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: Zhou Le.
The latest consensus on Wall Street is that the Federal Reserve may slow down the pace of interest rate cuts in the "Trump 2.0 era". Analysts suggest that due to the inflationary pressures from Trump's promised tariff increases and tax policies, the Federal Reserve is expected to proceed more cautiously and slow down interest rate cuts, with the Federal Reserve even possibly "pausing rate cuts" in December.
Several institutions have begun to reduce their bets on the prospect of Federal Reserve interest rate cuts. Nomura's economists have revised the expected number of rate cuts next year from 4 to 1; Deutsche Bank stated that Trump's victory increases the outlook for economic growth, rising inflation, and labor market improvements, increasing the likelihood of the Federal Reserve abandoning rate cuts in December; Barclays stated that the number of rate cuts by the Federal Reserve in 2025 will be reduced from the previous forecast of 3 to 2; Goldman Sachs economists now believe that the Federal Reserve will cut rates by 25 basis points in June and September of 2025, compared to the previous forecast for May and June.
In addition, DoubleLine Capital's CEO and 'New Bond King' Jeffrey Gundlach warned in a recent interview that if the Republicans ultimately take control of the House of Representatives, achieving a 'red sweep' (President Trump + Republican control of both houses of Congress), interest rates in the United States may soar because this would mean Trump can spend money as he pleases.
The variables of the Federal Reserve
After Trump won the US election, the Federal Reserve slowed down the pace of rate cuts, and markets even started expecting that the Federal Reserve might "pause rate cuts" in December.
On November 8th, Beijing time, the Federal Reserve announced a 25 basis point rate cut and unexpectedly adjusted its language in a more cautious manner regarding the future monetary policy path.
This has also raised concerns in the market: after Trump's election as president, the difficulty of the Federal Reserve's future interest rate decisions has increased. Given Trump's promised tariffs and tax reduction policies are expected to bring inflationary pressures, analysts predict that the Fed may act more cautiously and slow down interest rate cuts.
After Trump's victory, Wall Street generally reduced bets on the Fed's interest rate cuts. Nomura's economists even lowered the expected number of interest rate cuts next year from 4 times to 1 time.
Deutsche Bank's Chief US Economist Matthew Luzzetti commented that Trump's victory has raised the prospects for economic growth, rising inflation, and labor market improvements, increasing the likelihood of the Fed abandoning rate cuts in December.
Matthew Luzzetti pointed out that from a risk management perspective, this may provide a strong reason for the Fed to skip that meeting (action).
Teams from Barclays and Citibank stated in their latest reports that after the Trump administration took office, the possibilities of tighter immigration restrictions and higher import tariffs could increase, and these policies might stimulate US inflation, altering the Fed's monetary policy course.
Goldman Sachs' analyst team, led by Oscar Munoz of Barclays, wrote in their report: "While some investors may expect the Federal Reserve to even start raising interest rates in this situation, we expect that the Fed will choose to pause rate cuts when evaluating the impact of these factors on inflation and economic growth."
In addition, senior journalist Nick Timiraos, known as the 'New Fed News Agency,' posted on social media commenting on the 25 basis point rate cut by the Fed meeting expectations. The current market is more concerned about the impact of economic changes after Trump's election on Fed decisions.
After the Fed announced the rate cut, Timiraos published an article titled 'Fed Cuts Rates Again as Elections Reshape Growth Prospects.' The article points out that after Trump's election sparked market enthusiasm and raised long-term interest rates, Fed officials face new questions: what could slow down the pace of rate cuts.
In his previous articles, he also pointed out that if the Republican Party wins control of both houses of Congress, the Fed may adjust its 'basic assumptions' in December.
CITIC Securities' research report pointed out that Trump and the inflation expectations he brings may become an unavoidable concern. Powell's remarks after the interest rate meeting were obviously not as relaxed as the September meeting, but he indicated that the baseline scenario is to gradually adjust interest rates to a neutral level, with more positive wording on the economic situation and job market.
CITIC Securities believes that inflation issues will not be an obstacle to the Fed's interest rate cuts within the year, maintaining its previous judgment. It is expected that the Fed will still cut interest rates by 25bps in December, and next year's rate cuts may still be the general direction, but the magnitude of the cuts may be lower than the Fed's September dot plot guidance of 100bps.
"New Bond King" warning
Jeffrey Gundlach, CEO of DoubleLine Capital and 'New Bond King,' stated in a recent interview that if the Republican Party ultimately takes control of the House of Representatives, achieving a 'red sweep' (President Trump + Republican Party in both houses of Congress), US interest rates may soar because it means President-elect Trump can spend money freely.
Gundlach pointed out that if the House of Representatives is also controlled by the Republicans, there will be a large amount of debt to be thrown out, long-term US interest rates will be higher, and it will be interesting to see how the Fed reacts to this.
As the battle for control of the House of Representatives continues with no clear winner yet, even after Trump won the presidential election and his Republican Party won the majority in the Senate, the Republican Party is still in the lead in the House elections and is likely to maintain control of the House with a slim majority.
It is worth mentioning that Gundlach is a famous fixed income investor, and his company manages over $96 billion in assets. Gundlach believes that more government spending will need to increase borrowing through Treasury issuance, thus putting upward pressure on bond yields.
Golak warned that if the Trump administration extends the tax cuts from 2017 or introduces new tax reduction measures, the US debt could increase significantly in the coming years, further deteriorating the already troubled fiscal situation.
But Golak believes that Trump's election as president reduces the likelihood of an economic recession in the United States.
Several economists pointed out that after Trump took office, the Fed's easy path may be hindered because some of Trump's economic policies, such as imposing tariffs on foreign goods and restricting immigration, could reignite inflation in the United States.
David Kelly, the global chief strategist of JPMorgan Asset Management, warned earlier this week that if Trump wins the US election, the Fed may even suspend its rate-cutting easing cycle as early as December.
Stanley Druckenmiller, a financial heavyweight who once teamed up with Soros to attack the British pound, and the former number two at the Quantum Fund, also believes that the Fed may prematurely declare victory over inflation, overlook the persistence of inflation, and at the same time, the Fed's forward guidance limits its policy flexibility, fearing that Powell is overly obsessed with a soft landing and ignores the long-term stability of the economy.
Editor/Rocky
