestimated, or to use option strategies when the risk-benefit ratio is attractive.
Although this part of the position is very small, it has also contributed a lot of Alpha in the past investment.
Brother Li thinks that special opportunity trading is similar to a hand-to-hand battle. It may not affect the overall situation, nor can it reverse the company’s business trend, but it has value for traders.
In addition to GameStop, Brother Li’s other cases include Xunlei, which is widely despised, Yandex, which uses saddle options to buy bottoms, and WH Group, which is affected by the trade war, and so on.
Brother Li believes that even for long-term price investment, it is necessary to take a small number of positions for trial trading. The income is second, and the main purpose is to keep yourself in the market, sharpen your perception and make it sharper.
He thinks that the death method of value investment is that the perception is gradually dulled, and a self-reinforcing cycle is formed. Once a setback is encountered, it will be a major loss. One way to evade is to disperse, and the other is to maintain evolution, often deny yourself, and then carefully verify.
For derivatives such as options, Brother Li already had experience when he was a student.
In 2000, after finishing high school at the High School Attached to the Central Academy of Fine Arts, Brother Li came to the United States to study.
At the time, my mother was still working in Fremont, Silicon Valley. Not long after he arrived in the United States, Brother Li witnessed the process of technology stocks rising from the bubble to bursting, and then entering the depression and bear market.
Recalling the scene at that time, he said, “When I entered the market in 2000, I didn’t have much money at the time, and my impression was that it fell every day.”
This experience gave Brother Li a first-generation experience of extreme decline. At that time, the tool to let oneself avoid accidents was options.
That year, he didn’t even know what an option was. He just heard that it could protect stocks, so he bought them ignorantly.
19 years later, Brother Li, who is already a financial contributor, published the popular science article “Options are a Killing Sword” in “China Securities Weekly” in two episodes.
In the article, for the sake of easy understanding, he also used terms from martial arts novels to describe various option strategies, including Dragon Fighting in the Wild – its bloody black and yellow is a conservative long strategy for selling puts, Seeing the Dragon in the Field – Master Li Jian is buying Leap call’s strategy of picking up cigarette butts, Kanglong has regrets – profit can’t last long is a high-level long-term protection strategy of buying and selling puts at different prices at the same time, flying dragons in the sky – adults are also double-buying long-term volatility strategies and profit She Dachuan – Lijun Zizhen is a simple hedging protection strategy for holding underlying stocks with superimposed options and so on.
Among them, seeing the dragon in the field – benefiting to see the adults is the most commonly used strategy by Brother Li.
For some stocks that have no risk of bankruptcy within a few years and have been at the bottom for a long time, Brother Li often takes 2-3% of the position to buy some out-of-value leap calls that expire in one or two years as lottery tickets. He believes that the risk at this time Earnings ratio is usually the highest.
When buying a distressed reversal company, Brother Li thinks that leap call is more efficient than the underlying stock. This is the advantage of small investors, and the liquidity is too poor to accommodate institutional funds.
A leap call is a special case of a long-term call option, which refers to a call with an expiration time of more than one year and a lower strike price.
Chen Da, a popular Xueqiu user who once worked as an investment consultant at TD Ameritrade, a leading US brokerage firm , believes that leap calling is actually a speculative strategy, not an investment behavior. Because as time goes by, the time value of options will decrease.
For Brother Li, options are indeed a pure transaction, and you need to find out when the pricing is wrong. For example, in December 2021, Ali sold a bimonthly contract with an exercise price of $20 for more than 20 cents per lot. At this time, he can boldly sell the cover put.
Although options are used very slickly, Brother Li knows how to use different strategies according to different scenarios.
In the strategy of picking up cigarette butts, Brother Li feels that, unlike A shares, which have certain downside protection, US stocks may fall to the net-net level.
A net-net is the buying of a company’s stock at a price well below its intrinsic value, and is one of the oldest investing methods. Net-net generally uses the conservative liquidation value of the company to evaluate the intrinsic value of the stock. It means that finding a company whose value is still higher than the stock market value even after liquidation can ensure profits.
