Oriental Securities Wang Guobin: The Internet is a national dice game
2015-05-21 19:14:27 Source: Caijing.com (Beijing)
Text | Wang Guobin, Vice President of Oriental Securities, from the public account Oriental Research
Hello everyone, the title of my speech today is: "Internet", whether it enhances or destroys investment value.
To be honest, the title of my speech today may make many researchers feel uneasy. When I decided on this topic, the conference committee responded that our researchers were vigorously promoting the "Internet". If you suddenly raised this topic, wouldn't it make it difficult for us researchers to talk during road shows? When I made this report, I didn’t discuss it with you much. The speech time was just to fill in the gaps for everyone to think about after listening to it.
Why is this title? In fact, everyone who has participated in our strategy meeting will know that at the strategy meeting in May 2013, I gave a report on the Internet changing China. These are PPTs from that time, which mentioned the historical opportunities for China to overtake in corners in the Internet era. At that time, I believed that in the future investment process, the Internet must be included as a dimension in our investment framework, and we must stay away from companies that do not have Internet genes. It mentioned that we should focus on high-growth Internet-related companies, keep an eye on the mobile wave, pay attention to companies that provide products and services for Internet applications, pay attention to traditional manufacturing companies that use Internet technology to upgrade and transform, and at the same time short positions in industries or business models that have been disrupted by the Internet. , at present, these judgments make some sense. I also quoted Munger at the time. He said, "The Internet is good for society, but it is a disaster for capitalists. Many of them improve efficiency and reduce profits. The Internet will make every company make less money, not more." Make money." Two years from now, I wonder if we should look back at Munger's words when we invest emotionally in the "Internet."
Back to the front, you must have seen an article on the WeChat platform about some of the stocks in the United States that have given investors the best returns in the past 50 or 60 years. The stocks that gave investors the best returns from 1950 to 2003 in the United States were Kraft Foods, Reynolds Tobacco, Standard Oil of New Jersey, and Coca-Cola Company. Let's take a look and see if any of the high technologies that were popular at the time are left behind, including aviation and television 50 years ago, computers in the 1960s and 1970s, biotechnology in the 1980s, and the Internet from 1990 to 2000. None of them are left. In all statistics, I only listed the top four. In fact, not only the top four, but also the so-called high-tech companies are not found in the top twenty. There is a passage by Dostoyevsky that I think is very appropriate, "You can use any language you imagine to describe human beings, but you cannot say that they are rational." Indeed, as an individual, human beings are extremely unfair. Rationally, the world is not as we think we know it. We think high-tech companies are the best investments, but they are not.
On many occasions, people hope that I can look into the future and make predictions about the future. But there's really no good way to predict the future. If there is a way, I think these aspects will be helpful. One is historical lessons, the other is biological lessons, and the last one is logical inference in economics.
When I attended an event in Shenzhen some time ago, I delivered a speech. The PPT speech transcript of that speech was actually circulated many times in WeChat circles. I wonder why many investors haven't read the book "Extraordinary Mass Fantasy and Mass Madness". It tells about some of the largest bubbles in human history, such as the South Sea Bubble and the Tulip Bubble, and my idea is that our current capital market is providing new material for this book. This is my judgment about the future. I have said its meaning many times, but people who have not read the book still don’t understand. This is a nationwide game of dice. This judgment remains unchanged.
Now let us go back to history to judge our title. Does "Internet" enhance or destroy our investment value?
Historical data shows that no matter how great the benefits brought by technological progress are, it is always consumers rather than company owners who ultimately reap these benefits. Increased productivity increases competition, lowers prices and raises workers' real wages. In their enthusiasm for innovation, investors pay exorbitant prices to get in on the action. The benefits of innovation do not flow to individual investors, but to the innovators and builders, including venture capitalists who provide large sums of money for projects, investment bankers who sell stocks, money managers, and trading brokers. .
New technologies have never brought benefits to ordinary investors in history, and the valuation is too high. I have called on everyone on many occasions to quickly let go of our issuance. Letting go of issuance can lead to rapid growth in supply. If not, the bubble will expand faster than we imagine. There was a passage in Wu Xiaobo's "Crazy" yesterday that said very well, "China's current capital market is in a parabolic channel of irrational exuberance. This should be the largest capital bubble movement in the past ten years. All attempts to stay out of it All of them will become injured without any accident. Many people are speculating when the turning point will come, and more people are stimulated by this parabola to scream and plunge into it risklessly. "We are now in it. The parabola cannot go up or down; secondly, liberalizing issuance can prevent investors from losing investment opportunities in companies in the earlier stages of their life cycles, and can allow ordinary investors to share the early investment process and growth stories.
