The latest "review" by star fund managers: Gold has risen to the "no man's land," making it the hardest market to navigate at both ends, with the most common impact this year being the failure of macro analysis

Faced with the continuously low yields of the underlying assets and the declining bond market throughout the year, what kind of mental journey will star bond fund managers experience?

Recently, Sima Yimai Maiti, General Manager of the Fixed Income Department at Dongxing Fund, gave an in-depth sharing on the theme of "Is it news that determines the market, or does the market choose the news?" during a platform event.

It turns out that even well-known fund managers like Sima Yimai have found this year's operations very challenging. After careful reflection recently, he has drawn many profound and enlightening conclusions that are worth reading for investors, even those focused on stock investments.

Ultimately, he provided several important insights after his reflections.

Key Quotes:

1. Macroeconomic data analysis is important, but there is a considerable lag between data and policy implementation, and bank actions also have time lags.

2. Since this year or last year, the structure of market participants has become richer. Many quantitative funds have also entered the high-yield bond space, achieving impressive net values, and upon inquiry, it turns out they haven't performed particularly well in stocks; they just bought a bunch of high-yield bonds.

3. Finding the direction of capital flow is crucial; money flows to where it is less. If capable, personally monitor the market; feeling the market is very important.

4. If you have the ability to build good models, firmly believe in the models; all emotions are basically reflected in the models.

5. We are currently in a once-in-a-century major change, a historical cycle that most people in the market have not experienced; one cannot simply apply the experiences of the past few years to predict the future.

6. Earning less is more important than losing; it is difficult to make money at the market's top and bottom, so there is no need to nitpick. Once a trend reversal signal is detected, exit decisively.

7. Understand various market tools and the tools of counterparties; even if you don't use them, you cannot be unaware of them.

8. The market chooses the news, rather than the news determining the market; news is merely a catalyst.

9. No one can judge how much gold will rise because we have now entered a "no man's land." At this stage, regardless of whether it is related to the scale of U.S. Treasuries, at least everyone has another asset that can replace U.S. Treasury assets.

Using the first-person perspective, some content has been edited.

The Market Has "Changed"

I personally deal with bonds, and everyone feels that this year has been very difficult for bond investments. I would like to take this opportunity to share some insights and speak candidly.

I believe everyone has been listening to various macro reports and market analyses; there have been enough reports from research institutes. However, the perspective of a fund manager or investor on how to view the current market may not be heard as much.

I conducted a self-review and summary during the National Day holiday and have some insights to share with everyone.

Firstly, everyone generally feels that the most prominent impact this year is that macro analysis has failed. This year, macro analysis has not been very accurate or has been quite difficult to judge. Of course, the so-called macro analysis is more based on the macro analysis used by bond investors.

We, as fund managers dealing with stocks and bonds, work in the same office (the personnel composition is like a small market). In the office, we bond fund managers pay more attention to macro analysis, while stock fund managers focus more on individual stocks and fundamental analysis; everyone's focus is different It turns out that we said that at a certain stage, the market has a seesaw effect between stocks and bonds. This is also the reason for our previous logic of "stocks move with stocks, bonds move with bonds."

However, in the current market, since this year or last year, the structure of market participants has become more diverse. Those who used to focus on stocks are now also engaging in bonds. For example, in the past few years, many quantitative funds have also ventured into high-yield bonds, achieving impressive net values. When asked, they bought a bunch of high-yield bonds, which may not have performed as well as stocks, but they still bought a lot of high-yield bonds, resulting in stable net values.

Meanwhile, those of us who focus on bonds are also paying attention to some stocks.

Now, including the regulatory authorities, there is strong encouragement for us to engage in the issuance of equity-related products in secondary bond funds. From this perspective, bond investors also need to pay more attention to stocks. This compels stock investors to look at bonds and bond investors to look at stocks. Some quantitative funds that did not participate much in the past few years are now heavily involved in government bond futures.

Currently, nearly half of the trading volume in the stock market is from quantitative funds, which means that decisions are not made by people but rather by algorithms or models (which have a huge impact). (Considering the logic of model building) factors that were previously thought to be unrelated are now becoming interconnected (leading to significant changes).

