Source: Brokerage China
Author: Qu Hongyan
Recently, China Yangtze Power hit a historical high and once again showed the slow bull stock trend of "tripling in ten years". The slow bull market has left behind many passers-by and brought good returns to the steadfast investors. It is "rare for those who triple in one year to be like carp jumping over the dragon gate, while those who double in three years are few and far between." On the other end of the investment world, however, violent collapses are also deafening, with many financial products suspected of "Ponzi schemes" ceasing payments, leaving investors with no hope of recovering their investments. Both positive and negative cases illustrate the importance of forming a suitable mentality towards money in one's lifetime; otherwise, sooner or later, you will divorce yourself from your money. "I call this the money mind, a person's IQ can reach 120, 140, or even higher levels, and perhaps some people's minds are good at doing one thing, while others are good at doing another. They can do things that most ordinary people can't do. But I know some very smart people who make very foolish decisions because they lack the money mind." Buffett once said so.
The so-called money mind refers to believing in common sense, believing in compound interest, being cautious and rational, thinking independently, prioritizing security over return, not dealing with people with questionable character, not easily guaranteeing for others, not believing in windfall profits, and not trying to cross legal norms for extra benefits. In today's world of ubiquitous information, everyone's wealth may become the "prey" of those with ulterior motives. Only with the money mind, can one form good behavior habits and shield oneself from separating from one's wealth.
Do not entrust your wealth easily.
Wealth is easy to lose but hard to accumulate, and trust is a vital reason leading to the rapid loss of wealth. "Do not allow anyone else to manage your business unless you can watch their every move closely and understand their behavior; or you have strong reasons to believe in their character and ability. For investors, this criterion determines when you can let someone else make investment decisions for you." Graham's criterion written eighty years ago is so clear. Almost all the investors who lost their wealth in the financial products have violated the above two criteria. They did not have the ability to closely supervise the whereabouts of their funds, nor did they have sufficient reasons to believe in the character of the product issuers. They easily invested their own wealth solely based on others' glib tongue and a piece of commitment paper. They did not act as gatekeepers of their own wealth and ended up with nothing left even if the government punished the wrongdoers. "An ounce of prevention is worth a pound of cure." This is a phrase Munger often says.
Destiny must be in one's own hands, and investors with a suitable money mind will try their best to find suspicious points in their investments to protect the safety of their principal. For example, whether the manager is trustworthy, whether the underlying assets are profitable, whether oneself can timely monitor the risks in the investment process, and whether the sales staff is obtaining large commissions. As long as any unreliable signs are found, these investors firmly will not invest their money.
Do not desire to get rich quick.
As in the capital market and anywhere else, making money is not easy, and desiring to get rich quick will lead to quick loss of wealth. In the capital market, the desire to get rich quickly often leads to investors over-allocating specific stocks, industries, or assets at the worst time. For example, buying high-risk stocks that can gain huge returns once an adventure succeeds, but the chance of success is very small, also known as "whispering stocks" by legendary fund manager Peter Lynch. "They often tell investors a story with explosive effects. These 'whispering stocks' have a hypnotic effect on people, and it is easy for you to believe that the story the company tells has an emotional appeal that can easily confuse you." This is like hearing a very tempting "sizzling" sound, making you salivate, but you did not notice that there is no steak on the grill. In the eyes of investors who lack the money mind, stable yield provided by blue chips such as China Yangtze Power cannot meet their demands. However, historical experience clearly shows that buying stocks lacking in safety solely based on imagined high yields is unwise. The long-term average investment return of general stocks is 9%-10%, which is also the average investment return of stock indexes in history, a benchmark to measure one's investment performance and the benchmark to measure fund investment performance.
Author: Shi Qian. Will this be the arrival of the "real wolf"? The consumption tax rumors suddenly spread in various investment groups yesterday after the close of trading. There are reports that a trillion-level consumption tax reform will be approaching, and luxury goods and high-end services may be the first to test. As of the close of trading this morning, consumer stocks suddenly rebounded collectively, and retail and duty-free areas led the rise. Among them,
The global market situation changes suddenly!
This afternoon, the stock market in Japan suddenly plunged, with the Japan TOPIX index falling by more than 1% rapidly. At the same time, the stock market in South Korea also saw a larger decline in the afternoon, with the Nifty index and Sensex index in India both falling by 1%. This indicates that the European shipping index futures, which represent external demand, also plummeted by more than 10% again. It is worth mentioning that the USD/JPY exchange rate also experienced a noticeable plunge. So, what exactly happened?
A former official in japan stated today that japan's central bank's interest rate hikes may be faster than many people's current expectations. The central bank should strive to better communicate these measures to ensure that the market does not panic. Subsequently, the yen appreciated significantly, and the market began to worry whether the yen carry trade reversal in early August would make a comeback.
