Uncertainty principle

In the macro world, a car, a person, a leaf on the road, we can observe both the position and the momentum, but in the microscopic quantum world, because the observation behavior itself interferes with the state of the particles, it is impossible to measure both position and momentum at the same time. The more accurate the position is, the less accurate the momentum is, and vice versa.

This is the principle of uncertainty in quantum physics.

All the observations and analyses in the stock market are not for academic research, but to make money.The results of observation and analysis will affect investors' expectations, expectations will change investment behavior, and behavior will affect the premise of your observation and analysis conclusion.

A giant public fund manager is about to leave. As the style of the fund manager who is most likely to take over is quite different, the market expects the new fund manager to sell the heavy shares held by his predecessor, so he is the first to sell or even sell short. As a result, the stock price has really fallen sharply, and the new fund manager has decided not to sell for the time being.

This is called "price in" in investment (there seems to be no corresponding Chinese for such an important concept, who will create one? When we see a piece of information that affects the stock price, we must not think that we have found the money. The current stock price is likely to have "price in" the news.

According to the traditional efficient market theory, any information that affects the stock price will affect the stock price immediately, but it is impossible in practice.Even if everyone in the market knows this information, it cannot be completely "price in".

This is precisely because of the "uncertainty principle"The results of everyone's analysis and prediction are reflected in their behavior, and their behavior changes the market price, which changes the premise of the observation conclusion.Coupled with the fact that everyone has different risk pricing or expected return requirements, they also have different views on informationThis leads to either insufficient "price in" or excessive "price in". Therefore, even if everyone knows the information, it is impossible to completely "price in".

An important task in investment analysis is to find out how much the current fundamental information is "price in" and whether there is room for profit.

A set of conjugate relations made up of "uncertainty" in the micro world are position and momentum.In the world of stock investment, time and space also constitute a set of "uncertain" relationships.

There is at least one uncertainty about time and space

A bond, each point in time (time) corresponds to a clear value (space), and investors' expectations remain the same, so it will not interfere with bond prices (regardless of benchmark interest rates), just like objects in the macro world.

The reason why stocks are not bonds is that the macroeconomic and business expectations they reflect are not clear.There is at least one uncertainty in space and time. Time and space, when one quantity becomes more certain, will trigger some speculative behavior of investors, causing the other quantity to become more uncertain.

Maotai, as output, sales volume, cost, price are all relatively certain factors, the long-term rising space is relatively certain, but the specific how to rise, how much each year, is uncertain.

Why is the share price of a company with a net worth of more than 100 per share more than a thousand? The theoretical explanation is that this is the discount of free cash flow in the future, but the buyer does not calculate it this way. his real reason is that someone will buy it at a price of more than 2,000 or more in the future, as long as the expected rate of return is higher than his own requirements.

It is precisely because of the high degree of certainty of Maotai fundamentals and the certainty of long-term stock price rising space that a large number of non-long-term investors ignore operational information and pay more attention to other short-term news affecting stock prices, including but not limited to:

• Short-term supply and demand fluctuations in operation

• Disturbance on the policy side

• Macro environment such as interest rate liquidity

The volatility of stock prices is aggravated by the disturbance of short-term expectations.Using that famous example of "walking the dog", many people walk the dog to the end, but follow the dog, and the dog runs more randomly and becomes a "dog walking".

The more definite the space, the more uncertain the time; the more certain the time, the more uncertain the space. Therefore, investment should study not only the certainty of the company itself, but also this investment opportunity, whose certainty focuses on time or space.

Investment opportunities of "space is more certain than time"

After December last year, pork prices deviated significantly from the share prices of pig stocks, and meat prices continued to fall. coupled with the traditional off-season after the Spring Festival, expectations also declined, but many pig stocks rose more than 50%. How to understand this market phenomenon?

"Pig cycle" is a typical investment opportunity of "space than time". The characteristic is that the top inflection point and bottom inflection point of the price are bound to come, but I don't know when.I call it "not afraid of him not to come, just afraid of him messing around".

The "uncertainty" of pig cycle investment can be analyzed from two aspects: industry and stock price.

From an industrial point of view, because the rising space of meat prices in the pig cycle can be roughly determined, so enterprises should also persist in smashing pots and selling iron until that time. If only one company thinks so, it is likely to be the big winner in the end, but if many people do so, the result is that no one will quit. AndThe necessary condition of the cycle inflection point is that the capacity supply is clear, and everyone insists that the result can only be a very long time at the bottom of the current cycle.

This is why the expectation of space is too clear, which leads to the change of time.

Another "uncertain" angle is the stock price itself.