What I want to say is, regardless of how the market is, the only constant is—I've been in the industry for nearly 20 years—continuously learning new knowledge, constantly updating, maintaining a state of continuous growth, and keeping up with developments to adapt to the new market, ideally leading the market in the future.

Where is the economy and policy heading in the fourth quarter?

Today's report is mainly divided into three parts, with the first part being macro analysis.

As of yesterday noon, the data for last month or last quarter has basically been released over the past two weeks.

The PMI was slightly above expectations, rising by 0.4 percentage points, while the non-manufacturing PMI fell somewhat. Overall, the economic data for September was basically in line with expectations, and there were no significant fluctuations. In terms of demand, the factory prices have somewhat declined and will need further stimulation, requiring continuous observation.

Regarding CPI and PPI, the CPI was slightly below expectations, showing a negative figure. Of course, it has been widely discussed that the core CPI, excluding food and energy, has risen, indicating that food and energy, especially energy, are dragging down the figures. Since July, the reversal of the "involution" trend has seen some coal and coking coal prices rise, but after a quarter or a few months, they have slowly started to decline again, becoming a drag. This indicates that the difficulty of reversing the "involution" phenomenon is quite significant. The starting point is very good, aiming for moderate price increases, and this factor is also present in the communication process with external parties, such as the EU.

Since June, we have been advocating against "involution," and in the future, we hope that PPI and CPI will rise moderately. However, everyone will see that this is also quite challenging. Whether it is PPI or CPI, pulling it back to a relatively high position is difficult, and it remains challenging for PPI to turn positive year-on-year within this year The entire export sector and the Belt and Road Initiative have filled in some declines in other areas. On one hand, we have deepened exchanges with emerging countries, Latin America, and African countries, which is an improvement; on the other hand, we are in a state of decline with other countries, and this high-frequency data is relatively consistent and meets expectations.

In terms of financial data, social financing is slightly higher than expected, and real credit is slightly better than in August. This quarter, everyone is very concerned about M1 and M2. Basically, people now equate M1 and non-bank deposits with the money used for stock trading, but this part of M1 has significantly decreased year-on-year. In fact, the enthusiasm for stock trading has recently adjusted after a rapid increase over the past quarter, and there will be some structural adjustments internally.

As we have seen, the stock market has fluctuated in the past two weeks, but overall it has maintained a stable state, with the gap narrowing further and overall capital efficiency improving.

In recent days, there has been much discussion about industrial added value; fixed investment is relatively weak, while industrial added value is above expectations. The GDP growth rate for the second quarter is 4.8%, and there has been trading on this matter recently. For the fourth quarter, a high GDP is not necessary, as the annual target of 5% can be achieved.

It actually appears this way; there has been a lot of bond issuance in the first three quarters, which is different from last year's structure. Last year saw low issuance at the beginning and high issuance later, while this year is concentrated in the first three quarters, which corresponds to the subsequent bond supply.

After a lot of issuance earlier, the fourth quarter does not require a high amount, so whether there will be more stimulus and issuance windows in the fourth quarter does not seem necessary to achieve the annual target of around 5%, which is an acceptable result.

Focus on Fixed Asset Investment Next Year

I believe there is one area that may not be fully reflected this year, or will definitely decline for the whole year, but will attract attention next year, which is fixed asset investment. After accumulating in the first two quarters, the first three quarters are relatively low, and according to the scheduled progress, the fourth quarter may offset the significant growth in the first and second quarters.

This aspect may be highly linked to the next phase of stimulus policies, including some fiscal expansion, which is a very important trend that we believe will attract significant attention in the future.

The real estate sector has been relatively average for a long time. Previously, it was said that first-hand properties were relatively strong, but starting last month, first-hand housing prices have also begun to decline, indicating that the real estate sector is still hovering at a very low level without much improvement. Compared to the technology sector that everyone is concerned about, real estate continues to decline.

Moreover, our counter-cyclical policies are being introduced. Many factors will be considered, and we will see that this year, a large number of existing "cards" have been introduced for counter-cyclical policies. Based on the current discussions for the fourth quarter, how much more needs to be introduced? Of course, we do not know exactly what will be discussed.

