In a blink of an eye, the Hang Seng Index has returned to 13 years ago, with a drop of nearly 50% in more than a year, not far from the starting point of 20 years ago. Even Charlie Munger lost 30% of his heavy position in Alibaba. From a 20-year perspective, the Nasdaq and the Dow are still at the top of the mountain, with huge downward momentum. The outlook for Hong Kong stocks, which have always followed suit, is bleak. Wait until next year, which has been falling for three consecutive years, to see if there is a turnaround. Before this unseen change in a century, expecting a V-shaped reversal may not be as expected, and an L-shaped trend may be more likely. At present, the time and space for the bottom of the broader market may not be enough.
The world economy could look bleak over the next decade. At the beginning of the year, it was considered to be in the early stages of stagflation in the 1970s, and now it is more likely to be in the pre-depression period of the 1930s. This is the worst year for a 60/40 equity-bond portfolio in the past 100 years, more than any of the Great Depression and the 10-year bear, see chart below. We are in a period of chaos in the national fortune cycle measured in a hundred years.
In the next 20 years, who will have the fortune of the country is a question we must face. Although the rabbit is savage everywhere, she is still growing. It took the rabbit forty years to walk the road that others have taken for 200 years. It is normal for institutions to lag behind economic development. But rabbits still have huge room to grow. Remove the real estate bubble, and the economic development level of rabbits is at the level of cherry blossoms 50 years ago and lighthouses 100 years ago. At present, the overall situation is not bad, with a complete range of industrial manufacturing capabilities with the most scale advantages, photovoltaics and trams with global competitiveness and huge space, although some high-end manufacturing has shortcomings, but the technological development has been stagnant to catch up for a few years. With all-out efforts to handle their own affairs, coupled with the growing comprehensive national strength, they can cope with any siege and blockade and remain invincible. The current Hang Seng Index is probably the Nikkei Index at 200 points in 1974, as shown in the figure below. It’s not how good the rabbit is, but how good the opponents are. Of course, the future also depends on wise leaders and bad opponents. While investors choose to look forward to, they must also be cautious.
Where are our assets located? Safe undervaluation of high-quality equity for growth and gold against the loss of monetary credit are good options. High-quality equity mainly includes: the stable growth of super-undervalued value stocks as the cornerstone of the country, and the rapid growth of low-valued growth stocks. For the former, my requirement is to grow more than 10% annually in the next ten years in the most pessimistic market and to have an annualized dividend yield of more than 10%. For the latter, my expectation is that in the most pessimistic environment, the company or industry has room to grow ten times in ten years, and the buying price must be in the bottom area.
Looking back on this year’s operations, value stocks are mainly allocated in electricity. Fortunately, this year has not lost any money as of today. The substantial profit of its heavy position in China’s electricity has made up for the numerous losses of Hong Kong stocks. The losses of Hong Kong stocks mainly came from Yuhua and Intron. Yuhua is an inappropriate choice of value stocks. In this market, over-undervaluation is not a reason to buy, but catalysts and growth are. Intron is a growth stock whose positions are too high and concentrated, and the buying price is not at the bottom. Before the market bottoms out, it is difficult for growth stocks to perform well. At present, it is best to diversify to find future stars.
I am full of operations. I’m currently holding over 90% of my position in value stocks. Because I have confidence in the main position target, even if there is a temporary loss, making money is sure, far better than holding cash. I spread about 10% into growth stocks. When there is a big drop, I will increase the position by financing by no more than 5%. The one-year dividend can be returned, and the financing will be cleared when it is rising sharply. The purpose of guerrilla is to sense the wind and rain, and gradually lock in a batch of future ten times stocks at the bottom. At present, we do not seek to make money, but we do not want to lose money. When the dollar weakens, I will allocate about 10% of gold-related targets and increase my allocation to growth stocks to 20%. When the market bottoms out and shows signs of reversing, I will significantly increase my growth position.
Thank you for following my friends. In difficult years, stability is the first, making money second. I look forward to a safe passage.
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