Chen Da believes that the net-net strategy is relatively old and is not suitable for modern investment. Generally, these opportunities will only appear in large numbers during the stock market crash or the Great Depression. Moreover, even if such an opportunity arises, it may be a value investment trap.
After stepping on similar thunderstorms, Chen Da set a rule for himself not to touch companies with a market capitalization below 1 billion.
Contrary to Chen Da’s point of view, Brother Li feels that he will focus on US stocks with a market value of less than 400-500 million yuan, because this is a track that institutions do not pay much attention to. Moreover, in this field, the trading level of American retail investors is not as good as that of A shares. Investors can find some trading opportunities through in-depth research.
Among them, Brother Li, who lives across borders between China and the United States, pays more attention to Chinese concept stocks.
Brother Li feels that although they are second-class citizens in the U.S. market, China concept stocks still concentrate most of the leading companies and the best managers, engineers and product managers in China’s new economy, and the price-performance ratio is much higher than that of the GEM .
In Li Ge’s view, Chinese concept stocks are actually a super-cyclical industry. New technologies or models quickly overturn old ones, and are also affected by economic and monetary policies, resulting in huge price elasticity. Moreover, the short-selling rate of many Chinese concept stocks as high as dozens of percentages also ensures liquidity and flexibility. Traders can use option combinations to capture most of the market except for the plunge.
In 2017, Brother Li felt that Jumei Youpin was more suitable for cigarette butts, with a low valuation, a good balance sheet, and a small market value. In addition, there was an unfinished privatization offer to support it.
However, Brother Li still feels that he has no idea. The reason is that the moral hazard of major shareholders or management is very high.
Brother Li believes that many overseas listed companies are actually not very regulated, major shareholders have the absolute right to speak, and the risk of privatization at low prices is great. There have also been moths such as Dangdang.com and Renren.com among the Chinese concept stocks. If you step on one of them, you will be thundered.
For this kind of company that is both familiar and unfamiliar, Brother Li said, “China concept (shares) are all Cayman companies, retail investors can’t find it, it all depends on character.”
Then, how to judge the character of major shareholders?
Brother Li accidentally got the answer from a manual skill he acquired since childhood.
2
On February 16, 2017, Xueqiu’s operating account “Snowball Asking” issued a reward post: Is your job related to your major?
Brother Li replied: “Absolutely the same. I wanted to do art since I was four years old. I took the high school entrance examination of the High School Attached to the Academy of Fine Arts. I did this for studying abroad. But I wanted to draw when I was young, and now I do design for the support of my family. It is very dedicated. But in retrospect For a moment, it might have been good if I had studied business at the beginning, and my second interest was making money, but unfortunately my family never thought of training in this area, and there was no such atmosphere.”
Learning to paint since he was a child, Brother Li almost spent his youth in the ocean of art.
Brother Li has never taken the high school entrance examination or college entrance examination, so he has never cared about cultural courses. Compared with the junior high school days where the family education was stricter, Brother Li basically let himself go when he was in high school attached to the Academy of Fine Arts, and basically no one cared about him at school.
In the Academy of Fine Arts, you don’t need to take cultural courses and college entrance examinations, but just look at the rankings of professional examinations. The advantage is that you have a lot of free time. During high school, Brother Li took professional classes in the morning and read idle books in the library in the afternoon. Sometimes he and his teacher went to the construction sites of Metro Line 1 to collect antique porcelain pieces, visited Panjiayuan, and drank and chatted at night.
From childhood to adulthood, Brother Li has drawn at least tens of thousands of portraits. He feels that he has a good sense of people’s faces, and he is basically accurate in seeing people.
Brother Li feels that a person’s life experience and personality must be engraved on his face, and his experience and personality will have an important impact on his future life.
One day when he was watching the market, Brother Li had a whim, since the face carries a person’s past, isn’t it similar to the candlestick chart. If the K-line chart can be used to deduce the future trend of the stock, can the face of the boss of the listed company also be used as a superimposed indicator for judging the company?
Soon, Brother Li had a face-to-face interview with the boss of the listed company he was following, and posted a series of posts on Xueqiu, “If you want to ask whether the stock is good or bad, the face of the boss will determine life and death.”
