Stock Market Chitchat: G-Shares Are the G-Spot, and You Don't Need Protection in a Big Bull Market!
2006/5/12 19:02:25
Anyone who can actually chat about the stock market with this ID — if such a person exists — is at most in the sperm or egg stage, not even a fertilized egg yet. Moreover, this stock market game is made by doing, not talking, so generally I don't discuss it. But seeing how some people have been tormented so badly by this market, and it being the weekend, out of sympathy, let me say a few words.
A year ago, when the market plummeted to 1,000 points in its bloodiest storm, I saw many pitiful people online at the time. Using my old ID, I gave one clear pronouncement: "G-Shares Are the G-Spot" — the bloodier and stormier it gets, the greater the opportunity. Now this G-spot has been worked to the point where many people can't take it anymore. The overwhelming majority of market participants are quite pathetic — afraid when it falls, afraid when it rises, truly pitiable. For this reason, today I'll offer another saying: "You Don't Need Protection in a Big Bull Market."
The key meaning of "not needing protection" here is: don't apply old frameworks to forecast market movements, especially for those who don't know the market well. For example, the other day I saw someone complaining that the Wuliangye warrants had gone crazy, already at 3 or 4 yuan. These people simply don't understand the market well enough. Do you know how high the Bao'an warrants were pushed back in the day? Do you know that the Shenzhen market, influenced by Hong Kong, has always had a tradition of speculating on warrants? Do you know that in Hong Kong, warrants far crazier than this are everywhere? The market will always surpass ordinary people's imagination. Three or four yuan is expensive? Why can't a stock price be more expensive than the liquor it represents? What would be so strange about the day when — on a cum-rights basis — a bottle of Maotai or Wuliangye can't buy a single share of the corresponding stock?
Of course, for the very few, the market is simply an ATM — withdraw whenever you want. How can this be achieved? By thoroughly understanding the market. Those who truly understand the market know that all markets are the same — like people wearing different clothes, strip them bare and they're all identical. Those who truly understand the market don't care about bull or bear — the market is always an ATM. Of course, if the market can only be unidirectional, the only difference is that during bear markets, the amount of capital deployed and the frequency of swings should be smaller.
However, even in a bull market, the difference in profit levels between masters and novices is enormous. If a stock doubles, the most a novice can pocket is a 100% gain, while a master can easily turn it into 300% or 400%. In fact, stock investing is very simple. The most critical factor is cost, and timing is essentially cost. If you have the ability to keep your cost below the market's average cost, you will always be in an invincible position. Since fluctuation is where market risk lies, it correspondingly provides the opportunity to exploit market risk, to use every worthwhile fluctuation to drive your holding cost down to zero or even negative. This way, regardless of bull or bear markets, nothing matters. Where there's fluctuation, there's risk, and correspondingly there's profit. For a master, given enough time, the profit squeezed from a declining stock will certainly exceed what a novice can extract from a rising stock. Of course, this is just an illustration — a true master would never deliberately trade against the trend.
Investing is an art, and the art of investing ultimately comes down to the art of capital management — just as the art of singing ultimately comes down to the art of breathing. And market fluctuations ultimately unfold within a complete classification formed by the relationship between consecutive highs and lows. Once you understand this, the market becomes as readily visible as the lines on your own palm. All of the above applies not just to retail investors but equally to market makers. Those who understand this can navigate the market with ease. Of course, beyond this level, there is a higher path — but that's not something to be discussed with ordinary people, and even if I did, it would be pointless, so I won't.