【付鹏 全程炸裂】现在的经济为什么差？刺激为何彻底失灵？企业卷到绝境，风险逼近、普通人怎么活？未来汇率会如何？未来的机会到底在哪里？

Why is the economy so bad now?

I can tell you.

Some people still ask for stimulus.

Stimulus was possible in 2009 because all households had stable savings and low debt.

Now, savings are scarce and unstable. More importantly, everyone is in debt.

unstable. More importantly, everyone is in debt.

Simply put, young people can't leverage their assets, and that's the biggest risk.

What is Hong Kong doing ? They're welcoming you to the Quality Migrant Admission Scheme, right?

? They're welcoming you to the Quality Migrant Admission Scheme, right?

Our Hong Kong Chief Executive, right?

He's been hanging around Guangzhou and Shenzhen every day lately, isn't he ? Isn't he just asking to invite you?

isn't he ? Isn't he just asking to invite you?

But if you tell him , "I have no money, my family has no money , I'm just a poor guy," then sorry don't come. I don't want

come. I don't want you because what I really want is for you to have money, to be able to handle it, to be able to leverage it.

When housing prices reach a certain level, people naturally can't have children . And then there's South Korea... This applies

South Korea... This applies

to Japan as well as China.

In other words, it can be explained macroscopically: once leverage reaches a certain level , debt must be repaid.

China's current situation is that the next 5-10 years will essentially be a period of repaying debt after leveraging up.

All Chinese companies are currently very simple; they will engage in involution, a chaotic and messy process.

The reason is simple: the market is only domestic.

The US-China trade war that began in 2018, and the deglobalization efforts, have been aimed at kicking us out .

Since the start of the US-China trade war in 2018, I 've been telling you it's not just about trade technology , or technology; it's a comprehensive deglobalization and decoupling.

So , for example, regarding domestic consumer goods, remember this : high-end consumption will always be dominated by LV and Gucci.

Prada caters to the wealthy , but China also saw a surge in middle-class consumption over the past decade, right?

However, the end point for middle-class consumption is the leverage of the middle class. When this leverage reaches a certain level, middle-class consumption will stall, and we will enter a typical low-desire society.

Young people will start to realize that not getting married is good, not having children is good, not buying a house is also good, and this phone doesn't need to be replaced, it still works.

And then, although Mixue Ice Cream coffee is not very good , it's still acceptable, there's no need to drink Starbucks.

At this point, pay attention: once this level is reached, this situation will quickly emerge in China.

If you carefully interact with the relatively poor young people now...

You'll find that you can't tell the difference when you're dealing with second- or third-generation rich kids.

So China is now a typical K-shaped economy , you know?

So when you see all the data, don't take it as comprehensive.

For example, many people see bank savings deposits, but don't take that as everyone's.

You have 200 million , someone else has 10, and on average, they're rich.

Can you use an average for that?

China has also experienced huge irrationality in its development.

Among the chief executives who reported at the annual meeting, I might be the only one who's not quite serious.

Why?

Because firstly, I don't have an academic background, and secondly, I'm not from an official background as you might imagine.

I used to work in London doing hedge funds. My background is in hedge funds, so my understanding of economics and finance is completely different, completely different .

In fact, I'd say that the past ten years— around June 2009, when we returned to China — were significant milestones . I'll briefly discuss this later,

. I'll briefly discuss this later, if I have time , because each point in time was crucial .

Of course, I think many of you know that if I were to summarize the past, the period after the 2008 financial crisis in 2009 was a significant one.

And congratulations to HSBC and its clients, because... From our first collaboration

because... From our first collaboration last November to this year, you all are about to reach a second important milestone.

Of course, I have to say, it's not a good way to put it haha.

If we're talking about people here who aren't from private banking, but just regular bank customers , or even younger ones , I might say, "Oh dear, for many young people, the best era has ended."

I see some staff members laughing in the back . Uh, yes

. Uh, yes haha there is this situation .

So what exactly happened?

Let me show you a few words first: " This is a PPT that can't be made into a flash mob," "This is a PPT that doesn't have that high level of skill," and so on. Everyone, don't need to line up like this, right?

so on. Everyone, don't need to line up like this, right?

Just listen quietly. Actually, this is very important.

In this picture , from the top left to the bottom right , and from the bottom left to the top right, you've probably seen a few very popular things. For example,

you see that Buffett just finished his annual meeting , but more importantly, Buffett just went to Japan.

That's the key point, right? Don't think that his

right? Don't think that his meeting in Omaha isn't the key point. The key

point is that the old man went to Japan in 2011 and just recently went to Japan . Why would you

. Why would you fly to Japan when you 're over 90 years old ?

Of course, if I told you that flying to Japan could make you a lot of money, you'd probably think, " I'll tolerate it, right?

I'll tolerate the age, I'll tolerate the flight , and these people..."

We believe there must be some special factors behind his actions.

For example, around 2012, I was having dinner in Hong Kong with a Chinese person from the Soros Fund's office. He told me

office. He told me that Benson of the Soros Fund had just transited through Hong Kong to Japan around April or May of 2012.

I immediately became very suspicious.

Why ? Because

? Because I know them very well; they don't wander around without a reason, right? So my first reaction was,

right? So my first reaction was, why would they go to Japan? What

were they doing there?

The real controlling person of the Soros Fund isn't Soros himself; he's quite old.

Right? This was all left to professional managers.

The actual person was Benson.

In April of 2012 I learned from Hong Kong that he had transited through Japan.

When I returned to Beijing, the first thing I did was quickly pull out all the data on Japan to see why he had gone there.

After that , around July or August, I also flew to Japan.

After returning, various financial institutions invited me, saying, "Vice President, can you share with us what is actually happening in Japan ?"

Of course, by the end of 2012, I believe that in the following years, you will know what happened in Japan.

You saw Shinzo Abe come to power, you saw Shinzo Abe's three arrows, and you saw the significant depreciation of the Japanese yen . So, if you've ever wondered why

. So, if you've ever wondered why Buffett went to Japan, then if you extend this line of thought, you will definitely see Japanese trading companies, right?

Everyone will see that, for the past two years, Buffett has been buying these five major Japanese trading companies , right? Mitsui,

, right? Mitsui, Mitsubishi Itochu these are all well-known Japanese conglomerate trading companies.

Why did he buy them?

And everyone also saw that Buffett... For the past two years

Buffett... For the past two years , I've been buying ExxonMobil and Occidental Petroleum.

What has he been doing?

Some people say, "Oh, Buffett is betting on rising oil prices.

" Haha, I can only say that if you say that, you've basically never even entered the realm of finance, right? You

've basically never entered it, right?

What's the relationship between him and the cash cow ETF on the right, and Sister Wood's ARKK?

For example, in Shenzhen, right, Nanshan right we have many technology companies, right, like Tencent, etc. Everyone knows Sister Wood , ARKK, disruptive innovation , high technology , and new technologies like the back of their hand.

But I can say that I don't understand programming , I don't understand code, I haven't even learned C++, right? But what I want to say is that

right? But what I want to say is that any technological innovation, in certain aspects, is determined by capital.

Technical personnel are just one link.

Without money, without cheap money, everything is fake.

So behind technological progress, there is a very crucial factor : money. More money, less

: money. More money, less money, expensive money, cheap money— your investment will be completely different.

So what does Sister Wood's ARKK represent?