Following the example of the “Yuedan Ping” hosted by the Xu Shao brothers in the late Eastern Han Dynasty, Brother Li commented on the appearance of each entrepreneur in the post.
Among them, he gave a meaningful evaluation to Chen Ou, the founder of Jumei Youpin.
He wrote, “(Chen Ou) has a heroic appearance, standard facial features, tall and straight eyebrows with arrogance, nose, mouth corners, and jaw lines are very tough. He is very smart and good at thinking. But what caught my attention the most It was his eyes that reminded me of the word Eagle Watching Wolf Gu used to describe Sima Yi.
Many people say Chen Oushuai, but I have never felt it deeply. It would be more appropriate to say “cool”. “Cool” is cool. The ancients said that the eagle watches the wolf, and it is resolute and ruthless. The difficulty factor of Lang Gu is too high, I think it is very difficult for Chen Ou to do it, let’s call it “Wolf Vision”. You need to be careful when dancing with wolves. When it is in a good mood, it will bring back a prey for you. When it is in a bad mood, it is common for it to bite you. If an official asks about the outcome of privatization, I think there is a high probability that the price will be reduced. This is pure speculation, so please don’t hit me. “
Three years later, Jumei Youpin really proposed privatization at a low price of $2, which caused an uproar across the Internet. Compared with the earliest US$7, the privatization price has been greatly reduced, and Brother Li’s prediction has been fulfilled.
Chen Da believes that compared with the IPO price of 22 US dollars, Jumei Youpin harvested 20 US dollars in this privatization, and then bought assets worth 5 US dollars at a price of 2 US dollars. The founder Chen Ou and the privatization buyer group became the biggest winners, and all other investors were losers. Chen Ou harvested the investors who trusted him the most.
Brother Li feels that the cultures of China and the United States are very different. The United States values the spirit of contract and rules. In contrast, China is dominated by the rule of man, which mainly depends on people. No matter how good the company’s financial report is, as long as the person changes, the previous ones may not be counted.
Brother Li believes that in the reversal of difficulties, the role of management is greater than that of hidden assets. Most good, rich companies get into trouble because of human error.
Although he may not necessarily make much money from it, Brother Li still avoided many pitfalls by virtue of his physiognomic skills. He said, “If the boss doesn’t seem to be reliable, I will pass it.”
In the past, Brother Li, who was born in a literary and artistic family, also tried to go further and further on the road of art. In middle school, besides painting, Brother Li suddenly wanted to learn guqin one day, so the family arranged for him to study with the disciple of the famous teacher Guan Pinghu.
Not long after, Brother Li taught himself the piano again. A year later, I was basically able to play Chopin’s Nocturne series.
After going abroad, Brother Li studied design as a major, and continued his artistic life after going overseas until he returned to China in 2006.
Brother Li felt that it was a good time to return to China at that time. As soon as he returned to Beijing, he had a clear goal and seized the time to get married and have children and save his first pot of gold. During that time, he opened a juice shop, worked as an art director for a magazine, participated in exhibitions in Hangzhou, visited Wutaishan Design Hotel, participated in Olympic-related projects, etc., and did various things.
Before returning to China, Brother Li also paid attention to A shares. However, I didn’t understand anything at the time, so I followed an elder to buy it.
Brother Li clearly remembers that the first A-share he bought was LMZ. At that time, the uncle knew a lot about LMZ and had bought the top 10 largest shareholders.
Since he was busy with starting a business, Brother Li also forgot about stocks. Until the stock market crash in 2008, when my uncle asked, he had not sold the double-faced needles.
After opening the account and reviewing the trading, except for doing a T in the middle, I basically did not operate. The shareholding rose by more than 10 times according to the recovery price, and then fell back.
The uncle was surprised when he heard that, and he left at around 30 yuan. He never expected that the young man could survive.
During the famous subprime mortgage crisis, Li Ge experienced a peerless stock market crash in a daze. Although he made money in the end, Brother Li still has a deep impression on him after going through such a roller coaster.
Brother Li concluded that this market can make money, but he has not yet found a selling mechanism.
