Black Capitalism读书笔记

发改委权力范围

  1. 企业债的发行审核

监管机构

  1. 发改委NDRC -> 企业债
  2. 证监会CSRC -> 股票
  3. 人民银行PBOC -> 金融债
  4. 银行间市场协议NAFMII -> Medium Term Note
  5. 银监会CRBC
  6. 国资委SASAC
  7. 财政部MOF -> 地方债

金融简称

CP = Commerical Paper
MTN = Medium Term Note
CGB = China Government Bond

汇率政策

固定汇率制度限制利率政策的操作空间

A股IPO认筹锁定的资金通常是万亿人民币级别的

(500倍左右超额认购)

A股国企

国企的实控人和受益人均为国资委,并不以全体股东的利益为最优先考虑事项,这也解释了为什么上证指数10年未涨,上证,中证300等大盘指数的国企股票权重大,对大盘有决定性的影响。
国企在A股上市大都引入了大量的其他国企股东作为战略投资者,大型央企和国企交叉持股。
IPO的定价和配售机制决定了IPO价格低于市场公允价格,导致普遍的IPO后连续涨停板以及稀少的成交量。

国家的公司属性

中国的国家性质与西方商业公司有相似之处,都为追求股东利益最大化。中国的国家股东为CCP, 其根本的组织行动目的在于维持组织及组织核心成员在国内的政治、经济和文化等各领域的长期领导地位;以及分配社会资源的权力。

四大行和MOF

MOF -> 四大行 -> Corporate (Lending) -> GDP Growth
Corporate -> 四大行 -> MOF (Dividend)

2019年金融领域的解除管制

  1. 目的
    通过开放金融市场,吸引外资券商、保险等金融机构进入中国,从而达到扩大国外对内直接金融投资,为国内股权融资市场扩大资金来源,
    吸引外资进入中国金融市场,推动中国金融市场的效率提升,帮助降低国内杠杆。

举债发展的可行性

债务推动增长需要以GDP的高增长来保证债务可持续性,GDP增速下滑会导致社会财富增长低于利息支出,对债务人的偿债能力产生冲击。

央企、国企和券商银行对国债支持

国有企业和金融机构会被要求以资本金来购买国债和其他国有企业、地方企业债。

港交所

1949年内地的政权更替,导致了上海作为远东金融中心地位的消亡,资本、企业和人员大批迁移到香港,促进了香港金融市场往后50年的繁荣。

港币的地位问题

港币为何能成为一种能和美元等强势国际货币维持固定汇率的区域性货币

The Soros Lectures

Thesis

  1. Markets are always biased in one direction or another
  2. Markets can influence the events that they anticipate
    My Own: Market is always fluctuating.

Market price always distort the underlying fundamentals. The degree of distortion may range from negligible to significant.

Also, financial markets can affect the fundamentals.

Self-reinforcing and Self-correcting

  1. Self-reinforcing and self-correcting work for both the underlying trend and the prevailing bias

The Alchemy of Finance

The underlying trend refers to market forces other than price movement resulting from the imbalance of bid/ask orders. The prevailing bias is the source of short-term price fluctions. The underlying trend refers to the facotrs as a whole which neither side can afford to ignore, such as the general market trend, the market sentiment, the macro economy, the earnings trend, etc.

Stock Price Trend is observable by looking at the recent movement of stock price, if the underlying trend is flat, then the stock price trend is the same as the prevailing bias
(Stock Price Trend = Underlying Trend + Prevailing Bias)
Underlying Trend Cound include factors such as index fund sells, etc
The underlying trend is not necessarily recognized by investors.
// The underlying trend affect the stock price via affecting the prevailing investor bias.

Soros' Criticism on Economy Theory

Soros' criticism on economy theory is well justified in the financial market, but not necessary in the micro-economy field such as the market of ice cream. The demand and supply of assets in the financial market and the price of exchange do reflect the participant's expectation of future event, which doesnot frequently happend in the ice cream market.

The expectation of market participant can be confirmed by subsequent market event. Also, the subsequent market event can occur as a result of the expectation of market participant.

Imperfect Understanding of Market Participant

  1. The lack of knowledge of the environment
  2. The thinking and expectation of participant affects the situation to which it relates

Reflexivity

Perception -> Participation -> Impact on Environment -> Perception -> Participation

Robert Shiller – Destroyer of Efficient Market Hypothesis (EMH)

Efficient market hypothesis states that the market price reflect all information available and consistent alpha generation is impossible.

Rober shiller demonstrates that short-term price movement is substantially driven by psychology and cannot be reasonablely justified by all availble public information.

Shiller's perspective can be illustrated by his definition of bubble:
"A situation in which news of price increases spurs investor enthusiasm which spreads by psychological contagion from person to person, in the process amplifying stories that might justify the price increase and bringing in a larger and larger class of investors, who, despite doubts about the real value of the investment, are drawn to it partly through envy of others’ successes and partly through a gambler’s excitement."