Two years ago, I said that Sister Wood is basically a game... That's over, right?

For example, yesterday or the day before, you saw SoftBank's Masayoshi Son basically sell off all of Alibaba's funds and start withdrawing capital.

Why was his era, his 40 years, characterized by such a large-scale environment?

I often tell myself and my children a sentence: Remember this: 99% of destiny is determined by 1% of effort.

It's not that 99% of effort or 1% of destiny is wrong.

This is extremely important.

This trend is perhaps what we truly gain from working in the financial market —the ability to tell everyone what this trend is.

I'll explain that later. Of course, you'll also notice that

later. Of course, you'll also notice that recently, things have been very hot.

You've seen speculation in China on special-purpose stocks, state-owned enterprise shareholder returns, and dividend indices.

What are they doing?

You've also seen the new energy sector, which was very popular a couple of years ago, marked in green. It's benchmarked

against the US cash ETFs and the Ark ( likely referring to a specific investment platform).

And on the right... Okay,

I've shown you the most crucial element: the US Treasury yield spread.

What is the US Treasury yield spread ? Can it be simply understood as

? Can it be simply understood as the cost of global capital ? Okay, take a look at this chart and connect it to

? Okay, take a look at this chart and connect it to your mind. What kind of information do you get?

your mind. What kind of information do you get?

I can tell you that everything that happens on this chart points to one answer.

This answer is...

This chart is crucial.

You don't need to take pictures.

If you want to see it, the original image is on Sina Weibo.

Just open it up in high definition.

I hope everyone will seriously try to understand it.

Because if everyone here comes from a real economy background, or if you come from an IT or internet background, and not specifically from finance, this will indeed be a bit difficult for you to understand.

I'll try my best to explain it in the simplest and most understandable way.

Of course, I also believe you won't hear this kind of talk from the so-called "First Financial Daily" in China.

Because simply put, this is the real financial market.

What is this?

Of course, from Bloomberg...

Uh, you can see this directly from Reuters: US 1 YT minus US 10T.

What is this? It's the difference between the yield on 1-year US Treasury bonds and the yield on 10-year US Treasury bonds.

Note that it's the difference.

Why am I showing it to you ? For example,

? For example, if any of you here understand commodity futures, you know that everything we have has a concept called current price and forward price.

To put it more simply, for example, in this electronics market in Shenzhen, the shopkeeper will ask you if you want to pick up goods today or in 5 days.

You can understand that this is the current price.

The concepts of term and forward are relevant here.

For example, with funds, a one-year term can be simply understood as the current price of capital, and a ten-year term can be understood as the price of capital ten years later.

But what I want to say is that what is the actual meaning of these "one" and "ten" terms ? A ten-year term is roughly equivalent to economic growth

? A ten-year term is roughly equivalent to economic growth , which can be simply understood as forward-looking capital.

How is the interest rate determined?

Ultimately, it is reflected by the investment returns provided by the entire society.

However, your short-term capital and your long-term returns are not necessarily aligned.

So , what have we gained in Masayoshi Son's 40 years , or rather, the first half of my life ? In fact

, I can say to everyone here , what have we gained in our 40 years?

Some say our 40 years were due to reform and opening up, or the production, processing, and manufacturing industries that emerged after reform and opening up . I can tell you

. I can tell you that it's not entirely due to these 40 years.

From 1982 onwards, you will find that for most of the time on this chart, this number has been below 0.

That's right, for the past 40 years, it's been below zero.

What does that mean? If we translate it into the interest rate curve, it means your short-term funds are here, your long-term funds are here, and the difference between the two is the fluctuation.

So what does that mean?

This chart tells you one thing over the past 40 years: for most of the past 40 years, short-term interest rates have been lower than economic growth.

Do you understand what that means?

For example, if you're running a business and you expect to earn around 10% profit in the next three to five years , and a bank like HSBC says, " I'm offering you a loan at a cost of only 3," do you know what you should do?

In finance, you only need to teach one thing: borrow cheap money to invest in high-interest returns.

Essentially, the core of finance, besides studying economics and long-term returns, also has a very important aspect: where to borrow money, whether you can borrow cheap money, and whether you can borrow more money on top of cheap money.

So what happened this year?

I believe everyone here...

I just asked Mr. Ni, and I said I don't even need to guess, I already know... Knowing your clients' situation, is money cheap at HSBC right now?

Very cheap, lending is very cheap.

Ask your clients if they'd lend or not.

Why? At this point, you'll realize that cheap money doesn't necessarily stimulate lending.

If that's the case, you don't need to consider Japan.

After Japan's real estate bubble burst in the 1990s, even if interest rates were pushed to zero, you wouldn't lend.

Why?

Because there was no return on assets.

How is this reflected in our global interest rates?

Simply put, this number is above 0.

When this number is above 0, it means your current borrowing cost is high, and your investment return is low.

Who would lend to you? For example, let's take

to you? For example, let's take China's borrowing cost as an example. Even if you can easily get a business loan from a bank , right? The LPR doesn't add any points;

, right? The LPR doesn't add any points; it all comes into account.

If you find your investment return rate is 0 , or even 13%, I wouldn't lend.

So what was our past rate spread?

You can see that the largest rate spread after the crisis was 350 basis points. What does that mean?

basis points. What does that mean?

If measured in US dollar borrowing costs, it means that economic growth could still provide a 4% return , while interest rates had already dropped to 0%.

I'm talking about 2009.

And in the past 40 years, all of us, including most of the people in China now working in finance...

Why am I giving you the example of Buffett?

Remember this: your lifespan determines how much of the world you've seen.

Most of us working in finance in China today, have we seen what the international market was like 40 years ago?

Buffett is over 90, Munger will be 100 next year, right? In my words,

right? In my words, if you live to that age, you've seen everything.

Some might ask, "Mr. Fu, have you seen it?"

Well no but I'm sorry, I'm luckier than many people because the people who mentored me at the beginning of my career had . More importantly, they passed on their knowledge

. More importantly, they passed on their knowledge and taught me.

Of course, this doesn't contradict any financial principles.

Their financial principle is very simple: borrow cheap money to earn high-interest returns.

It's that simple.

Looking back over the past 40 years , what I really want to say is, do you all like crises?

Over the past 40 years ... Let me tell you something you should remember:

... Let me tell you something you should remember: you must love crises.

People in the real economy might not like it , but I can tell you that people in finance absolutely love crises.

Every crisis brings an opportunity that young people especially love : a gamble on turning a bicycle into a motorcycle . What is this gamble?

. What is this gamble?

You're betting that after a crisis erupts, governments and central banks worldwide will only do one thing: easing monetary policy and lowering interest rates. They'll do

interest rates. They'll do even more easing and lowering interest rates . So, guess what people are thinking right now?

. So, guess what people are thinking right now?

What have people in finance been thinking about over the past year?

Everyone is thinking the same thing: America is going to collapse, America is going to recession.

Ideally, America would collapse immediately , and we'd immediately face the next move from the Federal Reserve.

The second interest rate cut, and even lower rates, do you know why they think this way?

Because it's very simple.

If this doesn't happen, it means all gamblers won't be able to gamble.

What's truly terrifying isn't the odds of big or small; what's truly terrifying is that it won't be open. Go

to Macau and ask any gambler.

I can tell you, as long as the casino is open 24 hours a day , I'll accept it whether I win or lose.