One day, Brother Li heard a stock critic introducing ST shares on CCTV’s financial program. He said that there is no type of ST funds in the market, and suggested investors not to participate.
After watching the show, Brother Li became excited instead. After further research, he unexpectedly found that speculating in ST stocks was very in line with his trading idea of needing to lock in the selling time in advance.
Brother Li thinks that ST shares in the A-share market are a system of arbitrage, which mainly reflects the occupation of various resources by state-owned enterprises. However, no matter how good the resources of state-owned enterprises are, the first goal of most companies is not to bring returns to shareholders. It is best to buy when the management is forced into a corner and all parties can form a joint force for a short time. The hat is off and the crisis is eased and sold.
After doing this for a few years, Brother Li made a lot of money, and he was able to withdraw money from time to time to subsidize the physical business.
Soon in 2014, the A-share bull market also came.
However, this national feast is not a good thing for Brother Li. Brother Li found that all low-priced ST stocks rose all at once, and it was almost difficult for him to find cheap targets.
Without a margin of safety, Brother Li is not at ease.
In the bull market, Brother Li can only continue to look for undervalued models. Since the bull market came, the market capital was very abundant, and Brother Li found that there were more opportunities for mergers and acquisitions.
He has observed that reorganized stocks often rise in pulses after the announcement of the reorganization results. After careful consideration, he specifically looks for stocks in the market that have adjusted their stock prices but have potential reorganization opportunities to ambush in advance.
Among them, he focuses on individual stocks that are about to come out in the first and second trials, and then finds the right time to rush into the market, and sells them after the reorganization is successful.
It’s a pity that the good times didn’t last long, and the stock market crashed suddenly.
At that time, Dongling Grain and Oil, which was heavily held by Brother Li, was unexpectedly suspended. Although there is already a lot of floating profit, Brother Li still feels very uncomfortable watching the market rage.
At that time, Dongling Grain and Oil was integrating potash fertilizer assets, and the visual inspection was positive, but who would have thought that it would encounter extreme market conditions.
It was hard to wait for the bailout, but the market did not buy it, and Dongling Grain and Oil fell to the limit as soon as trading resumed. Brother Li was dumbfounded when he saw it.
Still, good luck. During the session, there was a momentary opportunity for the stock price to open for more than ten minutes, and Brother Li quickly ran away. This thrilling escape gave Brother Li a deeper understanding of A-shares.
During that time, Brother Li’s family also immigrated to the United States. Seeing that there are no chances in the A-share market, Brother Li moved to the US stock market. After experiencing the thrill of concentrated shareholding, Brother Li also began to diversify his shareholding.
Since he has studied, worked, and invested in both China and the United States, compared with China, Brother Li feels that he can understand American culture and accept it moderately, but he cannot participate heavily in sports like baseball.
After arriving in the United States, in order to facilitate his family to buy and rent a house, Brother Li also got a local real estate agent license.
In the process of researching real estate, Brother Li accidentally discovered a hidden listed company-JOE.
Although the main business does not have a particularly good business, St. Joe has a land bank of more than 100,000 hectares in Florida. It is probably the largest landowner in Florida and can be said to be a standard land bank.
The chairman of this company is the famous fund manager Bruce Berkowitz (Bruce Berkowitz). Under his integration, the financial statements of the company have been optimized, and the balance sheet is quite clean. There is a lot of cash in the account and not much debt. .
After the COVID-19 pandemic, St. Joe had tracts of land that could be developed, and the value of fixed assets suddenly exploded.
Brother Li believes that this discovery is mainly due to his long-term accumulation, and his favorite movie “Founder” also has a similar view. In the film, the first CEO of McDonald’s, Harry J.Sonneborn, seduces the founder of the company, Ray.Kroc: “You don’t understand what business you are in. What you are doing is not a hamburger chain, but a store lease. Land, only land That’s where the money is.”
Soon, Brother Li posted two articles on Xueqiu to introduce this rare cigarette butt stock, and reviewed the operation of St. Joe in the 2020 summary.
In the summary of the year, looking at the ticket pool, besides Sheng Qiao, Brother Li also manipulated dozens of individual stocks.