Spatially speaking, in the last pig cycle, meat prices more than tripled from the lowest point, Zhengbang and New Hope rose 7 times from the bottom, and Muyuan increased 10 times. Although considering that the last cycle was a super cycle, there were African classical swine fever and environmental factors in the industry, and there was an 18-year bear market in the stock price, the stock price could not have risen so much in a normal cycle (normally, the meat price had more than doubled). The lowest point of the stock price should have risen 3-5 times.

In terms of time, because the demand for pork is relatively stable, this inflection point depends entirely on production capacity. At present, the market's expectation for the upward inflection point of meat prices in the new pig cycle is 2022, 2023 at the latest.

The lowest price of XXX, a pig-raising company, was 10 yuan last year. Assuming that the lowest price in this pig cycle is tripled, it will be 40 yuan in the future. The current price is 16 yuan. If it can rise to 150% in one year, it will be an annualized 58% in two years.

It seems that even if you buy at the current price, the value ratio is good, taking into account the high volatility and the bankruptcy risk of some companies, which is exactly what the stock price is expected in the "Price in" cycle.

And you don't need to take such a long time. If this wave rises by another 50% to 24 yuan, the implied return of the stock price will still reach 66% (one year) and 29% (two years). Considering that the turning point of the cycle is always becoming clearer and still meets the expected returns of a considerable number of people, it seems that there is still room for "Price in".

But investment is not that simple, for example, there is a problem:

The sow stock peaked in March last year and fell back year-on-year. In July and August, the market was already expecting the inflection point of the pig cycle to be 2022-2023. Why did the price of pork stocks not start to "Price in" this expectation until December, rather than earlier?

The reason is that funds are also comparing the expected returns of various sectors. July and August happened to be the time when the expectations of track stocks were strongest. In the third quarter, the hot spot of capital trading in the market shifted to cyclical stocks. Only in November and December, when the market could not find a more cost-effective sector, the investment opportunities of the pig cycle began to emerge.

The funds that really ambushed the pig cycle began to enter the market as early as July. The capital killed in December is the rotation of the plate when there is no track opportunity. Once the stock price goes up and the meat price continues to decline, there are better systematic opportunities in the market, and the capital is bound to abandon pig stocks decisively.

Another risk of volatility is that this wave of rising pig cycle companies are not those that rise when the real pig cycle comes in the future.

There is a time period for raising pigs. No matter how expensive the price of pigs is, they will not sell piglets. Pigs will be fattened, even if they are cheap. So at the top of the cycle, the best enterprises are those with a high proportion of big pigs, large profit flexibility, and the bottom of the cycle, and the best ones are those with a large proportion of piglets, which are more likely to persist until the new cycle.

In addition, before the production capacity is cleared, the market should also be wary of companies with leveraged capacity expansion at the high point of last year's pig cycle, not excluding broken cash flow, which will not last until the day when a new pig cycle comes.

Therefore, in this market, the capital chooses the enterprises with abundant capital, high proportion of pigs or counter-cycle leverage at the bottom of the industry, while avoiding the enterprises with high proportion of big pigs or leveraged at the top.

On the other hand, if the pig cycle does come, the rising companies are not necessarily the same as this wave.Out of the "anchoring mentality", it is easy for retail investors to choose the companies that performed well in the previous wave, so it is easy to buy pastures at the highest point of this wave-being held up, and after the next cycle of pigs, they go to buy a wave of the best rising XXXX and XXX-- to be trapped again.

To sum up, in the investment opportunity of "space is more certain than time":

1. The long-term buying based on this opportunity will continue until the stock price is pushed to the expected return level corresponding to the space and risk.This is the basic fund for the stable upward movement of the stock price

2. The funds of some plate rotation will compare the yield between different sectors.When there are more opportunities for high returns in the market, it will give up this relatively certain sector, and vice versa, the flow of funds in and out also magnifies the volatility of the sector.

3. The fund will divide the long-term logic of a plate into several medium-and short-term stages.In order to choose the target with the most current logic at each stage, the flow of funds in and out has also caused several different stages of rotation to rise.

Let's take a look at an investment opportunity where "time is more certain than space".

Investment opportunities where time is more certain than space

Once the economy goes down, in October every year, the market begins to expect the introduction of a "steady growth" policy. The "steady growth" sector includes a series of industries in the infrastructure real estate industry chain. For example, real estate, building materials, construction, iron and steel, non-ferrous, home appliances, construction machinery and other industries, as well as communications, power and so on, which represent the new infrastructure sectors.