What agonizes them most is why the casino isn't open today . In our trading,

. In our trading, it's very simple: if the economy collapses due to high interest rates, I accept it.

After the collapse, I'll have another chance to leverage.

I accept that too. But

what can you do? High interest rates won't collapse?

What era?

40 years ago.

The average situation 40 years ago was that short-term interest rates were always higher than long-term economic returns.

What does this mean in economics?

Some might say inflation or deflation.

But there's another state that people don't like: stagflation.

This state is 40 years away from us.

In other words, it hasn't occurred globally for 40 years. This situation has occurred , but I'm sorry, have you ever considered that it might be happening now ? It could completely change all our investments.

? It could completely change all our investments.

Remember this: if short-term returns are lower than long-term returns , remember this: borrow more money and add higher leverage.

So what is this slope in finance?

This slope is leverage.

The cheaper the funds, the more stable the long-term investment returns.

Borrowing cheaper money to buy higher-yielding assets, borrowing more... Once it's reversed, let me ask you, how do you trade?

Bank deposits yield 5.x%

, investing in all assets only yields 3.x%.

I ask you, what would most people do?

Hmm, no problem, speak up.

Actually, your most intuitive understanding is the core of finance: you would deposit money in the bank, right? Okay,

right? Okay, congratulations, you're a very good ordinary person.

Cash, that is, short-term cash, doesn't mean only cash in the bank is cash. Cash cows are funds

is cash. Cash cows are funds or assets that can generate high-yield returns in the current period.

If we 're both calling it cash, let me give you an example . If a company pays a 10% dividend , is it considered a high-yield asset ? Is it

asset ? Is it considered high-yield cash?

Is there a difference between cash that pays you dividends every year and a bank deposit that only yields 5% interest annually ?

So, short-term gains are higher than long-term gains.

The most intuitive understanding is that funds should be held in cash , but financially it's called holding cash-like assets.

Think about the chart on the first page: why does Buffett buy those companies?

What's the relationship between those companies and the cash cow ETFs mentioned above ? Why are we seeing

? Why are we seeing our valuation rise ? Do you really think it's just a matter of a single statement from a CSRC leader?

? Do you really think it's just a matter of a single statement from a CSRC leader?

So , you guys are going to speculate on state-owned enterprise (SOE) stocks, and they'll go up, right?

What's the core of SOE stocks?

Let me ask you another question: What is technological innovation?

On this chart, what is technological innovation?

When the cost of capital is very low, you borrow cheap money and invest at high interest rates.

Okay, let's bring our example back.

My life went from bicycle to motorcycle. I'll

just briefly explain this one.

I benefited from this experience , which was when I returned to China in June 2009.

It was because of this reason.

After the 2008 financial crisis, the US lowered its benchmark interest rate to a very low level.

By 2009, you could call your HSBC private banking manager and say, "Hey buddy, what's the current lending rate for US dollars?"

He'd immediately give you a quote.

I don't know what the housing prices in Shenzhen were at that time because I wasn't in Shenzhen.

After I returned, we were in Beijing , but I can tell you, the housing prices around the Asian Games Village were 17,500.

What was China doing?

My purpose in returning to China wasn't because I wanted to go back.

My youngest son was born in 2008 , so everyone stand here and I can tell you, my eldest daughter is 24, and my youngest son was born in 2008. My parents hadn't seen him

in 2008. My parents hadn't seen him since his birth, so after the 2008 financial crisis ended, we were on vacation, and I returned to China.

Since I'm also part of the banking system, right ? Like the children of employees at China Construction Bank,

? Like the children of employees at China Construction Bank, plus other employees of the same organization , we had a gathering, and I suddenly received some information.

You can look it up: the China Securities Regulatory Commission's Order No. 61 of March 31, 2009.

What information?

During the Two Sessions in 2009, did you notice China's slogan? "Make the financial sector bigger and stronger, and promote entrepreneurship and innovation.

" Am I right?

I shouldn't have memorized it wrong.

After that, small loan companies and guarantee companies emerged ... To P, right?

... To P, right?

A whole series of things are done within this large macroeconomic context.

Have you noticed what the leverage ratio of Chinese residents was at that time?

Let me check this PPT, did you show it to me?

I forgot. This PPT should have been changed later.

Let me take a look... Oh,

it's not shown, it's not shown .

Okay, let me translate this for you later.

In 2009, the Chinese people were at a first turning point.

Before 2009, for those of you in Guangzhou and Shenzhen, the simplest way to make money was through exports, production, processing, and manufacturing —do your real business steadily.

After 2009, you should only have two benefits: one is buying and speculating on real estate , buying more and speculating on more real estate; the other is investing in Tencent, Alibaba , and mass entrepreneurship and innovation.

These are the two paths in China. Remember,

in China. Remember, some paths don't form naturally.

At this crucial juncture, they are all guided by the invisible hand of the government.

In 2009, when this slogan was raised at the Two Sessions , you saw that the Chinese residents...

The private sector is characterized by high savings and low leverage.

You know, this is a life-changing opportunity.

So, guess what ? We went back to China.

? We went back to China.

About a week before the 2015 stock market crash, we withdrew to neighboring Hong Kong.

I stayed in Hong Kong for two years.

He asked, "Did the vice president short the domestic market and buy back in?"

Well, I can only tell you that we didn't short the domestic market , but I did withdraw.

2016 was a crucial withdrawal point. Why?

What did China do in 2009? The

Fed's significant interest rate cuts caused the dollar lending rate spread to be 3.5% from 2009 to 2010.

That is to say, the implied global economic growth was about 3.5% , while the Fed's base rate was 0 %. If any of you have done trade

%. If any of you have done trade or business, why am I telling you not to treat me as an economist?

I've done everything you've done, and I've even done things you haven't done.

But back then, did you notice what the dollar lending rate was ? The loan interest rate is 0-0.25%,

? The loan interest rate is 0-0.25%, but the bank will add a handling fee.

If you open a USD letter of credit and post it, you'll find that the USD cost is around 2%.

Does anyone remember how much the RMB appreciated unilaterally each year before 2016 ? It definitely appreciated

? It definitely appreciated by more than 7 yuan, all the way up to more than 6 yuan.

But have you calculated how much the average unilateral appreciation was each year?

Let me tell you the answer: From the financial crisis until 2016, the RMB appreciated unilaterally by 3% each year.

Okay, have you noticed a problem?

You borrow USD from HSBC at 2% and then convert it to RMB.

Don't lock in the exchange rate, right?

The account manager will tell you that there is exchange rate risk if you don't lock in the exchange rate.

Anyone who understands knows that as long as this interest rate differential occurs, the RMB will definitely appreciate unilaterally. If

the RMB appreciates unilaterally by 3%, and your unilateral cost for borrowing USD is 2% then when you borrow USD and receive RMB, what is your real capital?

What is the cost of gold ? -1 -1 Oh,

? -1 -1 Oh, what do you mean? If you

do nothing and still earn 1% every year , what should you invest RMB in in 2009?

I won't mention the housing prices in Shenzhen, I really don't know. I

didn't buy a house in Shenzhen, right?

I know about Beijing and Shanghai, but not about here . What else is more profitable?

. What else is more profitable?