Among them, Brother Li also holds an unpopular target OPES, which is actually a Spacs.
Spacs refers to special purpose acquisition companies (Special Purpose Acquisition Companies), also known as “blank check companies”. Spacs are publicly traded companies with a two-year lifespan formed for the sole purpose of merging, or “syndicating,” with a privately held company so that it can go public.
Chen Da thinks that Spacs generally raises funds first, and then establishes a shell company to find assets to inject. This saves time and cost compared to an IPO, and it was popular before. However, because some emerging concepts are easy to put into it, and it also avoids the pricing model of traditional investment banks, Spacs is suspected of cutting leeks.
Brother Li believes that, similar to betting on the restructuring of ST shares, Spacs is still an arbitrage transaction. There are two main points of exit, one is when the party intending to reorganize is announced, and the other is before the official bell is ringing, respectively, when the target is the announcement of the reorganization of ST shares and the removal of the cap.
As long as it can make money, Brother Li will pay attention to it, and he can often find stocks that make him crave. However, Brother Li is also cautious about holding shares. He said, “Try not to fall in love with a company.”
Brother Li thinks that the biggest misunderstanding in investing is to firmly believe that the company you buy has no cycles and can go through bulls and bears forever.
In order to match words with deeds, by 2021, Brother Li will change the ticket pool again. Among them, like energy stocks, Brother Li almost bought the entire track, covering the upper, middle and lower reaches and oil service companies.
Brother Li thinks that buying the wrong company for the right industry often happens. If the research is not thorough, sometimes you can simply buy a basket of positions.
In energy stocks, Brother Li actually paid attention very early.
Since 2018, Xueqiu energy stock research expert Black Bread (random door: previous work) has continuously posted posts optimistic about the reversal of energy stocks. Brother Li also resonated quite a bit. He believes that energy stocks do have opportunities to reverse their difficulties.
Among them, Black Bread is particularly optimistic about Lanci Resources (RRC).
In 2004, Lankey Resources drilled the first shale gas well in the Appalachian region of the United States. Afterwards, Lankey Resources started the era of family life. In 2014, the stock price of Lanci Resources rose to $93, a 20-fold increase in 10 years. After that, after several consecutive years of decline, now the big-level opportunities are coming again.
Brother Li thinks that based on the valuation alone, Lankey Resources undoubtedly has a high value rate. The company’s proven recoverable resources are worth close to US$10 billion, but the market value is only US$1 billion, and there is still good volatility.
But the question now is, have energy prices bottomed out?
Because he was deeply impressed by the extreme drop, Brother Li wanted to buy the bottom, but he was unwilling to take the risk of the stock price continuing to plummet.
In the end, after comprehensive consideration, he decided to go off the beaten track on Lanqi’s resources.
3
In 2000, when he first arrived in the United States, Brother Li once went to the bank to deposit a large amount of tuition fees. However, at that time, under the persuasion of the bank clerk, I accidentally bought a wealth management product. By 2006, when they are all withdrawn, the annualized income of wealth management products will be about 10%.
Just over a year later, the subprime mortgage crisis broke out, and Brother Li witnessed a large number of bank wealth management products explode. Brother Li was glad that he had to go to school a few years earlier, otherwise he would have become cannon fodder.
Afterwards, as long as it is an investment, Brother Li must thoroughly understand the underlying assets.
When it comes to the bottom line of investment, Brother Li said, “When you enter, you have to consider the worst case.”
In the research of Lanqi Resources, Brother Li thinks that there are at least three risks that need to be paid attention to. One is the time cost. Energy stocks are ultra-long-term products, and it is difficult to determine how long the waiting time will be. The second is liquidity risk. Energy is an industry with heavy assets, heavy liabilities, and strong positive and negative feedback effects. Once liquidity management is not good, shareholders may be wiped out. The third is the risk of price fluctuations. Even at a low level, individual stocks will still fluctuate very violently.
After comprehensive consideration, Brother Li decided not to buy stocks or options for Lankey Resources. He felt that buying bonds due in 2023 was a more cost-effective choice.
On November 27, 2019, Brother Li published the article “Buying the bottom first and buying the debt” in the “Securities Market Weekly” to give a comprehensive explanation.