Irrational Exuberance读书笔记

The Characteristics of Financial Asset Bubble

Financial asset bubble is more like speculative epidemics

Speculative Bubble

Feedback loop of Bubble

The Position of Media in Speculative Bubble

Significant market events generally occur only if there is similar thinking among
large groups of people, and the news media are essential vehicles for the spread
of ideas

Reading Notes

Bank Management (Peter S Rose)

The asset weight of commerical banks among financial service providers declined from 66% to 25% in a century.

Ray-Dalio-Principles-Life-and-Work读书笔记

Ray Dalio's Investing Philosophy

It seems that Ray Dalio doesnot base his trading decision on the under or overvaluation of financial assets, he instead traded based on the prediction of future price movement. The attribute price movement not unpon the traditional market supply and demand theory, but more practically, transactions. By research deeply into the forces behind market movements based on historical data and the mechanism of economic world, Dalio was able to make bettings that have consistent returns.

Ray Dalio's success demenstrates the difference between stock market and the derivative market. From a value investing's perspective, Ray Dalio is more of a speculator than an investor.

A-template-for-understanding-big-debt-crises读书笔记

债务周期的长期负面影响

  1. 债权人的损失
  2. 债务人的未来收入和支出削减

观测债务周期的关键指标

  1. Debt to Income Ratio
  2. Debt Service Payment to Income Ratio

Credit is "Money"

Most of what people think is money is really credit, and credit does appear out of thin air during good times and then disappear at bad times.

A big part of the deleveraging process is people discovering that much of what they thought of as their wealth was merely people's promises to give them money.

债务危机的根源

举债投资的边际效用减弱,收入增长不及债务成本增长

How to deleverage the Economy

Make income grow faster than debt, lowering the debt-to-income ratio. For the burdens from existing debt not to increase, nominal income growth must be higher than nominal interest rate.

Current U.S. federal Fund Rate:

2.25%
2.2% - 2.5%

The amount of national (gross) income is equal to GDP

The debt burden cannot growth faster than gross income.

The primary beneficiary of QE

  1. Raise the market price for financial assets, generate capital gains for financial asset holders.
    The process of QE creates a positive wealth effect.

The Root Cause of Debt Crsis

The vanish of credit.

Deleveragings Can Occur Without Depression

GDP and Growth In Demand

Growth in demand are commonly accompied by growth in spending. As gdp growth slower than growth in demand, the economy as a whole spend more than production (income). The gdp and spending difference increases the total debt of economy.

Three Forces and Interactions

Productivity growth rate is relatively constant across the 100 years span, economic growth follows the trend in general but variations did occur frequently.

The marjor swings of economic growth are due to expansions and contractions in credit - i.e. , credit cycles/debt cycles, 1) long-term debt cycles and 2) short-term debt cycles

An economy is the sum of the transactions that make it up. A transaction is an exchange of money/credit for goods, services or financial asset. A market consists of all the buyers and sellers involved in the transaction of the same nature.

The average price of any good, service or financial assets in a time span is the total amount of consideration given (money or credit) by the total amount received in this window. The market participators (buyers and sellers) have different motivations.

When buying in credit, the settlement of the transaction is actually delayed until the debt is paid off.

A credit-based transaction, as well as other cash settled transactions, would result in an increase in asset of both the seller and the buyer. The expansion of balance sheet for both the seller and buyer would then allow more credit transactions to occur. The process is self-reinforcing because rising spending generates rising income and rising net worths, which raise borrowers' capacity to borrow.

The economy expansion is highly correlated with the expansion of credit. As increase in demand would result in growth in production and economy, typically financed by credit growth. In a credit-based economy, strong demands equals strong real credit growth. Consequently, recessions and depressions are developed from declines in demand, typiclly due to a fall-off in credit creation. In such an economy, demand is constrained only by the willings of creditors and debtors to extend and receive credit.

The modern practice of supporting economy growth by credit expansion is the root cause of debt cycles.

The constrain of modern credit-based economy is relative size of money (cash) v.s. credit. The total amount of debt in the U.S. is about 16 times the size of money in existence.

Lending naturally creates self-reinforcing upward movements that eventually reverse to create self-reinforcing downward movements that must reverse in turn. Mostly due to the fact that it is increasingly difficult to convert debt into income.

Short-term debt cycle is controlled by central bank's monetary policy to tighten or ease credit.

The long-term debt cycle is determined by the relative speed of debt service payment growth and income growth.

The-Intelligent-Investor读书笔记

Two Policies that Must be Followed to beat the Average

a. Inherently Sound and Promising Prospects for A Security
b. Not Popular on Wall Street

The Restrictions of Security Analysis

a. The conclusion of the study is only a nearly correct version of the past
b. The information used in the analysis may have lost relevance by the time acquired
c. The conclusion may become obsolete by the time the market is ready to absorb it.