Have you ever thought about how much premium your shares in listed companies could have brought you if you had the opportunity to participate in equity investment back then? Some

people only think about investing, investing, investing , but I can tell you that the true essence of investing is not assets, but how to incur liabilities, how to incur liabilities at the right time, how to incur more liabilities, how to incur lower capital costs, and then you consider assets.

Many people only think about assets, you know , without considering liabilities.

I can briefly talk to you about Buffett's transaction with Japan in a while, and you will understand immediately.

What is a real financial transaction?

In 2009, how did the borrowed US dollars enter the RMB market? Did

you have legal channels to enter?

Another is the "hot money" that Zhou Xiaochuan often talks about.

In our Guangzhou-Shenzhen area, especially Dongguan and Foshan, a lot of people are engaged in bulk commodity trade, import and export, and transshipment. What are people in

and transshipment. What are people in Shenzhen's Shuibei Market doing? They are really doing trade financing arbitrage,

doing? They are really doing trade financing arbitrage, borrowing US dollars to invest in RMB assets.

And why can RMB assets, such as housing prices, rise ? Do I need to explain this?

? Do I need to explain this?

Supply and demand, location, population, and so on. Educational resources

are all nonsense. The rise in housing prices is just one thing: whether people enter this area, and whether those people can borrow more money. It's the leverage ratio of the household sector . First, there must be residents;

. First, there must be residents; second, there must be leverage.

If neither of these exists, the asset is basically at its limit.

So what are people most concerned about in the past two years ? Right, young people are getting married and having children,

? Right, young people are getting married and having children, right? If you don't have children,

right? If you don't have children, what will happen to housing prices?

Right, if you don't have children, how will the assets be managed in 10 years with this population figure?

The second thing is to get them to leverage.

In 2009, they were encouraged to leverage and get in.

Why is the current economy so bad?

I can tell you.

Some people say, how can we stimulate the economy? In 2009, we could stimulate the economy because all the households had... Stable savings

and low debt are now the norm. The biggest risk is the lack of savings, instability, and, more importantly, the pervasive debt.

Simply put, young people have limited leverage, which is the biggest risk.

Therefore, housing in China is very simple: focus on core cities and core areas.

Avoid everything else.

Only these core areas can attract people . Leverage is no longer a concern;

. Leverage is no longer a concern; it can't be increased further.

So, only core areas can attract people.

What is Hong Kong doing?

Well, talented people are welcome, right? Our Hong Kong Chief Executive,

right? Our Hong Kong Chief Executive, right? He was wandering around Guangzhou and Shenzhen a while ago,

right? He was wandering around Guangzhou and Shenzhen a while ago, asking for invitations.

But if you tell him , "I have no money, my family has no money , I'm just a poor guy," then sorry, do n't come. I don't

n't come. I don't want you, right? Because what I want is for you to have money, to be able to handle the leverage, to manage the 5%+ interest rate level globally. If this is the case globally,

globally. If this is the case globally, what do you think will happen to Hong Kong's housing market?

Hong Kong housing prices fell by 15% in the past year.

Why attract investment and talent?

Shenzhen will soon follow suit.

I can tell you , getting a Shenzhen hukou used to be very difficult, but it will soon be very easy. The population won't stay, and everything will be over.

Several years ago, I told many people that China would soon be in that situation of encouraging two, three, and four children. The mother who gave birth to five heroes was awarded a medal.

There's no way around it ; population is a major issue , and there are many explanations for it.

But the most crucial one, in my opinion, is that when housing prices reach a certain level, people naturally can't have more children.

This is true for neighboring South Korea, Japan and China.

In other words, it can be explained macroscopically: when leverage reaches a certain level, debt must be repaid.

China's current situation is that the next 5-10 years will essentially be a period of debt repayment after leveraging up – low growth, low inflation, and low interest rates. In contrast, for the past 30 years, China has consistently experienced high growth, high inflation , and high interest rates. The difference between high and low is simple: when leverage reaches a certain level, it naturally decreases.

Neighboring Japan reached its extreme and collapsed, losing 30 years.

But the question is, why are current interest rates so high (especially for the US dollar)?

This involves the issue of globalization.

Remember the first chart we showed in the lower right corner, globalization and deglobalization?

In the era of globalization, the US experienced low inflation and low interest rates, while China experienced high inflation and high interest rates.

What exactly are inflation and interest rates?

Remember this: inflation and interest rates refer to the situation of most people in society.

What the US experienced was low growth...

uh... The low growth, low inflation, and low interest rates in the US mean that most Americans are in a state where income growth has stagnated for 20 or 30 years.

China, on the other hand, is experiencing 20 or 30 years of high inflation, high interest rates, and high growth. This actually means

growth. This actually means that a statement made by our Party over the past 20 years is correct: the lives of ordinary Chinese people have improved significantly.

However, this statement is missing a second part: the lives of the wealthy in China have improved even more.

The first part is correct, but the second part, added to the US context, means that the lives of the lower classes in the US are not good , but the lives of the wealthy are better.

The wealthy rely on leverage.

Remember, the wealthy rely on leverage and asset management; it is the poor who rely on labor.

That's why we always teach our children that hard work can lead to wealth.

Actually well I can only say that.

But according to our industry, we don't believe that hard work alone can lead to wealth.

This is why everyone wants their children to learn the core of finance, to understand the consequences of globalization and deglobalization.

Okay, let's not get too complicated.

Let me tell you a story: if you have friends from 20 or 30 years ago… He sold his house in Shenzhen and immigrated. Let me tell you,

and immigrated. Let me tell you, he absolutely regrets it.

Because after he moved out, he didn't immediately enter the upper-middle class in the US. Instead,

he became part of the lower class and had to rely on having children, raising them to get into Harvard or Yale, and then becoming lawyers or doctors to squeeze into the middle class . If it were just his social class moving out

. If it were just his social class moving out 20 30 or even 40 years ago, he would basically be part of the lower class in the US.

What would most people do?

Open a restaurant, no problem, right?

Then you'd see that joke online: someone works hard for 30 years running a Chinese restaurant, earns money , and returns to Shenzhen only to find that they can't even buy back their original house.

You've all heard that joke, right?

Actually, this joke is a standard result of globalization.

In the process of globalization, remember that American residents maintain only the minimum basic living rights (the income of the lower class in the US doesn't increase).

Since 1982, what are the figures for the US?

The average wage growth rate is 3 %. The wage income difference between the bottom 25% and the top 25% of the pyramid is 1%.

What does this mean? An

average wage increase of 3% , minus the 1% social class difference, means that the bottom 25% of American residents —the Chinese who used to run Chinese restaurants— only have a 2% wage increase.

You'll notice that this 2% is exactly the US inflation rate.

What does this mean?

You can understand it as the wages of the bottom 20-30 years of the US population not increasing after deducting inflation.

Ask today's young people what they would do if their wages didn't increase for 20 years.

But have you ever considered that globalization can ensure that even with stagnant wages for the bottom 20, they can still live comfortably?

Why did George Soros explain this topic more than 20 years ago when he wrote *The Alchemy of the World*? He said it was China's huge trade surplus

the World*? He said it was China's huge trade surplus that compensated for the decline of the bottom 25% of American residents. For example,

my salary is $20,000, $20,000, $20,000, $20,000— it doesn't change in US dollars.

But, the notebooks produced in China… This computer went from $5,000 to $1,000.

How did my purchasing power increase? This is the huge impact of China's exports.

increase? This is the huge impact of China's exports.