Historically, new technology and new economy are words that have been used repeatedly in the past. They were not only used to describe the economic conditions at that time in the 1950s, but we also used them again and again in the 1990s. Graham's book "The Intelligent Investor" was published in the 1970s. The book mentioned that air transport stocks also excited investors in the late 1940s and early 1950s. The most popular mutual funds at the time were the aviation securities fund and the aircraft automation fund. Like the stocks they owned, these funds eventually turned into an investment disaster. In mid-1971, the "Stock Guide" published by Standard & Poor's included 46 companies starting with words such as computing, data, electronics, science and technology. Compared with 1968, the prices of 2 companies increased and the prices of 8 companies fell by half. 23 companies have dropped by more than half, 12 companies have withdrawn, and more than 100 companies are no longer around. It is estimated that the decline will be even greater. These are real histories.
Of course we cannot say that investment bubbles are bad. Although investment bubbles are an unmitigated disaster for ordinary investors, these manias are not without their glories. Investors have contributed to all of these technological advances. The British railway boom in the Victorian era was a disaster for investors, but the British railway system has since made the country a huge economic and political success. Canal----railway----car----radio----radio----movie----television----computer; electric energy----aircraft-----medicine- ----Biotechnology----Internet, every innovation has greatly changed our lives, and it is the enthusiasm of investors that promotes development even more. Wu Xiaobo said that in today's market, the most sober people may be the people at the top, and their behavior can only be explained as a lucky game based on self-confidence. A strategist from another securities company said that betting on the fate of the country is being exploited. I hope the government will not think of things so simply, otherwise we will be in dire straits. I won’t go into detail about the history of how big a bubble can be and how harmful it can be. I have mentioned it on other occasions, and you can also read it.
Look at it from a biological perspective. What causes the bubble? This is what we need to analyze. Only by analyzing its situation can we know how long this bubble can last. Keynes said in "The General Theory of Employment, Interest and Money", "The period of life is not long enough. Human nature requires quick results, and there is a special enthusiasm for making money quickly." This special enthusiasm is the animal spirit. , is an irrational emotional phenomenon.
When we asked everyone to invest in the "Internet" field two years ago, it was equivalent to when you just stood up in the movie theater. Looking back two years later, all "Internet" companies may increase investment but not bring higher profits, because everyone is investing in the Internet, which is equivalent to everyone standing up. This is what I would like to share with you on this occasion today, or what I hope you will think about, whether the "Internet" has improved the investment value of our investors. Today's companies don't do "Internet", just like everyone in a movie theater stands up, and you can't see anything while sitting down. But even if the company does "Internet" and you stand up, you may not be able to see more clearly.
The Internet is very popular during this period, and a very important factor is that its capital promoter is a Ponzi structure. If you have the opportunity, you can read three books. One is "The Great Stagnation". The author discusses whether 30 years of scientific and technological progress in the United States has brought much change to society. The second book is "Smart Society". It is very, very well written. I was very excited to read it. It made me think back to the thoughts of the famous thinkers of the 18th and 19th centuries that I read in school more than 20 years ago. I studied them in college. These things, this book takes a big step forward in some of the discussions and assumptions about people made by sociologists and economists since the 18th century. It has the best discussion of big data and smart wear. Another book is "Breaking Point", which tells us that the Internet will evolve human thinking and then evolve into the brain, bringing unlimited possibilities to society. "Breaking Point" tells us that the carrying capacity of any network is limited. Its continuous evolution and growth will eventually exceed its carrying capacity, and it will eventually reach the breaking point and then collapse; to avoid collapse, we must move to before the breaking point. in an environment with greater carrying capacity. It said that "in the non-biological world, Ponzi schemes are networked. Therefore, each successful scheme will increase its carrying capacity to avoid reaching its breaking point." In fact, the capital market is a Ponzi structure. The reason why the Internet is rising higher and higher is because the amount of funds in the entire society is large enough, and a certain sector can rise again and again. This is because as a part, when the carrying capacity is not enough, it will continue to increase the carrying capacity by increasing leverage and transferring funds. Keep improving. This is the reason why certain sectors can rise higher and higher. Of course, like all fixed circumstances, sooner or later the castle in the air will collapse. It may be too early for us to judge when the Internet's breakpoint will be reached, but if I give a report at the end of the year, I think the breakpoint will definitely be reached.
