Mr. Cheng, Please Choose Your Words Carefully

2007/10/16 7:49:06

Yesterday, Mr. Cheng's remarks about speculation benefiting the market can't help but remind us of his remarks about bubbles and the like below 3000 points—yesterday's level being 6000. As an academic viewpoint, there's nothing inherently wrong with this—plenty of people promote such views. But Mr. Cheng's identity is obviously rather special. In the current environment, reversing his position from just a few months ago to publicly speak in favor of speculation is indeed somewhat inappropriate.

Speculation is nothing more than a type of market behavior—it is neither good nor bad for the market. Moreover, markets are full of false signals. For example, in the past, a certain stock surged 100% in a short time, then hit consecutive limit-downs, eventually dropping to zero and being delisted. Everyone who got excited about that 100% discovered that even measured from the starting point of that 100%, it was a lofty mountaintop. The preceding 100% bullish move was merely one step in an overall bearish program. This is just like the current market, which is in the process of topping. Promoting speculation at this time—is this really the right moment?

Markets are always fair—ultimately only a minority makes money. 80% of people merely ride the elevator then plunge into the abyss. Such is the fate of most retail investors. Promoting speculation at this time—what impression does it give those retail investors? What impact? Not everyone is suited for "infinite glory at perilous peaks." Not everyone is suited for the game of chasing tops. At this juncture, a person of stature and influence, an elder no less, should seemingly be doing more to warn people, rather than making such pronouncements about speculation.

After the climax, there's always a mess of feathers everywhere—that's speculation. The climax is speculation's pleasure; the scattered feathers are its price. And at least 80% of people end up among the feathers. Right now, a responsible person should be saying: those without the ability, without the skill—leave first. No final passage allows everyone through. At most 20% make it through in the end. First, before speculating, figure out whether your abilities place you in that 20%.

Of course, for those with ability, infinite glory awaits at perilous peaks. And if speculation can be leveraged to achieve higher-order objectives, all the better. Since regulators mostly lack practical experience, certain obviously flawed arrangements need someone to demonstrate their consequences. If even that doesn't change things—well, then that's just fate, and there's nothing to regret.

Sell points always come during rallies—stocks work this way, and so does the economy. Does the economy not have rhythm too? Without understanding this, the economy can hardly be "economic." People always ask about selling only after the decline. Once the economy turns, where is the exit channel? Only heaven knows.

Economic regulation is like buying and selling stocks—rhythm comes first. This principle indeed needs some proper reasoning through.