Secondly, the goods exported by China go around in circles and become China's foreign exchange reserves.

What does China's foreign exchange reserves buy? They buy US Treasury bonds . What are

. What are US Treasury bonds used for? They are used for two things : war and to subsidize healthcare and education for the poor.

So you'll find that if you are a poor American, what happens?

Your income doesn't increase, but your purchasing power for goods supplied by China decreases.

This purchasing power increases my income . At the same time, China's large trade surplus and foreign exchange reserves

. At the same time, China's large trade surplus and foreign exchange reserves compensate for my education and healthcare . As an ordinary citizen,

. As an ordinary citizen, I can accept that my salary doesn't increase.

Okay, after the 2008 financial crisis, our whole world started to change.

Why did the subprime mortgage crisis happen in 2008?

I can tell you... Let me tell you, before 2000, American residents didn't even know what real estate speculation was.

In the 20 years from 1982 to 2002, those who truly became wealthy in the US understood this game.

Once the wages of lower-income residents stopped growing, the dual-objective system of monetary banking and central bank policies we learned in textbooks would become ineffective.

In other words, the central bank would never need to consider wage inflation again, only the economy.

This leads to our current model.

What does this mean?

If the economy is bad, lower interest rates . If the economy is bad, lower interest rates. If the economy is bad

. If the economy is bad, lower interest rates. If the economy is bad , lower interest rates.

Since the economy is bad, you lower interest rates.

So, for me, every time the economy is bad , I borrow more dollars to buy more US financial assets, and I will become even wealthier.

In 1982, US financial regulation was relaxed with an important law called... Margaret Thatcher

called... Margaret Thatcher

... well, not after Margaret Thatcher .

This "Big Bang" in the US refers to the financial liberalization of 1982.

What does that mean?

For example, if I were a regulator , I 'd tightly control the banks, forbidding them from leveraging .

Even if such an opportunity arose, there wouldn't be a wealth effect.

But if I told the banks and financial regulators that they could create all sorts of financial derivatives to leverage the household sector —for example, mortgages could become 18 different types , and all compliant— when interest rates rose, we all suffered.

Actually, the real golden age of finance after World War II was from 1982 to 2022, a full 40 years . Then in 2002,

. Then in 2002, US households suddenly realized, "Oh , the rich don't earn money through labor; they have to speculate on financial assets."

In 2002, George W. Bush...

What does it mean to say that you have to pursue the American Dream ?

The American Dream?

If you don't own stocks , financial assets , or a house, how can you call it the American Dream?

But the problem is that the American Dream of these poor people is the most terrifying because their income isn't growing and they've taken on even more mortgage debt.

Can you tell a delivery driver that he should pursue the Chinese Dream, that he should buy that 30 million yuan mansion in Nanshan , right? No problem,

, right? No problem, I'll lend him leverage.

Would you dare do that?

But the American approach from 2002 to 2008 resulted in the collapse in 2008.

After the collapse, the American lower class faced immense difficulties , paying off 15 years of debt.

From 2008 to now, American households have been deleveraging and paying off debt.

But you know, if someone's income isn't growing, and they still have to keep paying off debt , what will it ultimately turn into? In

Europe and America, there are two things that can upend the entire society.

In France, there's something called street protests and revolutions. If that doesn't work

and revolutions. If that doesn't work , tractors will be driven to the Arc de Triomphe, and Macron will step down.

In the United States, there's something important: ordinary people are unhappy with their lives.

They have a vote.

What will that vote translate into?

Trump in 2008 ... The direct result of the shattered dreams of American residents

... The direct result of the shattered dreams of American residents is that it's either populism or compensation.

The only way to compensate is to increase their wages.

Do you think it's really like the macroeconomic explanations that the pandemic has changed supply chains and the labor market structure?

That's not the core issue.

The real core issue is that after paying off 12-15 years of debt, these people don't want to pay anymore.

You either need more compensation or a pay rise.

Currently, the US is experiencing only one result: inflation at the bottom and deflation at the top.

In the past year and a half or two, do you know who is suffering the most in the US right now?

The wealthy people on the West Coast, Silicon Valley, Los Angeles, and San Francisco— these are the ones who leveraged their wealth over the past 15 years.

This long period after 2008 created the lowest financial climate in the world in almost 200 years, and it also created almost the world's largest asset bubble.

What is this asset?

For example, in 1997, 1998, 1999, and 2000, you might think of the dot-com bubble.

But what is this asset?

Did you speculate on currency a few years ago?

Do you know why virtual currencies emerged?

Don't talk to me about technology; I'm talking about the real society.

If such massive liquidity… Such cheap capital is rushing into tangible assets.

What are tangible assets?

Food houses , these physical assets.

If they flood into these, what does that mean?

If prices get out of control, we're not far from war.

But virtual assets have an advantage: they only destroy the wealth of the rich.

What is inflation for the lower classes and deflation for the upper classes in the US?

Do you know what common prosperity is?

Do you know what Robin Hood-like wealth distribution is?

Do you know how society addresses the wealth gap in a K-shaped society when it reaches a certain level ? You see Silicon Valley Bank?

? You see Silicon Valley Bank?

I told them "Sorry brothers you poor people don't even qualify to open an account at Silicon Valley Bank.

It starts at $250,000, right?

" Think about the West Coast, what we call America's new rich . Now, to

. Now, to be precise, America is a place where the poor are doing very well and the rich are doing very poorly ( the rich are the old money reaping the benefits of new money) . What is the old money?

money) . What is the old money?

Washington, New York, Houston.

The new money is Silicon Valley, Los Angeles . What does the new money rely on

. What does the new money rely on ? Technological innovation.

? Technological innovation.

Where does your wealth really come from?

What does it come from?

Financial assets give you exponentially more returns.

You create something that might only generate $10,000 in social value , but the financial market gives you a valuation of 200, 300, or 500 times. You

500 times. You get hundreds of years' worth of returns in one go. That's our gold.

When interest rates are too low in the financial market , it leads to extremely high valuations for all assets . Technology, as a major driving force

. Technology, as a major driving force , naturally experiences a valuation bubble.

Having worked in primary market investment and financing, I can tell you that the characteristics of valuation bubbles are always the same.

Let's start with the primary market.

A few years ago, do you remember what happened in the US?

There was a funny project where a container was loaded, and the PowerPoint presentation said, " Our main business is delivering hot, freshly baked pizzas to your doorstep. "

We asked, "How will you deliver it?

" Well, we'll find a big truck , put in a container , and put the pizza oven inside.

When you place an order, our truck will go to your location... "We

're making pizzas right at your doorstep , and it's contactless delivery!

I was wondering why it's contactless?

Well, we have a drone on our container!

It just grabs this pizza box and drops it right at your doorstep !

How much funding are we raising? Starting at $1.5 billion?

Why not?

When valuations are in a bubble, it's like saying even a dog can raise money.

That's terrifying.

Once this happens in the primary market, a secondary market bubble isn't far off.

If you experienced the dot-com bubble of 2000, you know what it means when even a dog can raise money— that's when a bubble is imminent.

Actually, our domestic primary market has gone through the same process in the past decade.

So, what do you see now in overseas internet..."