From the perspective of economic logic, one of the reasons why investors pay such a high price is the growth rate trap. A high price-to-earnings ratio is one of the most prominent signs of a growth trap. The long-term return of a stock does not depend on the company's actual profit growth rate, but depends on the comparison of that growth rate with investor expectations. Lower market expectations, higher growth rate and dividend rate are the three factors. The formation of high yields creates perfect conditions.
When you have the opportunity, you must take a good look at Munger's "On Academic Economics": What are the shortcomings of economics. This is the best and most profound understanding of economics for investors. I read it again and again.
Is there a way to help people avoid these crazy times in the market? Can investors spot bubbles and avoid being seduced by the alluring prospects they present? As chairman of the Federal Reserve, Greenspan came under intense pressure for failing to debunk the dot-com bubble. He defended himself in a speech in August 2002, saying, "It is difficult to clearly judge a bubble unless it has proven its existence by bursting." He was skeptical of bubbles. Bob Shiller and Jeremy Siegel disagree. Siegel believes that the following phenomena can be considered a bubble: extensive and rapidly rising media coverage; lack of evidence of profits or even revenue; surprisingly high pricing based only on some concepts and names; and the belief that the world has already The idea that something has fundamentally changed so that some companies can no longer be valued by traditional methods. So many of our recent reports are trying to change traditional evaluation methods, and we all understand this tacitly.
Siegel cited an article published by Merrill Lynch's Global Equity Research Fund on February 14, 2000: "The meaning of life lies in creation. The love of creation may explain why the prices of technology stocks have risen repeatedly. The Internet revolution has enabled people to give full play to their creativity. Maybe this will bring us closer to the true meaning of life!” He said that professionals said this, which is an example of bubbles. We seem to be hearing similar words a lot lately.
When the market is full of bubbles, no one can tell you how far the market will go. The biggest mistake people make is not finding a good retreat when participating in the bubble and enjoying the bubble. There is a joke that when a bubble comes, there are two kinds of people. One kind of people constantly accuses it of being a bubble, and the other kind of people resolutely participate in the bubble and enjoy it. The former is getting smarter and the latter is getting richer. But I think it’s impossible for the former to get smarter and the latter to get richer.
There are three mistakes in our education. If investors make these three mistakes, they should not be buyers. The first problem is that all education faces the past, not the future. We have no thinking training to face the future. The second is that the views on all issues are either white or black. Have you ever thought about it? From childhood, the multiple choice questions taught are right, wrong, right and wrong. In fact, most things are not opposites of black and white. . The third one is linear thinking rather than interconnected thinking, but everything is in a network. Any judgment I mentioned today has its opposite. You must think clearly about this. So if you cannot have the way of thinking to face the future and simply judge things in terms of either white or black, a bubble is not a bubble. To judge, use linearity instead of interconnected judgment. I don’t think it is suitable to be a buyer. To be a buyer, you must have complex thinking.
Originally I wanted to make a prediction of bubble bursting, but now I leave this prediction to everyone. Buffett has a famous formula for judging bubbles, which is the market value divided by the country's GDP. We need to think clearly about what kind of growth rate we will have in the future and how high our GDP will be by 2020. How much can our entire total market value be? Now is the stage of comprehensive securitization of all assets in China for the first time since 2000. We should be able to judge this breaking point and its carrying capacity.
Siegel compiled the 20 best-performing S&P 500 "survivors" from 1957 to 2003 in "The Future of Investors." These 20 best "survivors" mainly come from two industries: high-profile consumer brand companies and large pharmaceutical companies, with 17 companies accounting for 85% of the total; with the power of compound interest, Philip Morris has grown in 46 years In time, it has increased 4,600 times! Ranked number one. So finally I would like to end my speech by quoting a passage from the title page of "Securities Analysis", which comes from Horace's "The Art of Poetry":
What is now in decline may regain its splendor in the future. .
Things that are popular now may be declining in the future.
Thank you everyone!
Original title: "Internet", whether to enhance or destroy investment value - Oriental Securities Vice President Wang Guobin will talk about the Internet in two years