Core Viewpoint - Gold has become one of the hottest investment assets in recent years, with a significant increase in value and a high risk-reward ratio over the past decade [2][3]. Group 1: Gold's Performance - Over the last ten years, gold ETFs have only experienced two years of decline, with the maximum annual drop being -7% and a 45% increase in gold prices this year [3][4]. - The performance of the Huashan Gold ETF shows substantial annual returns, with 2025 projected at 45.27%, 2024 at 27.45%, and 2023 at 16.34% [4]. Group 2: Investment Logic of Gold - Various investment logics surround gold, including its reflection of currency credit, its inverse relationship with real interest rates, its correlation with the US dollar index, its safe-haven attributes during economic downturns, and its performance during inflation [5][6]. - The underlying anchor for gold pricing is the concept of currency credit, which has been a consistent factor over decades [6]. Group 3: Quantitative Model for Gold Pricing - The increase in US government debt is closely related to gold prices; as confidence in government debt wanes, investors turn to gold as a reliable asset [8]. - Historical analysis suggests that if the US debt has increased significantly since the 1960s and 1970s, the fair value of gold could be estimated between $3,742 and $4,636 based on past debt levels [9][11]. Group 4: Conclusion - The article does not assert that gold should necessarily rise to the estimated values but aims to provide a quantitative model for understanding gold pricing [14]. - The discussion encourages further exploration of how gold should be reasonably priced, acknowledging that market behavior may not always align with rational pricing models [14].

Core Insights - The article emphasizes that most investors lack the ability to predict market movements and should instead focus on identifying patterns and understanding market errors to gain a probabilistic advantage [4][6][12]. Group 1: Investment Principles - Principle 1: Most individuals do not possess predictive abilities; instead, they should identify patterns and study market errors to gain a probabilistic advantage [6]. - Principle 2: The spread between high-yield bonds and government bonds serves as an effective signal for identifying market cycles [6][15]. - Principle 3: The traditional 60/40 portfolio has flaws, particularly during high inflation periods when both stocks and bonds may decline simultaneously [25][26]. - Principle 4: Valuation changes reward cheap stocks and penalize expensive ones, which is a significant recurring feature in global equity markets [30]. - Principle 5: Crises often present opportunities, while opportunities can be accompanied by bubbles [31]. - Principle 6: High-quality small-cap stocks, especially those with low valuations and net cash, present excellent investment opportunities [7][41]. Group 2: Market Nature and Cycle Positioning - Market Nature: The market is inherently unpredictable, and human cognitive limitations hinder accurate forecasting [12][13]. - Cycle Positioning: The relationship between high-yield spreads and inflation is crucial for understanding market cycles [14][15]. - High-yield spreads indicate when to allocate to defensive assets or small-cap value stocks and commodities [16][19]. - Inflation impacts the performance of stocks and bonds, particularly during periods of high inflation where both may decline [26][28]. Group 3: Asset Selection - Asset Selection: The principle of mean reversion suggests that valuation changes favor cheap stocks and penalize expensive ones [30]. - Value and Profitability Factors: Long-term performance indicates that value and profitability factors can outperform the market [34][38]. - High-quality small-cap stocks are identified as having significant investment potential due to their growth sensitivity and market mispricing [41][44]. Group 4: Commodity Insights - Long-term correlation exists between copper and oil prices, reflecting economic conditions [46]. - The copper-oil ratio serves as an economic cycle indicator, guiding asset allocation decisions [47][48]. Group 5: Gold as an Asset - Gold is viewed as a strategic asset that cannot be manipulated by governments or central banks, making it a preferred choice during extreme inflation or deflation [51][52]. - The demand for gold is supported by central bank purchases, which stabilize its long-term value [55]. Group 6: Portfolio Construction - The article advocates for an all-weather portfolio that includes currencies and commodities to reduce volatility and maximize returns [58][59]. - The traditional 60/40 portfolio is deemed insufficient for managing stock risk exposure, suggesting a need for a more diversified approach [58].

