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In the tumultuous Chinese stock market, he seems to be a lonely alternative. In his eyes, value investing is not only a method, but also a belief and a philosophy. He is Dan Bin, known as Buffett's most loyal Chinese believer. At the Dachen 6 Economic Forum held on the Shenzhen Stock Exchange on June 18, Dan Bin once again appeared under the spotlight with his "Rose of Time" theory.

 

▌Stock market volatility: 20% drop is normal, individual stocks may drop 50%

I am very happy to have the opportunity to participate in Dachen’s annual meeting and to communicate with the entrepreneurs present. People who speculate in stocks in recent days may be in a bad mood. Mr. Xiao asked, is it the biggest bubble in human history? It can be said that, from the perspective of my investment for so many years, the current Shenchuang board and some small and medium-sized boards, in addition to Moutai and Gree, are under 20. All stocks and all industries are incredibly expensive. If you go up, you may come down.

Take the ChiNext as an example. The profit for the whole year of 2014 was less than 400 billion. The market value reached 6.21 trillion a few days ago. How big is this bubble? Everyone hopes that these GEM companies or small and medium-sized growth companies can make up for his high valuation by relying on their rapid growth and performance. However, historically it is difficult to make up for him through high growth. Unless it is a small number of companies.

There is a book that compares the examples of two companies, one is IBM and the other is Standard Oil. 65 years ago, a Chinese investor asked you to choose two companies to invest. I believe that the vast majority of Chinese people would be willing to choose IBM.

Sixty-five years have passed, and IBM has surpassed the speed of Standard Oil in terms of its profitability, growth and earnings. However, the return of 65 years is not as high as that of Standard Oil, because the market profit of Standard Oil in 65 was 65 times, and it is still 8 times now. But what was IBM 8 years ago? It is similar to the price-earnings ratio of Shenchuang Board, and it takes 65 years to make up for your peak situation. Now, 65% of the companies on the ChiNext can surpass the growth of IBM, which I think is pretty good.

Even if IBM has proved to be the world's greatest high-tech enterprise in 65 years, the risk is still very high.

Of course, from the perspective of the whole world, Chinese investment is the bursting, birth, bursting, and birth of bubbles. But after the bubble burst, it may be a chicken feather.At present, most of the public funds and private equity funds, the more active money is all in the Shenchuang board and the small and medium-sized board.

It’s a pity that China’s A shares are very strange, very good stocks, very good stocks are selling very cheaply. It can be said that companies that are not particularly valuable are selling very, very expensive, and everyone is still rushing, of course we are also We don't know when the tuyere, for example, if it counts as a stop this time, we don't know.

So I think the jump from the building in Changsha may be the first case. Because our current capital market leverage is very large, after this leverage is large, it is easier to die. Now we have some funding, it may be 1:3, some 1:4, down 30%, 40%, and then there is no. If the market falls by 20%, it is normal, because it has risen too much. If the market falls by 20% or 30%,It is possible that individual stocks may fall by 50%. Under such circumstances, it is possible that this round, or the next few days, may not be very good in many situations.Maybe we need to make some changes in policy or media.

▌Speaking of the registration system: China’s listed companies will compete among the exchanges in the world.

Of course, the impact of the current registration system on China’s capital market is also the same. The major directional changes in all these markets in China are related to the implementation of possible specific policies. My personal judgment is that if the registration system is truly market-oriented, let our three exchanges, the Shanghai Stock Exchange, the Shenzhen Stock Exchange, and Beijing’s New Third Board, if we can use a competitive way to let the capital market play If it works, then I think this registration system will have a great impact.

As we said in the past, if a company wanted to go public, it might be invited by the Shenzhen Stock Exchange, by the Shanghai Stock Exchange, by the New Third Board, or by the Shanghai Xinxing Board. It might make a choice. What do I need? Which board is on? This will form a competitive relationship, of course there will be benign and vicious competition.For a company, he may choose a market with a relatively reasonable valuation, easier financing, faster access, and more favorable subsequent development.This will put our business into the fast lane of issuance.

So my personal judgment is like when we stock marketed in 92, the volume of that year was basically several hundred million. It is hard for us to imagine that 23 years later, our A-share market will reach 2 trillion market. Volume, I believe that people who speculated in stocks in 92, people from all over the world can't imagine the current volume of 2 trillion.I believe that the competition in these three markets will eventually make China's capital market the market with the largest number of listed companies in the world.

▌Talk about high valuation: Profits are higher than drugs? High valuation can last up to 2 years

If this judgment is true, then I think the impact on the high valuation of China A shares will be very, very large. We can know from common sense that if our GEM is average, assuming a price-earnings ratio of 130 times, all entrepreneurs, including me, I will also run the company to go public, even if you are in the early stage, you are investing 20 times , Sold 100 times, I think this business is more profitable than drug trafficking, such a high valuation is impossible to sustain.