The Key to the Market is "Expectation Gap"

This is actually linked to our theme today. If we want to analyze the market through news or fundamentals, it is currently very difficult. Because we do not know how Trump will act every day, and he releases news at midnight every day Since the trade war began, I have been staying up very late every day, sometimes until midnight, and occasionally even pulling all-nighters to watch the Federal Reserve. Because it's across the ocean, we finish our work during the day, and they are asleep; then when they finish, we are working in their evening.

Everyone is now very familiar with each other's actions. This includes the constant mention of TACO, "Trump Always Chickens Out," meaning Trump always backs down at the last moment. He even wrote a book called "The Art of the Deal." Every negotiation is a process of mutual game-playing.

Of course, that's how trading works; after each transaction, sensitivity to it will definitely decrease.

The first game of the year was in April, and the market's reaction, both stocks and bonds, was particularly significant. By the end of September and early October, the reaction to this round of negotiations was not as strong. People are gradually clarifying what the Americans really want and what China hopes to achieve, and where a new balance point for both sides can be reached.

Many people will refer to 2018; in fact, we will ultimately find that how the negotiations turn out is one aspect, but another key point is that the corresponding asset valuations also change during the negotiation process, and valuations determine the next trend. Although there were still some friction points in 2018 and 2019, we had clearly desensitized. The subsequent phase of rising indicated that not every negative news leads to a drop, nor does every positive news lead to a rise.

The most critical issue is the expectation gap, which will continue to unfold later.

Why has the bond market continued to weaken this year?

The second part is a review of major assets this year. Given all that has happened, what is the situation of various assets?

Various messages have emerged during the process; we analyze the messages as merely a surface phenomenon, just a catalyst, not a decisive factor.

For example, in the first quarter, the bond market faced continuous tightening of funds. Although the policy interest rate was around 1.5, in reality, borrowing costs had already reached 1.8 or 1.9. In terms of perception, although it was a loose monetary policy, I remember that at the end of last year, it was moderately loose, the first time since 2009 that "moderately loose" was mentioned, and this was the second time. However, later we found that after the moderate loosening, the overnight rates actually went up, which indirectly resembled a rate hike effect.

This was mainly to prevent excessive downward expectations on bonds. At that time, when it had already reached around 1.6, the entire market was particularly optimistic. I remember that at the end of last year and the beginning of this year, there was widespread optimism, with even some opinions suggesting that the yield on the ten-year treasury would drop to 1.5, 1.4, or even 1.3. This is called inertia thinking.

Inertia thinking can be very fatal in investing; we cannot always rely on it. The core issue is that the asset yield has already become too low. Initially, it was thought to be a week or two, but later it was found to be a month or two, and finally, by mid-March, there was still no adjustment. From 1.6, it suddenly jumped to around 1.9, an increase of 30 basis points, resulting in a very sharp change in yield This year, it has been said that investing in bonds is very painful. In fact, from the beginning of this year until now, it has only moved from 1.6 to around 1.7, which is just a 10 basis point increase. However, bonds have only experienced a bull market for a few days, and most of the time they have been adjusting, with the adjustments feeling like a dull knife cutting flesh.

Ultimately, the market chooses the news

From a fundamental perspective, triggering this market is like bringing water to a boil; it reaches a critical point where the specific news that triggers it is not important. It is not just this piece of news; other news will also trigger it because the prices of all assets have reached this situation.

From a stock perspective, this year has not been an immediate bull market. There has been a process of ups and downs. This year, the real starting point for the bull market, or the point of breaking away from the previous range of fluctuations, has been a smooth wave from around June to September, which basically started the process of quantitative change to qualitative change in the third quarter. Ultimately, continuous news has driven the stock-bond seesaw.

Veteran investors say that prolonged stagnation will lead to a decline; if you can't push it up, it will go down.

Here we take the Shanghai Composite Index as an example. It is difficult to analyze in detail, but from the quarterly perspective, this year, MACD turned positive around June or July. The last time it turned positive was in 2020, and the previous time was in early 2014. Therefore, this wave of stock market bull run has generally moved upward along the moving averages on a quarterly basis, indicating the process of quantitative change to qualitative change.