Market Overview - The A-share market saw all three major indices rise, with the Shanghai Composite Index increasing by 1.22%, the Shenzhen Component by 1.73%, and the ChiNext Index by 2.36% [3] - The total market turnover was 20,904 billion, a decrease of 5,062 billion from the previous day, with over 4,300 stocks rising [4] - The margin trading balance in the A-share market continues to grow, reaching a historical high of 24,469 billion, with a daily increase of nearly 2.6 billion [5] Company-Specific Developments - Sanhua Intelligent Control experienced a significant surge in stock price, reaching the daily limit after rumors of a large order from Tesla exceeding 5 billion for its linear joint products, which are crucial for the production of Tesla's Optimus robot [6][11] - The Hong Kong stock of Sanhua Intelligent Control also rose, with an intraday increase of over 13% [9] Sector Performance - The innovative drug sector rebounded after a period of decline, with notable individual stock performances including Guangsheng Tang up 17.41% and Shutai Shen up 12.5% [12][13] - The Hong Kong innovative drug sector also saw a collective rise, with new stock Xuan Zhu Bio surging over 160% on its first trading day [16] - The consumer electronics sector benefited from positive news, with stocks like Changying Precision rising by 14.19% and Xinwei Communication by 11.31% [18][19] - The meeting between China's Minister of Industry and Information Technology and Apple's CEO Tim Cook highlighted the potential for further collaboration in the electronics sector, with Cook expressing Apple's commitment to increasing investment in China [21]

Group 1 - The core viewpoint of the article is that equity funds outperform individual stocks in a bull market, while the opposite is true in a bear market [2][19] - In the current bull market, 81.82% of A-shares have risen, indicating a high probability of profit when buying stocks [4][8] - Growth stocks have a higher winning rate compared to value stocks, with winning rates of 76.51% and 67.17% respectively [5][6] Group 2 - Equity funds have a winning rate of 98.41% this year, significantly higher than the 81.82% winning rate of individual stocks [10][12] - Active funds, particularly mixed equity funds, show a winning rate of 98.52%, outperforming passive index funds [11][12] - The performance of equity funds has yielded significant excess returns compared to major stock indices, with a year-to-date increase of 33.27% for the CSI Equity Fund Index [14] Group 3 - In the bear market from 2022 to 2023, the winning rate of equity funds was only 2.28%, much lower than the 26.01% winning rate of stocks [26][27] - The performance of equity funds in terms of returns was also inferior to that of stocks during the bear market, with the CSI Equity Fund Index declining more than the major stock indices [27][28] - The article highlights the "see-saw effect" between the stock and bond markets, indicating that pure bond funds perform better in bear markets [29][30] Group 4 - The article concludes that in a bull market, equity funds have higher winning rates and returns compared to stocks, while in a bear market, stocks outperform equity funds [33] - Investors are advised to adjust their portfolios according to market conditions, favoring pure bond funds in bear markets for stability and higher winning rates [33]

Core Insights - The article discusses Warren Buffett's decision to sell McDonald's shares in 1997, which later proved to be a significant mistake as McDonald's stock outperformed his other investments, including Coca-Cola [4][9][10]. Group 1: Reasons for Selling McDonald's - The first concern was the low customer loyalty in the food industry, with Buffett noting that consumers might choose competitors like Burger King when hungry, unlike the strong brand loyalty seen with products like Gillette [6]. - The second concern was the heavy capital expenditure associated with McDonald's business model, which required significant investment in real estate for franchising, contrasting with Buffett's preference for lighter asset companies like Coca-Cola [7]. - The third concern was the reliance on promotions, which Buffett believed weakened product strength. He preferred businesses that generated revenue based on product quality rather than discounts [8]. Group 2: Reflection on the Decision - Less than a year after selling, Buffett acknowledged the mistake, stating that selling McDonald's was a poor decision that cost Berkshire Hathaway significantly, estimating a loss of over ten billion dollars in potential earnings [9][10]. - The article highlights that McDonald's global presence, initially seen as a burden, actually created a competitive barrier and capitalized on the growing demand for fast food, especially in emerging markets [10]. - It emphasizes the importance of recognizing a company's adaptability and growth potential, as McDonald's successfully innovated its menu and reduced reliance on promotions over time [10][11]. Group 3: Investment Insights - The case illustrates that certainty in investment does not equate to growth potential, as the fast-food industry was still expanding in 1996, and McDonald's had significant room for growth that Buffett underestimated [11][12]. - Heavy asset investments can create long-term competitive advantages if they establish barriers that competitors cannot easily overcome, as seen with McDonald's extensive global network [12]. - The article concludes that investors should allow for industry growth and company adjustments over time, rather than focusing solely on short-term challenges [12].