Before thinking about victory, think about defeat. Brother Li has always considered what will happen in extreme situations.
Roughly calculated, if you buy Lankey Resources bonds at the current price of US$87, the interest rate will be US$15 in the next three years, and the actual cost will be US$72. According to the worst case scenario, assuming that the company fails to reorganize and implements a liquidation auction, even with a large discount, the asset quality of Lanci Resources can be worth at least 4 billion US dollars. Deducting the priority repayment of bank loans, the creditor can get back the principal with a high probability, but it only needs to pay the time cost.
Black Bread believes that for Lanci Resources, there is basically no risk in using bonds to buy bottoms, and the successful refinancing in January 2020 also confirmed this point.
The main reason why Black Bread did not choose to buy bonds was that the upward space for income was limited. Since I have just started working and have spent a lot of time in this industry, I am willing to take greater risks to fight for higher returns. He joked that it might be because Brother Li has a baby at home, so the risk considerations are different.
In Brother Li’s position allocation, in addition to lottery positions and stock positions, bond positions are also an important part.
Since bond investors are mainly institutions, and institutions have a low risk appetite, they will only enter the market after seeing a clear signal, so individual investors can have a more leisurely time to find trading opportunities in the bond market.
Brother Li thinks that a troubled company changes gradually during the reversal process. Sometimes the business operation has turned, but the bond price has not yet reflected it.
When the operation is on the right side and the bond price is still on the left side, Brother Li will enter the market at the right time.
For example, Signai Jewelry in 2020 is a good opportunity. At that time, the turning point in business operations has appeared, but the face price of its bonds has remained at more than 70 US dollars. According to Li Ge’s calculations, due to the sharp rise in the price of precious metals, Signai Jewelry’s inventory has increased in value a lot, and it is not too worrying even if it goes bankrupt and liquidated.
Having said that, Brother Li has encountered bankrupt companies.
While allocating Lanchi’s resources, Brother Li also bought the bonds of another small oil company, Unity Corp, at a 40% discount. However, Unity Corp will not be able to survive the reversal, and the company will go bankrupt and reorganize in 2020. Brother Li participated in the re-listing through debt-to-equity swap. At that time, the company’s market value was discounted by 50%, and the price was around US$3. Later, when it rose to US$18, Brother Li withdrew. It took him more than half a year to complete this long transaction.
In 2022, urban investment bonds on the other side of the ocean are booming. When asked whether he would also consider investing, Brother Li made it clear that he would not participate.
In the view of Brother Li, the balance sheet of such assets is very opaque, and you have no idea where the underlying funds will be invested. The bonds I participated in have a clear whereabouts, and I bought short-term bonds with relatively short maturities, so future changes are relatively predictable.
In addition to general bonds, Brother Li also pays special attention to a similar product-real estate trusts (REITs).
Brother Li believes that real estate trusts implement mandatory dividends, which have a debt-like nature, and their beta has always been lower than that of the market.
Brother Li thinks that real estate trusts do not only include real estate, but are related to companies such as midstream pipelines, warehousing, and transportation, and are also related to the macro environment, which requires cross-border understanding.
Black Bread Introduction A recent study by Sieger showed that the long-term return of real estate trusts is similar to that of stocks, but the current market is also divided, and the specific return depends on the market segment.
Chen Da thinks that real estate trusts mainly invest in real estate through securitization without actually owning real estate. In the long run, the income of real estate trusts is still good.
Brother Li believes that there are three main advantages of real estate. One is that it can be used as collateral for personal credit lines, HELOC. loan.
The second is mandatory lock-ups. I believe that during the global crash last year, many people had the idea of reducing their positions in stocks, and they almost lost their jobs and urgently needed liquidity. Selling a house is too troublesome, and you can withstand the fluctuations.
The third and most important benefit is that you can fully control it. The companies behind the stocks pay dividends and repurchase, and mergers and acquisitions cannot be controlled by minority shareholders.
Because of his thorough understanding of American real estate, his idea of real estate trust allocation is very simple, which is to collect rent.