Although during this process, everyone will trade based on macro news, we ultimately return to the theme: Ultimately, the entire market chooses the news.

In other years, there may also be some news during the decline, but it ultimately does not trigger the entire market because it has not reached the corresponding historical points. Therefore, even at this stage, even if one missed the opportunity last year on September 24, participating according to the quarterly standards would still yield very considerable returns from a stock trading perspective.

Because those who are immersed in it every day may not necessarily make money, may not be able to sell at high positions, and cannot perfectly time the bottom, but on the technical level, the cold, hard technical indicators have already shown everyone the relationship between rises and falls.

The bond market has also adjusted for a long enough time

At this stage, why can't bond yields go down? Personally, I prefer to use the stock-bond cost-effectiveness ratio (this indicator), which compares stock dividend yields with bonds in a normal distribution.

It can be observed that in May of this year, there was a time when it fell below negative two standard deviations, and then it happened again. This explains why bond yields cannot go down and why we say that the certainty of high-dividend assets is increasing at this time.

From this perspective, indeed, the cost-effectiveness of bonds is very low, regardless of how the macro fundamentals are analyzed. The PPI has only started to rise gradually after the anti-involution measures were implemented. In the absence of anti-involution measures, bonds as an asset class indeed have very low cost-effectiveness, while the cost-effectiveness of high-dividend stock assets has begun to stand out completely.

From a historical perspective, it generally fluctuates within the ±2 standard deviation range. When it falls to negative two standard deviations, recently, everyone has been saying that the stock equity market seems to be struggling to rise or showing signs of weakening at high levels From the perspective of the cost-effectiveness of stocks and bonds, although bond yields have only reached around 1.7% now, dividends and bank stocks have already risen significantly compared to that time, and the cost-effectiveness has begun to decline sharply. Therefore, it just lacks a trigger point; it doesn't necessarily have to drop back significantly, at least there will be a process of value return.

The bond market has been adjusting for nearly three quarters now. The dimension of time is more important than the dimension of magnitude. An adjustment lasting three quarters is rare in history; as I recall, there was only a similar adjustment from the end of 2016 to the beginning of 2018 that lasted for a year, which was basically a relentless adjustment. Even in 2020, the adjustment lasted about three quarters.

So from the perspective of time, bonds have also adjusted quite a bit. Today, in the large market movements in the stock market, bonds have not seen a significant drop. From this perspective, the reason the stock-bond seesaw is not obvious is that the risk appetite for stocks has reached a temporary peak, and the bond market adjustment or market clearing has also reached a temporary (peak).

Returning to our theme, is news important? News is also important, as its significance lies in stimulating the entire market. At the relative bottom stage of the entire market for stocks and bonds, when you introduce these (policies), the impact is greater. Looking back, the capital inflow into the market was actually introduced as early as 2024, but this year's marginal effects are particularly obvious, and everyone is particularly sensitive to these effects. It's not about the sails moving, nor the wind blowing, but rather people's hearts moving.

In fact, many policies were introduced before the entire market rose, but the effects of those introduced in July were very significant for the market.

From the perspective of public funds, the adjustment of the bond ratio in secondary bond funds or credit bonds has also seen significant changes, including fee reductions and equity positions, which have played a very large role in the development of the equity market. If this were during a bond bull market, the effects might not be so significant, but introducing them during a bond adjustment phase has a very large impact on the market.

Who are the market "stars"?

At the overall market level, one very distinctive feature this year is the active proprietary trading of brokerages, including some banks, especially joint-stock banks, which have become the stars of the market this year.

This situation has not only occurred this year but also in 2020 and 2017, when a large number of bonds were issued due to stimulus policies. It was later found that actively trading institutions would fully utilize the opportunities presented by dense issuances to "short" the market. I have also heard that many institutions made a lot of money this year through shorting.

Basically, some ultra-long-term bonds are issued every Friday, and the market starts to rise on Monday, continuing upward until Friday, after which they cover their shorts through the primary market. Moreover, after everyone sees that the shorts are covered, in the following week, once a certain amount is issued and it becomes an active bond, there will be a downward trend starting the following week, forming a pattern.