I told many friends about my personal judgment that with such a high valuation, the maximum window period is about 2 years.Two years later, I believe that the valuation of A-shares will drop very quickly. Otherwise, I think everyone who invests will have a large number of shipping companies listed. If the valuation level remains the same, it may be the spring of the morning. The spring of PE institutions.

For us, we do investment, and I do the secondary market is very, very difficult to choose. You open the entire industry, all stocks, the average price-earnings ratio of the GEM is 130 times, and the small and medium-sized board is 80 times. How do you start? I have been in the industry for 23 years and it is getting harder and harder to be honest, and what are you doing? It is to take a huge risk. If you buy it 130 times, even if it doubles, the risk is very, very large.

We can only pin our hopes on entrepreneurs, 130 times the enterprise, 100 times the enterprise,You continue to do mergers and acquisitions, and do extensional expansion to change your valuation, but this is also very difficult. Of course, the capital market likes this kind of game and this kind of logic.But can you watch it for a long time? This is very difficult.

Of course, I will also talk about the issue of high valuation. For example, in 07, we made a serious mistake at that time. We were still holding on to the high position in 07, like Moutai. We held Moutai for 11 Years, it has not been sold until now. In 07, Moutai's P/E ratio was 73 times. By the end of 2012, Moutai's P/E ratio had become 8.8 times; Vanke's P/E ratio was 2007 times in 43, and Vanke's P/E ratio was 2012 times at the end of 5.9, and the P/E ratio has lost more than 80%. But for these two companies, Moutai’s profits have increased more than four times, and Vanke’s profits have more than doubled.

But looking back at the 07 P/E ratio of Maotai, should you sell it at 73 times? Said afterwards, it must be sold. But it is difficult to judge in the matter.

For example, do you want to sell 73 times the GEM? Including the business model of Shenche, it is actually a worthless business model overseas, including game companies that are not very valuable overseas, but the valuation is hundreds of times PE, so I think the bubble in the A-share market is still relatively High.

▌Being against the United States: A-shares will be Americanized and will definitely experience a wave of stock market crashes in 87

But for a long-term judgment, we talk about the long-term judgment of a market. I also said a point of view some time ago. I said that A shares will be Americanized. Why are A shares Americanized? I think this judgment is more important. Because if A shares cannot be Americanized, then the cycle of our A shares in the past 23 years is that A shares rarely have a bull market for more than 2 years. If A shares are not Americanized, then A shares will be very long in the future. A period of time should be a big bear market.

Because our bull market is two years, the bear market is 3 years, 5 years, 6 years, and 7 years. We were a bull market last year. This year has reached June, and there are still a few months away.If such a cycle is not broken, our market may fall into a slow "bear road" in the future.

The current capital market, because of the registration system, has played a more important role in the entire economic cycle than in the past. Therefore, it is possible to become more resilient. The high valuation itself does not hinder the long-term prosperity of a market. There will be an intermediate balance process, some blue chips and bubbles, there will be a balance process in between. Just like the collapse of Internet stocks in 2000, it does not mean that the US market is over. There may be a renewed rise in the main board market and there may be a good trend.

I said in March that the A-share market will become the market with the largest number of listed companies in the world. I also said that this wave of the A-share market will go to 3, and there will be a ten-year bull market. The ten-year bull market was not proposed by me now. I wrote the rose bottom at 2020. Although it is cruel, there may be roses paved with flowers in front of me. The bull market in 1840 may be ushered in, because of this point in 1942. It is very important, and to welcome the long and short bull market that is about to start around 1942. I said this in August 2020.

I said that China is now in the United States in 1942, and the future will usher in a very magnificent market. We may enter the longest bull market in our life.

Before 1942, the trend of the US Dow Jones Index was very, very close to the trend of the A-share Shanghai Composite Index. The zigzag change changed after 1800. This wave, from 1942 to 1966, has risen for so many years, and has risen for 83 years from 2000 to 17.

I personally think that the A-share market will definitely experience a wave of stock market crashes in 87. I don’t know if it started today? It shook up a bit, but it was going to kill people at once. There will be fluctuations in the middle, but in general it is the time going up.

We can see that China's capital market has condensed the changes in the US market for more than XNUMX years. We say that the secondary market, all the characteristics of the secondary market, have been demonstrated in the United States for more than XNUMX years.

For example, the IPO technology stock boom and the IPO frenzy. From 1942 to 66 in the United States, it was military industry in the early stage, and then the Marshall Plan. It is the same as the military industry in our A-share market and the Belt and Road Initiative. What I just said appeared in the middle. Some stocks have P/E ratios as high as 70 or 80 times.

▌New stock frenzy: "Demons and Ghosts" will be restored to their original form by the registration system

Of course, because our trading habits in the past 23 years are that demand is greater than supply, it is formed under such a big background. If in the future our capital market, because of the registration system, our supply and demand relationship will be fundamentally reversed. In the future, the supply may be very, very large, and the demand will change due to market changes. Perhaps one day the new stock frenzy will never appear in a historical stage. I believe this. As soon as the new stocks are listed, there will be daily daily limit and a dozen daily limit. This situation must be a very short period in history. It will not last long.

