In the Buffett era, investment managers need to meet regularly to exchange information, and it takes months for a company’s fundamentals to change to a change in stock price.
Nowadays, experienced investors can figure out the approximate investment value of a new-faced company within ten minutes, and it only takes 24 hours to understand the company’s fundamental changes to stock price changes.
Fund managers are looking at the market, while reading the research papers, while searching for valuable information in many exchange groups. Now is an era where a lot of information is flying in the air every minute.
This actually involves communication, so investors should also study the concept of communication, because the impact of communication tools on investment is not only reflected in transactions.
Changes in the company will cause the communication phenomenon to have an increasing impact on investment. For example, the phenomenon of “grouping” that has become more and more intense in recent years is much the same as the phenomenon of “silent spiral” in communication (the silence of one party will cause more voices to join the other party, just like a spiral). Place.
However, what happened in the market from no style to style? What kind of style is more likely to be “held”? This is a more complicated phenomenon than “grouping” and requires a combination of fundamentals and behavioral finance judgments.
How to let everyone buy it together?
Retail investors and institutions, which are also value investors, have very different behavior patterns due to different return mechanisms.
Retail investors’ stock selection is mainly based on personal style preferences. Even if the market does not approve it for a while, they can slowly “wait for the wind.” Monthly performance is not good, from being criticized, from being redeemed, bonus shrinking, and even risk of being laid off.
However, it is easy to choose the company you like, and it is difficult to guess the future style of the market. Individual investors can “wait for the wind to come” before buying, which is the so-called “buy on the right”. However, if the big money is bought on the right side, the cost is too high, so it is necessary to bet on the future track and style in advance.
The direct reason for the so-called style is nothing more than a large number of promising people and buying in one direction. But only to see this point, it is like saying that “stabs hurt people” as “not essential”. It still needs to be analyzed based on macroscopic and industrial reasons, plus some behavioral finance.
There is a “couple game” in game theory, which is similar to the formation mechanism of market style.
Assuming that there are only two large funds in the market, the joint force can influence the style of the market. Fund manager A is optimistic about liquor stocks and fund manager B is optimistic about auto stocks. Then there are four kinds of scoring results for the “couple game”:
1. If two people buy each If you are optimistic, it has no effect on the market style, and you get 0 points;
2. If you buy liquor stocks together to form a liquor group, A gets 2 points, and B
gets 1 point; 3. If you buy auto stocks together to form a car group, A gets 1 Points, B gets 2 points;
4. If A buys auto stocks and B buys liquor stocks, similar to the ending of “The Maggie’s Gift”, both get -1 point.
Obviously, although everyone does not trust each other and has their own optimal choice, everyone wants to cooperate and knows that the other party also wants to cooperate. This is a cooperative game. Both 2 and 3 are acceptable results.
The question is, which style to choose?
Couple games in real life can form a fixed pattern, such as listening to you this time, listening to me next time, you can also guess the box and draw the dice. But investment is difficult. If everyone clearly agrees to buy liquor stocks together this time and auto stocks next time, then it is suspected of manipulating the market and can only be tacitly agreed.
And big funds are not two parties, but many parties. Building a position is a long process. How can everyone buy it together? Who can trust anyone?
How can everyone make the same choice as possible without saying hello in advance? In response to this problem of cooperative games, Thomas Schelling, who won the Nobel Prize in Economics, wrote a book “Strategies of Conflict” in which the theory of “gathering points” was proposed.
The macro is born to be the focal point
The “focus point” theory has a classic experiment: give students 4 numbers: 7, 29, 319, 1 458, and ask students to pick a number separately. If you pick the same number as most students, you can get a reward.
The “focus point” theory believes that if the person being tested is smart enough, he should choose “7”, because 7 is the most common of these 4 numbers and is most likely to be chosen—in fact, the result of this type of experiment Mostly so.
There are also examples of “focus points” in life: you and your partner have agreed to meet at a certain mall, but you didn’t say a specific place, and you can’t contact him, then you will definitely choose to wait for him at the gate of the mall; if the mall has A few doors, you will definitely choose the main entrance or the door adjacent to the busiest street, because this is a place by convention.
Examples of “focus points” in business are technical standards. When a new technology comes out, it often has a set of standards from one manufacturer. However, if you want to smoothly industrialize, you must establish a unified technical standard as soon as possible. Several leading manufacturers hope to persuade other manufacturers to use their own standards, but there must be a standard at the worst. This is also a “couple game”.
The premise of “Schelling Focus” is that everyone hopes to reach cooperation as soon as possible, and the basis of cooperation is the most conspicuous “focus.” So when there is no focus point, we must take the initiative to propose a “focus point.”