Bonds issued on Monday, during that week, can even be shorted by Friday morning at 10:30 or 11:00. After a week, the yields start to decline, and then they can be sold off, and the next cycle begins (repeating the process) This year, the market has provided a very "moist" space for adjustments, offering ample short-selling opportunities. Once short-selling begins, it tends to create inertia.

Therefore, this year's returns have been continuously pushed up by the issuance of key maturities. The relationship between supply and demand plays a certain role, but market trading institutions utilize active trading strategies. Given that the market has trading tools for both long and short positions, they have been continuously engaging in short-selling this year, which actually helps us judge the future. If everyone believes the market needs to adjust, it must have a very moist environment for short-selling, and one very important factor is primary issuance. If there is a particularly high volume of primary issuance or many key maturities, it facilitates short-selling; otherwise, short-selling becomes very difficult.

If you take from the primary market directly, how can it not have any impact on the secondary market? In this case, it is actually a very good model that does not affect the market and allows for smooth operations.

Has this environment changed so far? Why do we say the market will be relatively friendly later? After October or in the fourth quarter, this environment will not be as prevalent because the treasury has stopped issuing many key 30-year maturities and has instead split some inactive bonds into 20-year and 50-year maturities. At this point, attempting to short-sell will become very challenging.

Because after selling off, you still need to buy back in the secondary market, which could lead to selling pressure or even a short squeeze.

In the absence of primary issuance, everyone can be relatively assured about the magnitude, intensity, or strength of short-selling in the future market adjustments.

Moreover, if you look at today, the entire stock market has surged recently, while the bond market has seen little adjustment since at least October.

Gold Enters "No Man's Land"

In short, gold has decoupled from the dollar (similar to the 1970s). Looking at a short economic cycle, the negative correlation between gold and the dollar has completely decoupled.

In the context of the Federal Reserve cutting interest rates and a weak dollar environment this year, the core major buyers in the entire market are central banks. Central banks are all decoupling from the dollar, so the negative correlation between the dollar index and gold prices has begun to decline.

The core point is that since 2018, several BRICS countries, as major buyers, have been buying gold together. At the same time, since global gold production is still relatively limited each year, it is unlikely for gold to experience significant adjustments.

Because the players are still relatively few, and the annual supply of gold is not that abundant. As long as these central banks decide to start buying gold and simultaneously decouple from the dollar or abandon dollar assets, gold will start to rise steadily.

It is not like some fully traded commodities; I personally feel that gold is not a fully traded commodity. It is very difficult to sell off; you cannot penetrate the holdings of several billion-dollar central banks. Because everyone is buying, they are also unwilling to let their market value fluctuate.

Moreover, I saw a statement this morning that if gold rises to $5,000, the total global gold holdings would basically equal the total amount of dollar and U.S. Treasury assets It is equivalent to me finding another asset to replace U.S. Treasury bonds.

So, in the short term, no one can judge how much gold will rise, because we have now entered a no-man's land. At this stage, regardless of whether it is related to the scale of U.S. Treasury bonds, at least everyone has another asset that can replace Treasury bond assets.

Bonds Will Not Face Much Pressure in the Fourth Quarter

Returning to our main topic, the market chooses the news, or the market chooses the news.

What does it mean for the market to choose the news? It means that in so many situations, everyone is constantly looking for the main line, what exactly is the main line? The core is that one type of asset is overvalued, or one type of asset is undervalued, and the market lacks a triggering factor.

Especially in the entire market, where stock and bond assets are mixed together, and everyone is now using quantitative methods and large models, many quantitative funds have also learned Ray Dalio's All Weather model, everyone's strategies are relatively consistent. When strategies are consistent, it will form a correlation between different assets: one type of asset is overvalued and has the potential for adjustment; one type of asset is undervalued and will rise.

So you will see that when looking at stocks and doing bonds, you will find that Treasury bond futures have a negative correlation with stock index futures or stocks on a minute-by-minute basis. Here, if stocks rise for a minute, Treasury bond futures will fall. If people are artificially looking at these bonds, their reactions may not be so fast. I think there may be some machines or quantitative orders that continuously hedge in this way. Many traders may not react as quickly, indicating that there is considerable marginal trading capital in this market. Although we cannot judge the scale now, it is enough to influence this market.

