The Current Stage of the Market

2007/9/3 8:49:53

Recently, too many newcomers have flooded in — a mixed bag of fish and dragons. So this ID will wade into the mud and repeat the current stage the market is in. All of this has been stated repeatedly before, but for those of average level, it's worth stating explicitly one more time.

This ID's views have always been consistent, unfolding according to the same logical framework:

One. This great bull market will continue for at least another 20 years, rising at least another 30,000 points. This view has never changed, including the three major stages into which this bull market can be divided, which have already been clearly stated.

Two. The current trend is in the bubble-forming process of the first stage of the great bull market. Since it took 2 years for the market to rise 4.5 times from undervaluation back to normal GDP-corresponding levels, from a purely symmetrical perspective, the bubble stage can also extend for 2 years, rising 4.5 times — meaning it could reach 20,000 points in an extreme scenario. But one thing is certain: even if 20,000 is reached first, the subsequent bubble burst will inevitably bring prices back to GDP-corresponding levels — that is, back to a position at or below the current level.

Three. A bubble can burst naturally or be deliberately pricked. Deliberate pricking involves policy regulation, which constitutes non-systematic risk. When facing such risk, one must be clear: this does not change any long-term trend — at most it creates a mid-term correction. If regulation is relatively skillful, the bubble stage can be extended longer and reach higher, and the subsequent burst will be correspondingly less destructive. But whether such regulatory skill can be achieved — this ID has no confidence whatsoever.

Four. In the bubble stage, it's like walking on a knife's edge. Having chosen this path, you can only continue forward. Any injuries sustained cannot be blamed on anyone — you must bear them yourself. If you don't have the heart for this, then withdraw, and don't be envious of others earning the ultra-high returns within the bubble. The bubble stage demands better mentality and higher technique.

Five. Some stocks are worth holding for 20 years, only to be sold after the entire bull market ends. Once you've chosen such stocks, you hold them through thick and thin — till the seas run dry and the rocks crumble. But you can use short-to-mid-term fluctuations to reduce your cost, and after reaching zero cost, continue adding to your position. From the long-term perspective of the great bull market, the bursting of a bubble merely provides a prime opportunity to lower costs and accumulate shares. If you have the technique and mentality, seize it well. If you lack these, then steel your conviction and hold resolutely for 20 years without looking back.

Below are the top 10 performers from the semi-annual report by earnings per share:

Top 10 by Earnings Per Share

Securities Code, Securities Name, EPS (yuan)

600137 *ST Langsha 4.75

000338 Weichai Power 1.87

000623 Jilin Aodong 1.71

600497 Chihong Zinc Germanium 1.70

600109 Chengdu Construction Investment 1.50

600993 Mayinglong 1.45

600432 Jien Nickel 1.43

600030 CITIC Securities 1.41

000592 S*ST Changyuan 1.34

600677 Aerospace Communication 1.29
*ST Langsha's earnings come purely from a restructuring — no substantive meaning. So the real number one is Weichai Power, which is one of the 10-to-20 stocks this ID plans to hold till the seas run dry. Another one, Jien Nickel, is also in the top ten. This clearly shows that those who say this ID's stocks are all garbage stocks are talking utter nonsense.

As for the fundamentals of this ID's stocks — let's wait N years before passing judgment. Right now, what can you possibly see?