Simply put, the “focus” refers to the things that are conventionally established, that everyone can see or want, and are easy to form cooperation, and it is also the direction that is easy to form a group in investment.
In reality, institutional investment behavior is more complicated. Most fund managers don’t like grouping, because if they don’t, everyone can make their own money.
But once the market is found to have a tendency to “group”, only a portion of the positions can be used to participate in the group. Because institutional investors are “bounded rational” investors, especially public funds, restricted by rankings and the state-owned enterprise system, that is, I don’t need to beat the market, I just need to stand in the middle of most of my peers and keep my job and capital. At this time, predicting the next grouping sector and retreating before the collapse is a matter for top-ranked fund managers to consider. For most fund managers, it’s enough to beat the low-ranked ones. And the bottom of the rankings are the “unlucky guys” who refuse to hold the group and bet on the wrong track, then the matter is simple-you need to take out a part of the position to participate in the group.
Therefore, whether the institution likes Baotuan or not, he must pay attention to whether the market has a “focus” and determine whether a new Baotuan direction will be formed.
So what is the “focus” in investment?
The answer is “macro”.
Many investors also pay attention to the macro, but their purpose is to “choose a time”, judge the market’s rise and fall, and determine which level of positions they should go up to. This form, I think, is “knocking on the keyboard with your fist.”
Of course, it is not to say that the macro has nothing to do with the ups and downs of the market, but that the macro “medicine is too strong”. When it becomes a factor that determines the direction of the market, it is often either a big bull market or a big bear market, so macro factors directly dominate the market’s ups and downs. Only once in two or three years (for example, my country has encountered it in 2015, 2018, and 2020).
The real role of the macro is to become the “focus” of the style. The reason is that everyone needs to look at the macro, and it is almost always a “grand narrative.” For example, GDP, social finance, CPI/PPI, and even the leading group documents. When the data comes out, no matter what kind of investors they hold, everyone will look up, as if they will lose something if they don’t look at it.
In fact, when the overall amount of capital in the market is basically unchanged (that is, when the large inflow and outflow of capital is excluded), the macro-level impact on the broader market is zero, and the fluctuation of the index is all style. It is more like an army. With the big banner of the Chinese army, if the banner is to the east, it is easy for the capital to go east together, and if the banner is to the west, the capital will easily flow to the west, thus forming various styles of the market.
But this analogy is also inappropriate, because there are often multiple macro banners of the Chinese military, pointing in different directions, and often changing, so funding is more of a brief commotion caused by interpreting surface information.
The most classic macro factor that really plays the role of “focus point” is “Merrill Lynch Clock”. After the catastrophe, everyone will immediately think of counter-cyclical products such as infrastructure and communications; the epidemic is under control, global economic behavior has resumed, and everyone will also develop pro-cyclical styles such as bulk commodities and shipping.
In fact, the middle view and the macro view are often inconsistent. The biggest role of the “Merrill Lynch Clock” is not to be “quasi”, but to easily form a “gathering point” and trigger consistent actions.
But the Merrill Lynch clock has not worked well in recent years, because the government’s counter-cyclical management capabilities are getting stronger and stronger. As long as the clock automatically goes up to 15 minutes, some people begin to worry and want to set it back. As a result, the clock was moving for a while, moving backwards for a while, turning like an electric fan for a while, and motionless for a while. After a few times, no one looked at it, and it lost its “focusing point”.
But the market is very smart. It will automatically look for factors that have a “focusing point” in the chaotic order—usually the main contradiction and the most significant phenomenon between the current economic operation and macro-control.
There is no need for a “clock”, but time is inherently there, and the interpretation of the macro becomes the key to understanding style.
“Pretty 50” and “Mao Index”
After 2016, there have been two large-scale white horse holding groups, namely the “Pretty 50” in 2017 and the “Mao Index” in 2020. It sounds almost the same, but in fact, there are big differences in reasons, varieties, and influence.
The 2017 “Beautiful 50” White Horse Group is a comprehensive market for leading stocks. Most industries-whether it is traditional manufacturing, consumer food and medicine, or TMT (digital new media) and high-end manufacturing, as long as they are a leading company, they can rise. A wave. The final climax was that at the beginning of 2018, ICBC’s PB (average price-to-book ratio) reached 1.35 (now 0.64).
However, the 2020 “Mao Index” White Horse Group is only part of the industry leader in high-certainty assets. Moutai skyrocketed, Ping An plummeted, China Merchants Bank went up, and ICBC went down. The obvious characteristics of the industry are more inclined to consumer industries such as food, beverage and medicine.
The difference in style lies behind the “absurdity” of macro fundamentals.