First, regarding the fourth quarter, in a short-selling environment, we judge that the phase pressure will not be so great because the Treasury Department has basically dismantled the key maturities. It looks like there will be no 30-year bonds in the fourth quarter, which have been split into 20-year and 50-year bonds.

The structural issue of bond issuance is divided into two categories: the structure between Treasury bonds and local government bonds, and the structure of long-term and short-term maturities.

This is reflected in bond issuance. After the very active and easily shorted 30-year bonds are gone, it becomes very difficult to short the 30-year bonds, and the short-selling power will naturally disappear. Recently, there has been a certain probability of being shorted for the 20-year bonds, but the extent is not so large.

The overall cost-performance ratio of stocks and bonds shows that although stocks have risen relatively sharply today, under such circumstances, bonds have not adjusted much, and even some maturities have risen.

Will the Bond Market Adjust After a Long Period?

Looking back at the historical market conditions of the bond market, you can see that the situation in 2021 was also similar, resulting in "long periods must fall." It kept falling until investors saw that the adjustment was complete, and Treasury bond futures began to break through a downward track and started to rise, indicating that the bottom had appeared.

Looking at this year, at the end of last year, there were also several peaks that could not be broken, forming a smooth downward trend for Treasury bond futures.

You will see that recently, Treasury bond futures have started to rise, and the downward channel of asset cost-performance has been broken. Although I have also been forced to learn technical aspects, when you cannot find reasons at the macro level, you have to look for them from the technical level At the macro level, due to the high degree of uncontrollability, we do not know the corresponding on-site information. However, from the perspective of the cards on the table, we can see the overall market trend.

The models in brokerage research institutes cover various aspects, including high-frequency quantitative data at the macro level and some commodities. From the investment perspective, on the subjective level, for example, if I look at the macro central bank's fundamental monetary policy, you will see it; but when the monetary policy is adjusted or not adjusted, yet other factors have changed, you may end up ignoring them.

This is similar to our cognitive biases or information cocoons; we tend to use what we are familiar with or what we believe in. However, if other factors in the market have changed, you may not see them. But through models, these changes can be reflected.

Therefore, everyone can do more modeling to prevent making subjective judgments and objectively ignoring certain factors. In investing, one cannot escape the subjective path dependence.

I have summarized the research reports from various firms; you can take a look at this phenomenon. We have always talked about consensus expectations, but the market's consensus expectations are like this (the success rate of subjective judgments is not high).

At the end of June, the market was basically bullish during the bottom phase. By the end of July and in August, the market began to adjust; there weren't many bearish views, but there were still many bullish ones. Only one firm might have a relatively better rhythm, while others remained bullish or bearish throughout.

Starting to be bearish early is not necessarily a good thing; those who are bearish all the way may even lag behind. After being bearish for a while, when the market starts to adjust, they begin to turn bullish. This indicates that everyone is analyzing similar data but drawing different conclusions. Some start to turn bullish when the market is about to adjust; or some firms that are relatively conservative remain neutral, possibly due to the research institute's working style, which cannot afford to be bearish. However, one can see that there are deviations in the market's consensus expectations, and in fact, the market's expectations are mostly wrong.

In this wave of the market, the 10-year bond yield has dropped from 1.82 to the peak and has now fallen by 70 to 80 basis points, which is quite a significant fluctuation. From this stage, there aren't many who have turned from bearish to bullish; if it drops another 5 basis points, a consensus expectation will form again.

So this is actually a small market; we have always said that the market's expectations are mostly wrong.

Of course, from the perspective of research institutes, being bullish all the way can lead to crossing cycles. Looking back, they may have been right all along, but from an investment perspective, we cannot do that; we still need to time the market and make waves.

When the market falls, funds will be redeemed, and losses will be magnified; financial institutions' proprietary funds may be forced to close positions or stop losses by risk control departments at the market bottom. From bullish to bearish and then back to bullish, the bulls may not even survive to see the real bullish day.