Core Viewpoint - The article discusses the recent market turbulence caused by sudden tariffs and rare earth events, emphasizing the need for investors to maintain a calm mindset and adhere to their strategies amidst external shocks [5][6][7]. Group 1: Market Conditions - The current market is experiencing significant fluctuations, with the Shanghai Composite Index around 3900 points, compared to 3300 points earlier in the year, indicating a rise in market temperature from 30° to 60° [10][11]. - The article highlights that different valuation levels can lead to varying degrees of volatility when facing unexpected events, with high valuations potentially leading to more severe market impacts [23]. Group 2: Investment Strategies - Investors are advised to maintain a steady approach, focusing on value and allowing time to mitigate short-term market fluctuations [13][14]. - A "portfolio check-up" is recommended, including assessing cash flow, ensuring it can cover 3-6 months of expenses, and maintaining a balanced position to withstand market storms [18][19]. - Adjusting the portfolio to enhance defensive positions is suggested, particularly by replacing high-risk assets with more stable investments like state-owned enterprises and high-dividend stocks [26][27]. Group 3: Tactical Adjustments - The article encourages investors to consider increasing exposure to growth sectors, such as technology and emerging markets, when market conditions improve, while maintaining a defensive framework [34]. - It emphasizes the importance of a balanced portfolio that includes both defensive and offensive assets, suggesting a typical allocation of 20%-30% for growth-oriented investments [34]. Group 4: Long-term Perspective - The article stresses that every market disruption is an opportunity for growth and strategy refinement, urging investors to remain adaptable and resilient [38][41]. - It concludes with the notion that investment should enhance life quality, advocating for a diversified approach to asset allocation to improve risk management [39][42].

Core Viewpoint - The article discusses the current bullish market in Hong Kong and emphasizes the importance of learning from successful investors like Joel Greenblatt, particularly his "magic formula" for stock selection [3][4]. Group 1: Joel Greenblatt and Gotham Capital - Joel Greenblatt founded Gotham Capital in 1985, achieving an annualized return of 50% in the first ten years, compared to Warren Buffett's 25% during the same period [5]. - Over a 20-year period from 1985 to 2006, Gotham Capital maintained an impressive annualized compound return of 40% [5]. - Greenblatt's influence extends beyond his fund's performance; he established the Value Investors Club and teaches value investing at Columbia University [8][9]. Group 2: Efficient Market Hypothesis - The article critiques the Efficient Market Hypothesis (EMH), which suggests that all available information is reflected in stock prices, arguing that this does not align with reality [14][15]. - Greenblatt challenges the notion of market efficiency by demonstrating price volatility in stable companies, indicating that markets can be inefficient [16]. Group 3: The Magic Formula - Greenblatt's "magic formula" is a stock selection method that focuses on buying good companies at discounted prices, utilizing two main filters: earnings yield and return on invested capital (ROIC) [17][18]. - The first filter assesses company valuation through earnings yield, while the second filter identifies quality companies based on their ROIC [18][19]. - The process involves selecting companies with a minimum market capitalization of $50 million, excluding utility and financial stocks, and then applying the two filters to identify potential investments [19][20]. Group 4: Implementation and Data Selection - The implementation of the magic formula involves regularly buying a diversified portfolio of 20 to 30 stocks over a period of three to five years [21][22]. - Greenblatt emphasizes using last year's data for the magic formula, arguing that it provides reliable insights for selecting a basket of companies despite individual fluctuations [24][25]. Group 5: Longevity of the Strategy - The article notes that the magic formula may not work consistently every year, with periods of underperformance that can lead investors to abandon the strategy [26][27]. - Greenblatt asserts that the effectiveness of value investing relies on its inconsistency, which prevents it from being arbitraged away [29][30].

Core Viewpoint - The private equity industry in China has seen a significant shift, with quantitative funds now surpassing subjective funds in number among the hundred billion-level private equity firms, marking a pivotal change in the investment landscape [2][6]. Group 1: Market Environment Changes - The market has transitioned from a "wild" era characterized by slow information dissemination and significant mispricing to a more civilized and efficient environment [8][15]. - In the past, the market was dominated by retail investors, leading to prolonged deviations of stock prices from their intrinsic values [10][12]. - The current market environment, influenced by technological advancements and macroeconomic changes, presents greater challenges for subjective fund managers, as mispricing opportunities have become shorter and more complex [17][20]. Group 2: Investment Products and Tools - The availability of investment products and tools has evolved from scarcity to abundance, with the introduction of stock index futures in 2010 marking a turning point for quantitative strategies [26][27]. - The diversification of trading products has led to the emergence of various innovative quantitative strategies, providing more profit opportunities [29][31]. Group 3: Technological Advancements - Technological progress has played a crucial role in the rise of quantitative strategies, with the volume of data available for analysis significantly exceeding that of subjective approaches [33][35]. - Quantitative strategies benefit from faster execution and continuous improvements in computational power, enhancing their effectiveness compared to subjective strategies [37][39]. - The distinction between subjective and quantitative investment lies in their methodologies, with subjective investment relying on individual insight and quantitative investment relying on data and algorithms [39].