The macro background of the 2017 market is the transformation of the industrial structure led by the macroeconomic cycle. The profitability of large enterprises has historically exceeded that of small and medium enterprises. The background is that the first is the period of economic slowdown and the increase in industrial concentration; the second is that the cost pressure brought by the supply-side reform is greater on small and medium-sized enterprises-especially the former, which has a more far-reaching effect.
The market in 2020 is more of a financial phenomenon, as well as tragedy expectations after the catastrophe. Low interest rates, low growth, and flood of liquidity have led to the pursuit of long-term funds with high certainty by highly leveraged funds.
The same is the macro factor. The industry and economic cycles, aggregate demand and aggregate supply are more of a phenomenon spontaneously formed by the market, which lasts longer. Therefore, the white horse stock market in 2017 is a major turning point in the overall style of the Chinese capital market. The style may last for several years, or even more than ten years, and it is not easy to be reversed. Looking back many years later will have profound significance. In any case, it will not be evaluated For too much.
And macro factors such as exchange rate, interest rate, currency, economic policy, etc., are more artificially manipulated, and their impact is limited to the current period.
Therefore, the white horse group in 2020 will start to be restored in 2021, and the interest rate and inflation expectations will rise a little bit. If a reversal is said, it will be reversed. Apart from the pure concept of “Mao Index”, it will not give the capital market. What changes will it bring.
Of course, no matter how you understand the macro, you don’t know what to buy, because the relationship between the macro and the market style must be realized through the middle view.
Macro and meso
The formation of the macro style is effected in two aspects: the
first effect is to affect the prosperity of the “medium” industry, leading to the rise or fall of the EPS (earnings per share) of micro enterprises, the most dramatic part of which is Form a market style. This is true whether it is the “Merrill Lynch Clock”, the government’s counter-cyclical adjustment, or the large industrial policy.
This year, the traditional manufacturing industry is re-emphasized by the market. From a micro point of view, it is the improvement of corporate profitability; from a meso point of view, the industry has undergone a cruel reshuffle, and the competitive landscape has improved; from a macro point of view, investors are expecting a long-term decline in interest rates. , Which is good for the asset-heavy manufacturing industry. Made in China has gained a comprehensive competitive advantage in the international division of labor and trade.
The macro will not directly affect the market. It must fall on the “medium-level industry”. Therefore, some people think that there is no need to analyze the macro-level, just look at the “industry boom”-this view is like the police found a weapon and announced the case. Same.
It is true that industries with high prosperity can rise, but those with high prosperity may not be able to rise. Is the prosperity of real estate not high? Some industry booms can last for a long time, and some will suddenly disappear. What are the reasons behind it? All these must be reduced to a macro analysis.
Therefore, the second and more important role of the macro is the “macro”, which is to form a “focus” that can be seen by the entire market and to force the market in one direction. This is tantamount to bypassing the industry’s prosperity and directly acting on the capital level, which is ultimately reflected in the rise or fall of micro-enterprises’ valuations.
The continued sluggish valuations of banks and real estate are not because of the business climate, but because investors have seen the macro economy face the supervision and restrictions of the former “industry with economic stimulus”.
Styles based on a high degree of prosperity can ultimately be verified or falsified by industry data; these styles that are out of the factor of prosperity look like “wind”, and it is impossible to understand if they are not taken from a macro perspective.
There is no turning point in the Internet platform economy whether it is micro or meso. The market’s concerns are macro. Is anti-monopoly just the first step? Does strong supervision mean the “utilization” of Internet platforms? Even deeper thinking, if the Internet platform is “utilized”, which industries can obtain structural opportunities on the basis of this “utility”?
These macroscopic worries seem to be illusory, but it is easy to form consistent expectations.
This is because many fund managers don’t believe in the macro at all. After all, the macro is the most imaginary thing in investment, and it is of no use to the “bottom-up” investment style. Moreover, the macro pursuit is “vaguely correct.” If you want to see the general direction, the macro is also ambiguous.
As a result, everyone believes that their “fuzziness” is correct.
However, the macro is the most basic communication language in this industry. Whether you are interested or not, you need to explore and study it.
Therefore, the macro factors can easily become the “focus”, and after a consistent view is formed, it is difficult to be falsified in the short term. Because the style is self-reinforcing from being visible to everyone talking, but a style that lasts for more than a year is bound to be a macro phenomenon.
Macro factors can be used to explain how styles are formed, but not all styles can form a “funding group”. After forming a consistent view, it has nothing to do with “macro research”. The baton of the next research was handed over to the “laws of communication”, and all styles will eventually evolve into a self-marketing campaign.