After getting the real estate brokerage license, Brother Li also joined the real estate brokerage group to participate in the exchange. After joining the group, Brother Li found that the communication in the group was active. Brokers from all over the place were saying that the house price was going to rise, and he realized that inflation was going to rise.
In addition to real estate changes, his previous experience in investing in energy stocks also made Brother Li vigilant against inflation early in the morning.
Now, Brother Li will clearly start from the macro, top-down, and then decide on the specific configuration. This is like choosing crops based on the weather. Different climates are suitable for different crops.
Brother Li feels that the current macro environment is very unstable. The reason is that mature economies have high debts, the economic recession cycle is getting shorter and shorter, the volatility is increasing, and there are more and more trading opportunities.
By 2022, the strongest macro factor affecting the market is inflation. Brother Li thinks that the core factor of inflation is energy and gas oil. Energy is currently the shortest-term asset, forming a seesaw effect with long-term assets. He believes that essentially all stock and bond market participants are energy traders.
After buying Lanqi resources, Brother Li will continue to pay attention to energy prices. When inflation is confirmed, I will immediately switch bonds to underlying stocks, or even options.
Black Bread thinks that although Brother Li used bonds to buy Lanqi’s resources in the early stage, his later operation of buying options with bond interest shows that his strategy is not blindly conservative, but has an offensive part.
In Li Ge’s configuration, the stocks, bonds, and lottery positions are dynamically managed and rotated according to the opportunity. For the same target, in different scenes, Brother Li may use various weapons.
Brother Li believes that the right way to invest is of course long-term trading, allocating blue-chip white horse stocks and striving to outperform inflation. But this does not apply to everyone, or it does not apply to the vast majority of people, because long-term investment is basically against human nature. When the market is volatile, some special trading methods may be more suitable for human nature.
If there is a lottery opportunity, Brother Li will sell the bond rotation to trade, and his bond position is reserved for this.
When the short-squeeze market of GameStop appeared, Brother Li used part of the short-term debt rotation in March to sell deep virtual value puts with higher cost performance. Because it is replacing the bond position, Brother Li is selling the most out-of-the-money. The price of this put is about 2 yuan, and the premium is almost 7%, which is more cost-effective than the short-term bond with a yield of 3% due in two months.
Brother Li thinks that there must always be some lottery tickets, otherwise life will be too boring.
After joining the UI design department of a local bank, Brother Li has been working from home for the past two years. His life rhythm is not fast, and he spends less time on transportation. Even shopping malls are rare social activities.
Brother Li also paints at home every day, and his hand-made “Tang Feng” was also well received on Xueqiu.
Chen Da’s deepest impression on Brother Li is that the painter, who was delayed by investment, has a calm investment style, similar to himself in asset allocation rather than gaming.
Recalling the investment enlightenment, Brother Li felt that the library of the High School Attached to the Academy of Fine Arts contributed a lot. At that time, he read a lot of biographies, especially the biographies of military strategists. He thought that business management was very similar to war. Just like in World War II, how the capital market reflects macro events can also be used as a reference today.
In addition, I also like to read philosophy books. However, I have never read investment books. Brother Li believes that investing is investing in the future, and what you see is reflected in the stock price. The scientific method can train basic skills, but it is more about grasping human nature.
When asked about the similarities and similarities between art and investment, Brother Li thought it would be helpful for observation. After studying art, I have a sense of the development of things, which is very helpful for judging the future situation.
Brother Li said, “Investing is like painting, sometimes you have to step back and take a look.”
end
On December 15, 2022, the Federal Reserve announced an interest rate hike of 50 basis points, completing the seventh rate hike this year. After the hike, the U.S. benchmark interest rate reached its highest level in 15 years.
For Brother Li, this is actually not a surprise. He noted that global central bank tightening is drawing to a close as some cracks in financial markets are beginning to show. Since the third quarter, I have adjusted some of my heavy positions in energy stocks to precious metals and other positions that directly benefit from the peak of policy tightening, making the whole more balanced.
@今日话话@苗哥很婚@黑色茶@陈达美股投资@Ricky @魏斌杰
$GameStop(GME)$ $San Joe(JOE)$ $Range Resource(RRC)$
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