From an investment perspective, everyone should still look at this issue relatively flexibly. If fully allocated, it doesn't matter, but I believe that a considerable number of people have positions that are relatively unstable on the liability side, and some timing adjustments are still necessary

Expectations Are More Important Than Data Itself

Finally, regarding all-weather strategies, Ray Dalio says that inflation analysis is one aspect of the fundamentals, but more importantly, it is about expectations. We are not trading the fundamentals, but rather the expectations of the trade, which is akin to the second derivative of the fundamentals.

Our current macro fundamental analysis has become ineffective. Dalio mentioned many years ago that analyzing growth is useless; what you need to analyze is whether growth exceeds expectations or falls below expectations; whether inflation exceeds expectations or falls below expectations. This is the analysis of the expectation difference, rather than the data itself.

This is also one of the reasons why macro fundamental analysis has become ineffective over the past six months, forcing us to grow.

In addition, there is another very important aspect of policy, which is international trade relations.

Summary

In conclusion, let me say a few words.

First, macro analysis is very important, but there is a considerable lag from macro policy to implementation. By the time the Ministry of Finance feels that the cost of issuing bonds is high in the fourth quarter or at the end of the third quarter, and then discusses issuing bonds with the central bank, a quarter has already passed.

So we anticipate that this will happen, but it still has inertia and lag. By the time adjustments are made (although they will definitely be implemented), we do not want to see returns retract or investment losses during this lag period. Static analysis is important, but we also need to consider the lag.

Second, capital flow is very important. Money flows to lower places. I still need to monitor this every day. Simply put, the financing cost for 7 days, for example, if I borrow money today at 1.5, the market is tight at 1.52, and the market is loose at 1.5. From what everyone feels, the weighted difference may not be significant, but if we borrow money ourselves or monitor the market ourselves, we will feel the difference. It is possible that the capital situation is off by two or three basis points, but the overall market adjustment has already been very large. Therefore, everyone should also do reverse calculations of market duration and must monitor the market themselves to feel this.

Third, a model needs to be established. There are many excellent models in the market that can be referenced. Subjectivity must yield to objectivity because all our emotions are reflected in the model. People have emotions and desires, and various daily encounters will affect our investments, but models are cold and relatively objective. The failure of a model is a question of the model's quality, but it is very important to establish an objective data set.

Fourth, theoretically, we are in an unprecedented major change in a century. Everyone has not experienced this. I see many analyses that have been conducted from 2021 to now, at most analyzing back to 2018 or 2019. I have been in the industry for 20 years and do not dare to say that this 20-year cycle is comparable. We may need to look at the current stage from a larger dimension, such as 30 years or 60 years, and cannot simply apply the experiences of the past few years to predict the future.

One more thing, to put it bluntly, don’t stubbornly hold on. It is difficult to make money at both ends of the market. The confirmation of the bottom (requires a process) takes time; once the bottom is truly confirmed, it has already risen. The process of confirming the top also requires time. If a reversal occurs, decisively exit the market without any attachment. You may feel that you have earned less, but in reality, there may be a bottomless pit ahead because the market's bottom is always cleared out by everyone’s stop-loss or liquidation You still have some surplus, which indicates that the market bottom may not have been reached yet. A bottom is only recognized when someone has incurred losses or has been forced to cut their positions.

Additionally, to understand market space, I just mentioned some short selling. We cannot short sell, but we need to understand what other institutions in the market are doing. We may not participate, but we cannot be unaware.

Finally, in the current environment of complex information, the market chooses the news. The news will not stop; in today's globalized world, everyone is focusing on major asset classes, and ultimately, the market chooses the news. If an asset is overvalued, you may need to sell; if an asset is undervalued, you have the opportunity to buy. As for whether to take a left-side or right-side approach, everyone can decide for themselves.

However, I believe that looking back, if a certain asset cannot rise, it must be overvalued. Conversely, any asset that rises from the bottom must be undervalued to be bought up. Therefore, ultimately, the market chooses the news, and the news is merely a catalyst.

Risk Warning and Disclaimer

The market carries risks, and investment requires caution. This article does not constitute personal investment advice and does not take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article align with their specific circumstances. Investing based on this is at your own risk