Topics that Must be Covered in the Study of Corporate Income

a. Accounting aspect: What are the true earnings for the period studied ?
b. Business aspect: What indications does the earnings record carry as to the future earning power of the company ?
c. Invest Finance aspect: What elements in the earnings exhibit must be taken into account, and what standards must be followed, in endeavoring to arrive at a reasonable valuation of the shares ?

Tests for determining "bargin" issues

  1. The indicated value by appraisal is at least 50% more than the current market price
  2. The value of the business to a private owner, the realizable value of the assets.

Top major sources of undervaluation

  1. Currently disappointing results
  2. Protracted neglect or unpopularity.
  3. The market's failure to recognize its true earnings picture.

Timing and Pricing

  1. Timing: The endeavor to anticipate the actions of the stock market
  2. Pricing: The endeavor to buy stocks when they are quoted below their fair value and to sell them when price rise above such value

About Market Timing

Market forcast is by itself meaningless.
The general market is unpredictable.

The Effectiveness of Investment Theory

  1. New conditions has emerged that is not in the old formular over time
  2. The popularity of a theory cast an adverse effect on its performance as more people applies it.

The paradox of market valuation

The more successful the company, the greater are likely to be the fluctuations in the price of its shares. The better the quality of a common stock, the more speculative it is likely to be. Gambling and speculation is about the betting on uncertainty with a potential high return. The uncertainty component can be if the company can succeed in the future, or if it is definitely going to succeed, how big success it can reach. The market price for hight quality stocks is highly speculative because the public can not reach consensus on the potential about the future of a company, even if they agree on genenral its success or failure future, they surely cannot agree on how success it will be.

Graham's Lifetime of Experience

The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits hisself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgment.

Distinction Between Investor and Speculator

Intention of Stock Purchase

  1. Speculator
    The speculator's primary interest lies in anticipating and profiting from market fluctuations. (Price Orinted)

  2. Investor
    The investor's primary interest lies in acquiring and holding suitable securities at suitable prices. (Earnings Orinted)

Although a change of earnings will eventually reflect on price movement, the intention is different.

For investors, the market quotations are there for his convenience, either to be taken advantage of or to be ignored.

The Two Components of Profitability

  1. Operating Performance: operating margin
  2. Financial Performance: net margin

Factors to be considered when making a investment decision

  1. Do I have more information than my trading counterparty ?
  2. Do I know this company as well as I thought to be ?
  3. How much should this security go up to make even taking into account the tax and trading cost ?

Avoid Losses

Taking a 95% loss is much easier than making a 95% gain, let alone a 95% gain is not enough to make up the previous loss

Bull&Bear Market and Security Riskiness

Common stock is frequently considered as risky in bear market and "safe investment" in bull market when the reality is the exact opposite.

Component of Stock Market Growth

  1. Real Growth
  2. Inflationary Growth
  3. Speculative Growth

Security Analysis读书笔记

Portfolio Theory and Value Investment

The core difference is the definition of "Risk". Portfolio theory takes "Risk" as the price volatility of securities. In contrast, value investment treats "Risk" as the inappropriate valuation of securities.

The underlying logic for defining "Risk" as volatility is the need of frequent measurement of asset portfolio in market value. The emphasis on the liqudity of security.

Value investor does not focus on market value of their holdings but rely on long-term value realization instead.

About The Timing of Selling

It is questionable that a value investor should sell a security when it reaches full value. As good asset provides long-term cash flows that are difficult to completely converted into current value based on available information. A value investor may rely on such assets to survive different economic conditions, especially downturns.

Invest for Certainty

A good value investment should involve certain judgement for key elements.

Uncertainty of future falls into several categories, internal uncertainty and external uncertainty.

Principal Obstacles to Success of the Analyst

  1. The inadequacy or incorrectness of the data
  2. The uncertainty of the future
  3. The irrational behavior of the market

Two Assumptions of Analytical Work

  1. The market price is frequently out of line with the true value
  2. There is an inherent tendency for these disparities to correct themselves

Market Modelling: Voting Machine instead of Weighing Machine.

The market price will not reflect the value of each securities in an exact and impersonal mechanism. Rather, it reflects the choices of countless individuals partly of reason and partly of emotion

Trend Essentially a Qualitative Factor

No limit may be fixed on how far ahead the trend should be projected; and therefore the process of valuation, while seemingly mathematical, is in reality psychological and quite arbitrary. For this reason we consider trend analysis as a qualitative factor in its practical implications, even though it may be stated in quantitative terms.

A Test of Distinction Between Investment v.s. Speculation

Safety: An asset is only safe only if it is assured, or at least strongly indicated, by the application of definite and well-estabilished standards.