The layoffs at major internet companies, and now even Shenzhen tech companies in China are starting to lay off employees— that's true, that's true, that's true . What's the situation

. What's the situation ? It's very simple:

? It's very simple: a harsh winter is coming. And

is coming. And after this bubble bursts, American households are doing very well.

And what is the household sector? The

household sector is defined by short-term interest rates.

My salary is growing by 7%, my bank deposits by 5%.

So I ask you, why shouldn't you be happy?

People often say, "If interest rates are high, your economy wo n't be good." Do you feel that way?

Now, I ask you all, if you're in the real economy, do you remember what the interest rate level was when China's real economy was at its best?

When real estate assets had the best returns... Back then,

small loan companies and guarantee companies charged 2% or 2.5% interest rates. Would

interest rates. Would you lend money?

There were plenty of people willing to lend.

So remember, don't take interest rates too seriously.

I'm telling you , many people's interests are built on interest rates and asset prices.

So for them, they'll always tell you one thing: if the economy is bad, lower interest rates.

But in reality, our world has proven one thing: economic strength and interest rates aren't necessarily related.

When the economy is strong , it can withstand high interest rates.

When the economy is weak , like Japan, even lowering interest rates to negative levels didn't help.

It's that simple.

For example , imagine you want to sell your house in Shenzhen and immigrate to the US . Is that possible?

. Is that possible?

If it were according to the country's wishes, I would tell you ... I won't give you that kind of advice

... I won't give you that kind of advice , but you should think about whether it's feasible or not.

The world is changing.

What will be the logic after these 40 years end?

Okay, this is the United States , representing global liquidity.

Now, what is China's situation ? It's very simple:

? It's very simple: high debt and high leverage.

If the transformation fails, but remember this: this transformation absolutely does not refer to Shenzhen. Even

if Shenzhen's science and technology innovation goes up to the sky, it won't drive the entire society's economy for a long time.

Technological progress can only drive everyone if it is transformed into national productivity ; otherwise, it will only drive a small group of people.

What will that lead to in China's current situation?

China is now the opposite: low growth, low inflation, and low interest rates.

And behind these three lows is one high: high leverage.

All our production capacity ... One way

... One way

to avoid this so-called involutionary environment is to go to the US. Did the US have that era? Yes,

the US. Did the US have that era? Yes,

the US in the 1960s, 70s, and 80s.

Even in this highly competitive environment, American companies didn't achieve profit growth; they achieved market share expansion. It was

n't profit margin growth, it was market share expansion.

Now, all Chinese companies are very simple; they are prone to involution , a chaotic mess.

The reason is simple: the domestic market is the only good market.

The US-China trade war that started in 2018, and the deglobalization, the West wants to kick us out .

Since the start of the US-China trade war in 2018, I've been telling you it's not about trade , it's not about technology.

It's not about technology, it's about comprehensive deglobalization and decoupling.

So many of us might say, "You can't live without me these days." But

these days." But even after 50 years of marriage, people can still divorce. Who

ca n't live without whom?

It's just a matter of how to reconcile when things end, and whether you're willing to accept the costs and processes involved.

China now has to go global because if we don't, all our production capacity over the past two or three decades has been supplying the world.

If we don't go global, relying solely on our domestic consumer sector...

and within that sector, a problem has emerged: most of the post-90s and post-95s generations are shrinking , lowering their desires, and reducing consumption upgrades.

In China , for example, regarding domestic consumer goods...

remember this: high-end consumption will likely always be limited to LV and Gucci. Prada caters to the wealthy

and Gucci. Prada caters to the wealthy , but China also saw a surge in middle-class consumption over the past decade, right?

However, the end point for middle-class consumption is the leverage of the middle class.

When this leverage reaches a certain level, middle-class consumption will stall, and we will enter a typical low-desire society.

Young people will start to understand that not getting married is good, not having children is good, not buying a house is also good, and this phone doesn't need replacing —it still works.

And then there's the fact that Mixue Ice Cream coffee, while not great , is still acceptable; there's no need to drink Starbucks.

At this point, be aware that once this level is reached, China will quickly experience this situation ... If you carefully

... If you carefully interact with relatively poor young people, you'll find that you can't see the difference when interacting with the children of the wealthy .

So, China is now a typical K-shaped economy, you know?

Therefore, when you see data, don't treat it as comprehensive.

For example, many people see figures like bank savings deposits, but don't assume that represents everyone.

If you have 200 million , and someone else has 10, the average is that person is a millionaire?

Can you use an average for that?

China has also experienced significant irrationality in its development.

So what are the consequences ? Note that last November, we

? Note that last November, we experienced the first time in 40 years that such a situation was broken.

This timeframe is crucial because it signifies the end of the game of the past 40 years.

Cash has far outpaced long-term economic growth.

In other words, if you hold cash now and invest in any entity or industry, you'll find a 150% difference in risk-free interest rate spread alone.

All funds will be frantically searching the world for cash-rich assets, high-dividend companies , and companies unaffected by economic downturns – these are the good companies .

Buffett has already taught everyone what the best companies are .

Whether the economy is good or bad, this is a necessity.

Let me ask you, for example, in the last few months, have you noticed speculation in traditional Chinese medicine?

Why the speculation in pork and lamb?

You need to meet several characteristics: Whether the economy is good or bad it's a rigid demand; whether you use it or not , the price can rise.

And whether the economy is good or bad … Are there companies that can always make money ?

For all of you here, is there a service on your phones that's a necessity? Even if

you lose money today, or you make a profit today , would you not pay your 200 yuan phone bill?

Is it affected by the economy?

What does it have to do with the macroeconomy we're discussing ? The only thing to fear is...

? The only thing to fear is...

Suppose there are 500 telecom companies in Shenzhen now , then we're doomed , and we'll benefit, right? If there are only 3 companies in Shenzhen,

right? If there are only 3 companies in Shenzhen, would you find them engaging in price wars?

So what is Buffett buying?

You can look at the allocation of US cash cow ETFs.

What are they?

Energy, pharmaceuticals, finance— what does that mean?

These industries meet these characteristics.

What do you really want to gain by buying them?

You don't want to profit from stock price fluctuations; you want to gain something...

Do you know what dividend yield is? It's a typical cash-like asset.

is? It's a typical cash-like asset.

For example, on the right is ExxonMobil.

These are some of ExxonMobil's financial data. Overlaying them,

you'll find that the first situation is that many ordinary people understand Buffett buying ExxonMobil and Occidental Petroleum as a bet on rising oil prices.

Okay, let me show you the world's most important companies, ExxonMobil and BP.

You'll find a problem.

This is 2002.

Note that this is before 2002, from 1982 to 2002.

Then you'll find that in 2002, China joined the WTO , and prices rose, right?

According to your reasoning, with rising oil and gas prices, their stock prices should be good . But you find that

. But you find that from 2002 to 2022, over 20 years, oil prices remained flat.

Whether there's ExxonMobil or BP, it's the same . Their stock prices have risen the most. What was the right time? It

. Their stock prices have risen the most. What was the right time? It

was precisely when oil prices were low, the economy was weak, and China hadn't entered the market. The market

had risen for 20 years.

Does this overturn your investment understanding?

Actually, some principles are very, very simple.

What is a good company ? Buffett has been educating everyone for years

? Buffett has been educating everyone for years about what a good company is.

But I can tell you, learning from Buffett 20 years ago was wrong.

20 years ago, you should have invested in Jack Ma and Pony Ma , leveraged your investments, and bought houses.