It is worth noting that recent data shows that new arbitrage trading has resumed, with leveraged hedge funds increasing their short positions in yen futures. At the same time, the us dollar is depreciating while the yen is appreciating. This undoubtedly increases market volatility. Another data point that is sensitive to yen carry trading is SOFR, which has also shown signs of rising recently.
A sudden plunge is coming
In the afternoon today, the us dollar suddenly took a nosedive against the yen, plummeting by more than 0.5% in a short time. The yen exchange rate is now only one step away from the level on August 5th. On that day, the yen soared by 1.62%, triggering a major drop in global equity markets.
With the yen exchange rate strengthening again, the Japanese stock market has also started to dive. Despite the early strength in the morning session$Nikkei 225 (.N225.JP)$the index began to rapidly decline in the afternoon, with the TOPIX index falling by more than 1%, followed by the South Korean stock index.
The main cause of this volatility may be the recent comments by former Bank of Japan official Watanabe Toru, who is one of Japan's top experts in fighting inflation. According to reports, Watanabe Toru stated today that the Bank of Japan may raise interest rates at a faster pace than many people currently expect, and the Bank of Japan should strive to better communicate these potential measures to ensure that the market does not panic. "The pace of rate hikes may be faster than what everyone expects," he said. "This year, it is absolutely possible for the Bank of Japan to raise interest rates twice."
In addition, on Tuesday, Bank of Japan Governor Ueda Haruhiko submitted a document to the Japanese government stating that if the Japanese economy and prices perform as expected by the central bank, the Bank of Japan will continue to raise interest rates.
On the other hand, the market may also be reflecting the August non-farm payrolls data in the United States. Jefferies Financial Group believes that a better-than-expected employment report will solidify the prospect of a "soft landing" and a 25 basis point rate cut in September, which would be beneficial for the US dollar. An orderly pace of rate cuts may be the most desirable scenario for the Federal Reserve. On the contrary, significantly weaker-than-expected data could stimulate expectations of a recession and a 50 basis point rate cut, which would be bearish for the US dollar and US stocks. As of now, the market is expecting the US to add 0.164 million jobs in August, up from 0.114 million in the previous month, with the unemployment rate dropping from 4.3% to 4.2% and hourly wage growth accelerating from 3.6% to 3.7%.
Will the carry trade be disrupted again?
So, with the appreciation of the yen, is there a possibility that the carry trade will disrupt the market again and create another black swan event like on August 5th? Based on the current data, this possibility is not small.
Standard Bank's G-10 strategy director, Steve Barrow, said:"Closing arbitrage trades does present a serious threat to the optimistic view of future risk assets." The strategist wrote in a report on Thursday that as Japanese interest rates rise and the yen appreciates, the reversal of overseas asset investments that have been recovered from Japanese trade and current account surpluses over the decades may occur. The Bank of Japan, rather than the Federal Reserve, may be the "most important central bank," and the "tragedy" or "omen" caused by the sharp rise in the yen and the stock market crash in August could be a signal for the future. Although the Federal Reserve's moderate and stable rate cuts may benefit higher-risk assets, if the Bank of Japan's rate hike leads to a large number of arbitrage trades being closed, the bullishness of the Federal Reserve may be completely offset.
Tom Nakamura, currency strategist and co-head of fixed income at AGF Investments, said that it is not common for foreign exchange dynamics to have a broader impact on the U.S. stock market, and one has to go back to the 1997 Asian financial crisis to find relevant comparisons. The further closing of yen arbitrage trades is still a very large cross-market risk, and investors are somewhat concerned about the Bank of Japan's actions in the next one or two years.
Despite the Bank of Japan's suggestion that the next rate hike may be in October, yen arbitrage trades remain large, active, and seemingly on the rise. Recent data shows that new arbitrage trades have resumed, and leveraged hedge funds have increased short positions in yen futures.
Another indicator of the reversal of yen carry trades, SOFR, has also shown signs of rising recently.
Arif Hussain, head of fixed income at PIMCO, recently warned that after the drastic reversal of yen carry trades caused by the July rate hike in Japan, investors "see the first shift in this rift, and future market volatility could intensify." The Bank of Japan's hawkish stance and concerns about the slowdown in U.S. economic growth sparked a frenzy for the yen on August 5, but investors may have overlooked the deeper underlying causes of the global stock, currency, and bond market downturn. As the world's fourth largest economy continues to raise interest rates, a large amount of Japanese funds invested overseas may be repatriated. "To some extent, the rise in Japanese bond yields may attract large life insurance and retirement fund investors in the country to switch from other high-quality government bonds to Japanese government bonds." Arif Hussain issued a warning about yen rates even before the crash in August.
Nakamura believes that 140 is a key level for the yen to dollar exchange rate. A gradual appreciation of the yen to the range of 130-135 should be controllable. But if this were to happen in the next one or two months, it would mean trouble.
Editor/rice