Market Overview - The three major A-share indices experienced a collective pullback, with the Shanghai Composite Index down 0.62%, Shenzhen Component down 2.54%, and ChiNext down 3.99% [2] - The total trading volume across the Shanghai, Shenzhen, and Beijing markets reached 25,966 billion, an increase of 2,224 billion compared to the previous day [2] - Over 3,500 stocks in the market declined, indicating a significant market downturn [2] Sector Performance - Traditional sectors such as gas, insurance, liquor, coal, banking, port shipping, and photovoltaic equipment showed positive performance, while technology sectors like metals, semiconductors, and consumer electronics faced significant declines [2] Optical Module Sector - The optical module sector saw a substantial pullback, with companies like NewEase falling over 9%, Zhongji Xuchuang down over 8%, and Tianfu Communication down over 5% [4] - Major shareholders in the sector have been reducing their stakes, with NewEase's controlling shareholder selling 11.43 million shares for 3.749 billion at 328 yuan per share [8] - Despite the sell-off, the fundamental performance of optical module companies remains strong, driven by increased capital expenditures from clients like Nvidia, Google, and Amazon [8] - Inventory levels for Zhongji Xuchuang and NewEase increased, while Tianfu Communication's inventory decreased slightly [9] - Gross margins varied, with Zhongji Xuchuang's margin increasing to 41.49%, while NewEase's margin decreased to 46.64% due to structural adjustments and rising raw material costs [9] - Analysts suggest that despite external trade tensions, the long-term industry trend remains intact, particularly in AI computing and cloud services [9] Photovoltaic Sector - The photovoltaic equipment sector showed resilience, with companies like Longi Green Energy and Yijing Photovoltaic experiencing price surges [11] - Reports indicate that significant policy changes are expected in the photovoltaic industry, aimed at regulating production capacity [12] - Chinese photovoltaic companies are accelerating their overseas expansion, with cumulative overseas component order contracts exceeding 11.1 GW as of September 2025 [13] - Major companies like Longi Green Energy reported a revenue decline of approximately 14.83% in the first half of 2025, while losses narrowed significantly compared to the previous year [14] - Analysts believe that with improving industry prices and strong overseas demand, the photovoltaic sector is poised for a turnaround, making it a key area of focus [15] Port and Shipping Sector - The port and shipping sector saw gains, with companies like Nanjing Port hitting the daily limit up [17] - The Ministry of Transport announced a special port fee for certain U.S. vessels, which could lower domestic port costs and enhance competitiveness [20] - China's exports grew by 7.1% in the first three quarters, supporting increased port throughput [20] - Recent retaliatory measures against U.S. companies have raised concerns about potential trade disputes, impacting market sentiment [20]

Overall Introduction - The book introduces market rules, asset allocation logic, and strategies for different asset classes, including stocks, bonds, and commodities, while addressing practical issues faced by investors [4]. Core Views - The book proposes three dimensions to assess the market: policy, economy, and inflation, which are used to determine market conditions [7]. - Economic cycles are divided into six stages, each with corresponding asset preferences, ranging from bonds in the early slowdown to cash and commodities in the stagflation phase [11][12][13][39]. - Effective asset allocation strategies include the Permanent Portfolio, All Weather Portfolio, and Global Market Portfolio, emphasizing diversification and risk management [14][15][16]. Current Situation - Current policies are characterized as accommodative, with indicators such as M1 growth increasing from 0.39% in January to 5.96% in August [33]. - Economic recovery is weak, with industrial value-added growth declining from 7.7% to 5.2% [37]. - The market is likely in a transition between the late slowdown phase and the early recovery phase, suggesting a preference for small-cap growth stocks [39][40]. Investment Insights - Long-term asset allocation is crucial for sustained success, with diversified strategies proven to provide stable returns [44]. - A balanced stock-bond allocation is suitable for most investors, allowing for flexibility in extreme market conditions [45]. - Simplifying investment approaches and focusing on fundamental market principles can lead to better outcomes [47][48].