Definition of Investment

An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.

Past Performance V.S. Future Assessment

The traditional view was that prudent bond investing must be based on solid inference from past data as opposed to speculation regarding future events. However, the motivation of inferencing from past data was exactly trying to has know about the possibility of future.
Thus the real difference is really about whether we should judging a firm's future perspective based exclusively on historical data (concervative); or we can forward-looking at the quality and possibility of business.

Forward-looking

Forward-looking analysis can be profitably applied to instruments of all sorts.

About Investment Risk

The supposed acturial computation of investment risk is hardly practical. Investment losses are not distributed fairly evenly in point of time, but tend to be concentrated at intervals, which is incalculable.

Four Principles for the Selection of Issues of the Fixed-value Type

  1. Safty is measured not by specific lien or other contractual rights, but by the ability of the issuer to meet all of its obligations.
  2. This ability should be measured under conditions of depression rather than prosperity
  3. Deficient safety cannot be compensated for by an abnormally high coupon rate
  4. The selection of all bonds for investment should be subject to rules of exclusion and to specific quantitative tests corresponding to those prescribed by statute to govern investments of saving banks.

Old Equity Investment (Common Stock) Theory - Threefold Principle

  1. A suitable and established dividend return
  2. A stable and adequate earnings record
  3. A satisfactory backing of tangible assets

P/E Ratio and Bond Interest Return

A PE ratio of 25 is equivilent to a 4% coupon ratio corporate bond. Both pay 4% on yield plus face value of the security when held to maturity/sold.

U.S. Economy Cycle

1929 - 1933, down
1934 - 1937, up
1937 - 1938, down
1939 - 1943, up
1944 - 1947, down

Dividend Policy

Liberal Dividend: A policy to distribute a major part of earnings as dividend to shareholders

Conservative Dividend Policy

Conservativem means following the current tradition.

Three Traits of Human Nature:

  1. aversion to boredom
  2. a tendency for emotions to overwhelm reason
  3. greed

Three Approach for Value Investment

  1. Secular Expansion as Basis
  2. Individual Growth as Basis of Selection
  3. Selection Based on Margin-of-safety Principle

Intransic Value

Intransic value only concerns about the earning power of the business, not including the growth potential. Value investing is about buying at a bargin price (compared to intransic value) with enough margin of safety. Invest in certainty.

Investing in growth potential is speculation and add more factors on top of the intransic value and current price level (bargin or not). More factors, higher uncertainties.

Current Earnings Should Not Be the Primary Basis of Appraisal

The market level of common stocks is governed more by their current earnings than by their long-term average. This fact accounts for the tremendous fluctuations in common stock prices. The mistake of the market lies in its assumption that in every case changes of this sort are likely to go farther, or at least to persist, which is doubtful.

Earning Power and Losses

Net losses should not be included in the average profit to represent a company's earning power.

Losses represents only the loss potential. Earning power and loss potential should be split apart.

Capital Structure

A speculative capitalization structure may give the common stock a definite speculative advantage even though it will turn the common stock unsuitable for investment.

PE ratio and Earning Basis

A PE ratio of 20 means the stock is expected to generate earnings of 5% per year of the investment for the time forward.

The relationship between Profit per Value and Output per dollar of stock value

Profit per value is inversely related to output per dollar of stock value

Valution of a Company by Summing Up The Valution of Parts With Different Ratio

Discrepancies between price and value

  1. Causes of Price Discrepancies
    A. Exaggeration
    B. Oversimplication
    C. Neglect

Factors for the Market Valuation of Secondary Issues

  1. If professional market operators are interested in the issue
  2. If professional investor are interested in the issue
  3. The interests of genneral public torwards the issue
  4. If there are sponsors of the issue

Market Behavior of Top Issues and Secondary Issues

  1. Standard of leading issues almost always respond rapidly to changes in their reported profits, so much so that they tend regularly to exaggerate marketwise the significance of year-to-year fluctuations in earnings
  2. The actions of the less familiar issues depends largely upon what attitude is taken towards them by professional market operators. If interest is lacking, the price may lag far behind the statistical showing. If interest is attracted to the issue, either manipulatively or more legitimately, the opposite result can readily be attained, and the price will respond in extreme fashion to changes in the company's exhibit.

The composition of the market-leader group has varied greatly from year to year, especially in view of the recent shift of attention from past performance to future prospects

The paradigm shift of stock valuation was primarily driven by the growing impact of business renovation, especially its destructive power against existing market participants.

Bargin Purchase of Common Stock

  1. The bargin rate needs to be increased when the general market is statistically at a high level

The definition of Market Analysis

  1. Predicting future prices based on market price movement and signals, including macroeconomic and microeconomic factors without reference to the company fundementals.

The Constrain of Growth Projection Valuation

  1. The Law of Diminishing Return
  2. The Law of Increasing Competition