But starting from November of last year, the investment strategy for the rest of our lives has become very simple: copy Buffett's homework . This is something

. This is something you might not know.

In the past 40 years , only 40% of investment returns came from economic growth.

What does that mean?

Globally, in the past 40 years, for every $100 earned, only $40 came from what you understand as economic growth ; $60 came from low interest rates.

Leveraged investments yield returns, so there are two types of investors in this world: one is long-term value investing, which yields discounted returns from economic growth; the other is pseudo-leverage from interest rate fluctuations.

Real estate, to be precise, is a typical example of a leveraged asset.

If "housing is for living in, not for speculation " were implemented, theoretically there would be no price fluctuations.

So, in the past, I can only say that the first half of my life was spent on speculation and leverage. Therefore, I've done all the speculative work you've ever done.

Primary market equity investment and financing, right?

Secondary market speculation on technology companies and stocks is perfectly fine .

In my words, I don't care what artificial intelligence is; I only care whether others care or not.

And I can tell you all that the technology stocks you've speculated on in the past few years can be speculated on for two or three years.

From here on, I don't know what kind of stories will emerge from the various technology-related narratives.

This year, a chat tpt popped up. Who knows what AI will be like next year?

Of course, I just want to say that when you hear about AI this year, do you remember the "original universe" by the Daming Lake last year?

Do you remember the "Internet Plus Everything" from 10 years ago?

I'll tell you a secret later . Of course,

. Of course, after attending the Artificial Intelligence Conference a while ago, I found that it was the same group of people who came to listen to Yuan Yuzhong last year.

Of course, for me, I haven't even learned C++ , so I went to the conference.

I can tell you , I wasn't listening to code; I was observing people.

Okay, I just want to tell you that in the past few years, global interest rates were low.

We could speculate, then sell to the 90s generation, then to the 95s generation, then to the 00s generation, and then global liquidity would tighten , and we'd put the 00s generation at the top.

Do you know why it's the 80s generation passing it on to the 90s generation, then to the 95s generation, then to the 00s generation? The younger they are, the more they believe in technology.

00s generation? The younger they are, the more they believe in technology.

They think technology can change the world .

As a result, the world will cruelly teach you that technology can change the world , but it absolutely cannot change the world by speculating on technology.

Speculating on technology cannot change the world.

Do you know what problems we'll face now?

Since November of last year, all thematic investments can only be speculated on this way , and not this way . It's very simple.

. It's very simple.

When you want to give money to those born in the 90s, you find that their "original universe" (referring to their financial situation) hasn't recovered yet, they don't have money, and they can't borrow more.

This cycle will be very short , with rapid speculation and rapid decline because the overall environment is one of lack of money.

Some people say, " The RMB interest rate is so low now, why is there no money?"

Note that all technology investments don't follow the RMB interest rate.

How can I explain this to you?

Let me ask you, wasn't the GBT (Golden Triangle) boom this year because it was available overseas first, and China followed suit?

And let me ask you, wasn't the "original universe" (referring to the concept of "metaphysics") something that was available overseas and then followed suit? Some

followed suit? Some people say, "Isn't new energy new energy?

Really, isn't it?

Without Tesla, would you have what you have now?"

China 's strategy in technology is to "cross the river by feeling the stones," following the crowd , like "black cat, white cat , catch mice."

So, we'll see a situation where there's a hot topic overseas , and we immediately follow it. Then the question arises:

it. Then the question arises: how do you value and price? Those who

have done primary market investment often say, " When I invest in a certain company, my benchmark is a certain American company/US stock company /US stock ."

/US stock ." The most powerful aspect of the US stock market is that it prices all the top innovative leaders in US dollars, leading to a...

The result is that it prices all stock market levels . There's only one situation in China

. There's only one situation in China where the RMB will influence asset valuation : when we invest in a company in the US, and we say that the benchmark for our investment is a Chinese company listed in China.

When you can do that, the RMB will price the asset. So, you know, when the Fed started raising interest rates

the asset. So, you know, when the Fed started raising interest rates in November 2021, global interest rates began to completely reverse.

You'll find that the rate of return on this chart quickly flipped.

All the black returns on this chart come from interest rates, leverage, and valuation.

In other words, if you invest in a company like Tencent, only 40% of the money you actually receive comes from Tencent's actual value, while the other 60% comes from the low interest rates, high leverage, and willingness to buy your stock at high prices across society.

However, times are changing.

We are moving towards real investment returns through deleveraging.

For example, you might find that Apple's stock price will continue to rise , but the logic, pace, and magnitude of that rise will be completely different from the past. In the past, you could

the past. In the past, you could quickly accumulate wealth in a short period of time because of leverage and low interest rates.

Now, you can only slowly grow the company and wait for its profits, like Buffett.

Of course, there is also the category of cash investments . When

investments . When investing in a good company, note that it's not just about making money; you also need to share profits with everyone.

So, from a shareholder's perspective, evaluating a good company is very simple: it's not just about making money without sharing profits, right? Like some domestic entrepreneurs who say,

right? Like some domestic entrepreneurs who say, "I won't give you dividends for five years, what can you do about it?"

That kind of company is not a good company. It should

make money and share profits even when the economy is bad.

The fact that the company continues to make money demonstrates its monopolistic nature.

Therefore, you'll find that you shouldn't look down on the wealthy ; the upstream investments they make are in essential things like food, drink, and basic necessities.

Whether the economy is good or bad, you can live without an iPhone, but you can't live without food.

So you understand why the huge gap between technology and the wealthy sometimes lies in what happens without it.

For example, if a meteorite hits Earth today, right? The whole

right? The whole world is paralyzed.

Without technology, what humanity truly struggles for is what to eat tomorrow morning.

Technology changes the human world , but it doesn't determine it.

Therefore, the wealthy monopolize all upstream resources.

Can you live without communications?

Can you live without water?

Can you live without electricity?

Which of these public utilities can you do without?

You can't live without coal, oil, and gas, don't look down on them.

They're cyclical most of the time , but once the economy enters stagflation, they become cash.

That's why I always emphasize holding cash or cash assets when the economy is bad . How can a company increase shareholder returns?

I don't necessarily need to earn more money; I can boost cash flow by spending less during a downturn.

So you'll find a very important data point , this yellow line, which is called the impact of capital expenditure on cash flow.

What does that mean? It means

a company can spend less while still maintaining the same level of profit and sharing it with everyone.

That's a good company.

Do you know what the worst thing about technology companies is?

Why do they rely on financial markets?

They spend a lot but don't see any returns.

Without financial markets, technological progress would indeed be slower because... Oh,

because... Oh,

but after the high valuation collapses, you need to consider whether you can reduce capital expenditures to make money and also make money for shareholders.

If not, your price will be very low.

What can energy companies do?

Energy companies cut capital expenditures.

So you can look at ExxonMobil.

From 2014 to 2015, after the global economic slowdown, it significantly reduced capital expenditures to increase its free cash flow and increase its dividends to shareholders.

Now remember, it's not an energy company , it's a cash cow.

Now guess what our state-owned enterprises are?

Look here, these are state-owned enterprises . Last year, compared to our risk-free rate

. Last year, compared to our risk-free rate , you don't need to guess.

Now the RMB bank deposit rate, measured by the 10-year government bond, is 2.7%.