So in the past 23 years,We have seen the characteristics of the frenzy of new stocks in the secondary market of China's capital market, which should be brought back to its original form in the next few years because of the arrival of the registration system.

Like the United States, in this wave of 24 years of bull market, such a situation has also occurred, but it does not hinder the long-term prosperity of a market. Because I look at the U.S. market myself, because we have invested in China for 11 years, and we have also invested in overseas for 11 years. Then investment overseas is a complete value investment, a market supported by blue chip stocks for growth.

Overseas, if we, as an investor, make a serious mistake, as soon as a project opens 92%, the company will withdraw on the third day, and it will be gone. But the A-shares had an accident, the limit dropped two or three stops, and now it is back.

Someone asked me, has the A-share market changed in the past ten years? I said it was worse than before.The demons and ghosts in China are dancing and dancing. I have seen all the demons and ghosts really live more splendidly now. This is a big problem in the A-share market.

In any case, China is still in a prosperous stage, the market will have some repairs, but we say that the law of value may be late, but it will never be absent.

▌Speaking of the New Third Board: It will turn China's university cities into Silicon Valley

Generally speaking, it will be in such a change.

Many friends say that friends who are now doing business may think so, saying that the economic situation is not good, why is there a bull market? The economic situation is good, why doesn't the stock market rise? It also appeared in these two periods of American history. For example, from 1964 to 1983, the U.S. index rose by only one point in the past 17 years, but its economic scale also increased greatly. These two big bull markets, because one is 24 years and the other is 17 years, this is a change that has gone through many economic cycles. What determines the long-term future of the capital market? What I personally see is to determine whether a market is a long-term bull market. What is the most fundamental thing? It is the change in interest rates. The main reason for these two big bull markets is that interest rates have fallen from 16% to 4%. This wave of bull market in the A-share market also started with interest rate cuts. If China’s interest rates in the future are like Europe and the United States If the interest rate is zero, if it is a long-term interest rate cut, the long-term prosperity of the capital market is still very likely.

The worse the economic situation is, the more interest rate and reserve ratio must be cut, and the more liquidity must be released. In this case, the market may have a continuous and long upward process.

This is an economic problem facing China. China needs to rely on direct financing to promote economic growth, rather than indirect financing. This is the China Growth Enterprise Market, the small and medium-sized board, or the new third board system reform to allow China to transition to Europe, America and Japan.The arrival of the new third edition and registration system will make China's cities where universities are concentrated may become Silicon Valley.

The new third edition will play a very significant and obvious role in promoting the structuralization of China’s economy. I also wholeheartedly hope that our registration system can be truly market-oriented, allowing companies to enter the vast ocean of capital markets and rely on their own development. Make great progress, or eliminate it. Big in and out, good ones stay, and bad ones eliminated, so that the upsurge of entrepreneurship in the whole society or the situation can become the mainstream of a society. In this way, I believe that China's economic structure will undergo very, very big changes due to such a system arrangement.

▌Speaking of the bull market again: the creative board will become history, and the next wave will be the slow bull

If this wave goes down at more than 5 points, it is not a bull market, or a rebound, which means that the bull market has not yet come. If it is a bull market, it will definitely break 6124 points, and it must break the high point to be a bull market.

The approximate high point is about 5 points. It needs to be adjusted. It may be adjusted very deeply. Then the wave should be able to break 6 points. Moreover, our government and the leaders of our Securities Regulatory Commission hope to slow down.When the next wave gets up again, it must be a slow cow, this wave is a fast cow, and the fast cow is over. If you want him to be fast in the next wave, he can't be fast.

In the next wave, I think it may be some blue-chip stocks with real performance support, or really good companies, and companies with great progress will develop. Just like the real good corporate development in the United States after the dot-com bubble burst.

Especially the current VIE structure, 360 is also privatized. For companies like this, after returning to A-shares, I think they will lower the valuation of even the NEEQ or ChiNext stocks, because there are some really good companies that have gone public, and some corner companies have very good Big problem. In addition, the long-term return on investment is obtained by reinvesting dividends and dividends. In my own judgment, the glorious years of the GEM are gone forever.

Of course, this judgment is for investors in the secondary market, and for the entrepreneurs present here, you can also use this high valuation, because even if it is 130 times down to 70 or 80 times, it is still overvalued. It is still yours. Spring is still your hot spot.

The years left by this wave of quotations in the history of China is the story of Shenchuangban. This story ends here, probably because of its huge volume, tens of trillions of dollars, and active money in this sector. Maybe It will oscillate again and again, and even record new highs is not ruled out, but it is basically the end, and it is going down.

Of course, from the valuation of the capital market, only these sectors are underestimated, that is, brokerages, insurance, and banks. There are also opportunities for brand consumption and environmental governance, including nuclear power and so on.

Because of time, I will communicate with you here. Because the capital market has undergone tremendous changes and there are many different opinions, what I said may not be correct, for reference only, thank you.

Article reprinted from Entrepreneur Magazine 

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