Since the policy of stabilizing growth usually came out after the previous year's economic work conference, specific policies were issued intensively after the two sessions.Although the ultimate beneficiaries of the industry is not only "steady growth" related industries, but it is the first to determine the benefits of the industry, but the strength is unpredictable, so it has become a "time is more certain than space" investment opportunity.

The reason for spatial uncertainty is that local finance has entered an era of hard constraints, and the economic work conference also clearly proposed to control the total amount and adjust the rhythm. The total amount of infrastructure in that year was determined, but it was concentrated in advance to the first quarter (and some were moved to this year last year).This leads to a full game based on the "prisoner's dilemma" in the market, which is characterized by constant conversion of long and short positions.I analyzed the investment psychology behind it in the article "Prisoner's Dilemma: if you want to make other people's money, let's play human nature first."

"No matter how strong the market is, the game funds have a clear time node, and the long-short conversion of the game is very fast, and the more it rises, the faster it falls, even for the funds that are not originally a game, because the short atmosphere on the market is too obvious. I can't help but sell short first. "(for the specific process, you can read that article)

"steady growth" includes two stages: "expectation" and "cashing in", while the game is mainly in the "expectation" stage, at this stage, before the economic work conference in November last year, the market began to anticipate policies, and after the release of the document, the market began to anticipate which sectors would be affected in the future from the relevant documents, and finally to the end of the two sessions and the introduction of policies one after another.

At this stage, relevant policies are being discussed, and market expectations are always changing with the height of speculation of the plate itself. Once speculation is high, investors will think that it is excessive "price in" and begin to reduce the positions of relevant sectors. Once it falls to a certain level, some other investors will think that the sector "price in" is insufficient and begin to increase their positions.

The investment promotion strategy makes statistics on the five industries with the best average performance in the expected phase of "steady growth" in the past five times, including typical "steady growth" expected industries such as building materials, home appliances and non-ferrous materials, and also growth industries such as medicine and electronics, which have nothing to do with "steady growth".

"steady growth" industries are more likely to get increases in the expected phase, but not every time. And judging from the winning rate of the following styleThere is no obviously dominant style, and the whole market takes turns to hype various sectors under various expectations.

In the end, most of the gains in the "steady growth" industry are reflected in the expected stage, and in the second stage of policy implementation, it is no longer obvious, unless there is a catch-up in the expected phase of insufficient growth, such as non-ferrous materials in 2017 and 2020.

To sum up, "time is more certain than space" investment opportunities:

1. Once there is a relatively clear expectation and timeline, the market will push the stock price of the relevant opportunity into place according to a relatively optimistic estimate.

2. After a wave of rising stock prices, there has been a long period of consolidation in the differences between insufficient "price in" and excessive "price in" in the market.There is a continuous withdrawal of funds to pursue other more specific market opportunities

3. As the space becomes clear, the stock price will return to the normal direction of implied income, up or down.-- or there are new expectations that lead stock prices into a new round of "price in".

Butterfly Effect

If a person travels to the market in 2021, then all the investment opportunities last year are certainty opportunities for him. But if he wants to participate in these opportunities, his behavior will change the market, and if he has enough money, it is likely to change the market very much. make a certain opportunity less certain (you can watch the movie "Butterfly effect" and "Black Hole Frequency").

Heisenberg, the creator of the uncertainty principle, said: "in the statement of the law of causality, that is,'if you know the present, you can foresee the future', what is drawn is not a conclusion, but a premise.It is a matter of principle that we cannot know all the details now. "

Investors are always looking for opportunities for certainty, but their plans can't keep up with the changes. The reason is thatThe trading behavior of investors always makes the opportunity of certainty "uncertain" again.Among them, expected return, investment cycle, risk preference, and so on, are all variables that change certainty.

When you have an expectation, others may be expecting you, and when you see deterministic growth, others may be looking at the second derivative of growth.

When you also want to anticipate other people's expectations and consider the second derivative of growth, too many people do so and the market is overly "Price in".

In 2020, some securities firms threw out a valuation forecast based on the 2025 performance of the Ningde era, and the market was in an uproar, but now look at it.At the beginning of the industrial trend, it is a way to make money by beating expectations into the foreseeable future.

By the second half of last year, when the market had become accustomed to valuing the lithium battery sector with its 2025 results, the sector as a whole began to show a continued decline in valuations, although the industry was still booming.

The principle of "uncertainty" tells usDeterministic opportunities only exist before they are discovered by the market, but investment decisions can only be based on certain certainties. How to solve this contradiction?

Your investment decisions need to be fault-tolerant enough to adapt to one of the "uncertainties" of space and time.