You suddenly realize that since 2016, the dividend yield of state-owned enterprises has risen from 3% to almost 6%.

Of course, you know... What do you mean by "state-owned enterprise dividend yields were too high after 2016" ? Do you know what a major event was in 2016?

? Do you know what a major event was in 2016?

Supply-side reform . What did supply-side reform change?

. What did supply-side reform change?

After our reform and opening up, many industries, including coal and electricity , allowed private enterprises to participate , right? Now,

, right? Now, I ask you all, are there still private enterprises in the upstream sector?

Supply-side reform was implemented in 1998.

Premier Zhu Rongji was there . At that time, Liu Huan sang a song. Street barbecue was very

. At that time, Liu Huan sang a song. Street barbecue was very popular then, creating Jinzhou barbecue , not Zibo barbecue as it is now.

The song Liu Huan sang back then was called "If the heart is still there, the dream is still there. At worst, we can start over. " The goal

there. At worst, we can start over. " The goal of supply-side reform in 1998 was to eliminate excess capacity in the upstream sector and protect state-owned enterprises.

The supply-side reform implemented in 2016 was exactly the same, enabling the profits of state-owned enterprises to recover to normal economic levels.

Then, in 2020, the State-owned Assets Supervision and Administration Commission required state-owned enterprises to...

The dividend payout ratio of the company increased from 4% to nearly 5.5% in one go.

Did you think the special stock market rally started this year?

The special stock market has been rising for two years.

So why didn't you look at it before?

Because you were all speculating on new energy.

In my words, if the return on investment in new energy is 15%, state-owned enterprises have 5%, and the risk-free rate is 3%, what would you buy if you borrowed money?

You would definitely borrow 3% of the funds to buy a 15% return.

Actually, this example is very simple.

If Shenzhen's housing prices rise by 20% every year, I would like to ask everyone here, who would still be in business?

Corporate assets need to be compared.

From last year, uh, November 2021 , to last November, the only track that we supported in the past ten years officially entered the market.

So the expectations and... A significant slowdown in profitability leads to a sharp decline in returns.

Then, people might wonder, " Do you have any other investments?

" If you find there are no returns, suddenly you realize, "Hey, borrowing less than 3% to get 6% interest is a great business, isn't it?"

This creates a surge in the market.

Now, let me pose a question: When would you not do this?

Assuming bank deposits are still at 3 %, under what circumstances would you not buy cash?

It's not complicated.

When the deposit interest rate is around 5%, you would definitely buy, right?

For example, suppose HSBC's deposit rate is only 3%.

Then another bank says, " I'm offering high interest rates to attract deposits; my deposit rate is 6%. "

I guess you'd have to move your money from one bank to the other.

But suppose bank A and bank B... Bank C rates are all around 3%, it doesn't matter where you move to, so let me ask you, what are you competing on?

HSBC has good service ( this is an advertisement).

Then you'll find that you're competing on service, on extra returns.

Do you know how low this number dropped in the last two weeks?

It dropped to 4.3%. The

risk-free rate is 2.8%, and the dividend yield is 4.3%.

But you should note that although both are cash , one is a risk-free, stable bond, and the other is a volatile stock.

So here we should add what is called stock volatility implied cost, which is about one point. If you add that back,

one point. If you add that back, you'll find that your bank deposit is close to the dividend yield.

So let me ask you, are you still going to buy?

If you're not going to buy, who with large sums of money would buy ? Who? People are hoping for

? Who? People are hoping for a tenfold increase in state-owned enterprises (SOEs) over the next five years, but they're just treating them as cash for arbitrage.

So, can they be allowed to grow even further? Yes,

SOEs can distribute even more cash.

But here's the problem: what do overseas companies, like the US's cash cow ETFs, rely on ? Note that

US cash cow ETFs rely entirely on shareholder meetings.

That is, shareholders are willing to give money, and the board of directors is willing to distribute money to shareholders.

Have you ever heard the saying, " The Party Committee is greater than the Board of Directors" ? If you have,

? If you have, you know you have the right to vote for a larger share.

Who decides how much to distribute? The Party Secretary isn't the Chairman,

distribute? The Party Secretary isn't the Chairman, of course, unless the Chairman is also the Party Secretary . Okay, this brings us back to the last question:

. Okay, this brings us back to the last question: Japan.

Japanese trading companies are essentially the same as Chinese state-owned enterprises , but they are not party organizations ; they are family organizations with a higher board of directors.

Japanese companies often say, " This is Kazuo Inamori's company, not a board of directors."

Then guess what Buffett is doing?

Let me tell you.

The secret is that after Buffett went there, he met with all the executives and family members of the five major trading companies in the hotel.

He talked about one thing: you are a cash cow because you control the global upstream and downstream.

So when the economy is bad, the five major Japanese trading companies are like Chinese state-owned enterprises , American energy companies, and upstream companies.

Everyone can make money and have a lot of free cash flow.

The only problem is corporate governance . They may not be willing to share the profits with you.

. They may not be willing to share the profits with you.

So Buffett went there and talked about one thing: do you want to share the profits?

I'm almost at 5%.

If you don't share the profits, I'll buy the company and make it mine.

The Japanese said, "Mr. Buffett , don't control me.

I'm willing to share the profits with you."

"Oh, is that so?" "

Okay, deal.

" That's the answer you see.

Now, guess what?

If it were a Japanese company, or a Chinese company, buying 5% of a listed Japanese company and then negotiating with them, they would bite us.

To put it bluntly, the Japanese were still knocked down by two atomic bombs.

Buffett really went there to talk about this: either I buy you and share the profits , or you obediently share the profits and I won't control you. After

the two of them finished talking...

The emergence of Japanese cash cows has led to a global scramble for short-term high-dividend cash, and the same applies to China.

The principle is simple: it returns to the principle we discussed at the beginning – interest rates.

So, times have changed, and this situation may continue for many years.

Here's a little tip: 15-16 years ago, when I first returned to China, I taught many people how to use trading companies to borrow US dollars to buy domestic RMB assets , real estate, stocks, and equity investments.

Now, I'll tell you the real game for the next 5 to 10 years : how to borrow low interest rates to buy high interest rates. The US dollar isn't cheap anymore , but its high interest rates remain very attractive.

So, the question is, who is buying low-interest assets? Buffett did something:

assets? Buffett did something: he bought these high-dividend assets in Japan but issued unsecured yen bonds in Japan.

What does this mean?

Buffett didn't spend a single penny; he used Japanese... Savings

were borrowed at extremely low interest rates to buy Japanese assets, and the Japanese were forced to pay high dividends.

Don't you all talk about harvesting?

This is the real harvesting of capital.

If this happened in China, it would be called barbarism.

Barbarians will basically be eliminated in the end.

In China, the biggest thing is not capital.

You either can do this, or you need to think about it.

The RMB will become low growth, low inflation, and low interest rates.

What does that mean? If the US dollar continues to maintain high growth , or rather, high growth, high inflation, and high interest rates, the RMB will definitely depreciate , not appreciate . Instead, it

will depreciate.

The reverse is the transaction: borrowing RMB to transfer to high-interest assets.

These high-interest assets can be the few high-interest assets in RMB , or they can be high-dividend cash cows globally.

You will find that this generates arbitrage capital flows and trading opportunities similar to those of 15 years ago . Think about it carefully.

. Think about it carefully.