As a first-time investor, the editor recently asked me what stocks are good to buy, and whether bank stocks are the most stable? The stock market has become very volatile as the epidemic spreads rapidly and raises serious economic concerns.The circuit breaker was triggered 4 times within 10 days in March 2020* (Circuit breaker)On March 9, March 12, March 16 and March 18, respectively, the Dow Jones index fell by 7.8%, 10.0%, and 12.9% respectively, each time falling more severely. On March 18, the US stock market once again triggered the circuit breaker mechanism due to the S&P 500 index falling by more than 7% intraday, suspending trading for 15 minutes, which was the fifth circuit breaker in the history of the US stock market. (The first time the circuit breaker mechanism was triggered was on October 27, 1997)
At that time, I was thinking about a lot of people, and even myself, wondering whether there would be a rebound in Bo Yibo, but it was actually a very dangerous thing, because low levels cannot be predicted.
*Circuit breaker mechanism: (English: Circuit breaker / Trading curb) refers to a mechanism that suspends trading for a period of time when the range of price fluctuations reaches a certain defined target (circuit breaker point) during the trading hours of the stock market. (This mechanism is similar to a fuse that blows when the current is too large, hence the name.)
The current circuit breaker mechanism was revised in April 2013 and halted the stock market in three stages:
Phase 1: If the S&P 500 index falls 7% compared to the previous trading day’s closing price, trading will be suspended for 15 minutes.
Stage 2: If the S&P 500 Index falls 13% compared to the previous trading day’s closing price, the pause will be continued for an additional 15 minutes.
Stage 3: If the S&P 500 index falls by 20% compared to the closing price of the previous trading day, the market will be closed immediately and trading will resume on the next trading day. However, if the above-mentioned decline occurs at or after 3:25 pm EST, the circuit breaker mechanism will not be triggered.
When many people invest, they feel that the cash they hold has been lost (because the interest rate is low and the interest rate is low), but they have never thought that when global assets fall, including the real estate market, stock market, etc., you have actually made money with the cash you hold. Let’s take a very simple example: Originally you could buy 1 lot of stocks for 1,000 yuan, but due to the sharp fall in the stock market, you can use 1,000 yuan to buy 1.5 lots of stocks. Cash is King means this, your cash is worth more than before, and you have liquidity, so you can freely choose what to invest in the future.
Are you happiest holding Hong Kong dollars?
As a Hong Konger, holding Hong Kong dollars is a lucky thing. The reason is that Hong Kong has implemented an exchange rate system since October 17, 1983, which is guaranteed by 100% foreign exchange reserves. The Hong Kong dollar is pegged to the US dollar at an exchange rate of 7.75 to 7.85 Hong Kong dollars to 1 US dollar. Since the US dollar can be called a hegemon, many stocks, commodities, and debt transactions are in US dollars. No matter whether the market is falling, or even unlimited QE, there is still unlimited demand for US dollars, and the price can remain stable. (But of course, the linked exchange rate also has many disadvantages. The main reason why Hong Kong people cannot buy houses is because of the linked exchange rate. This can be discussed in the future.)
Don’t worry about the stock market falling, pick up the fire immediately
A common mistake made by novices and veterans alike is to rush into the market as soon as the stock market drops. Professional investors will wait until the market bottoms out and then enter the market after a small rebound.
The editor immediately asked me: “How did you know that it had dropped to a very low level? I thought HSBC was already so low when it dropped to 44…”
Therefore, when buying stocks, you don’t just buy them when someone tells you to. You need to read the news and pay attention to the market conditions. The current market situation is so turbulent, are bank stocks really stable? Large companies and small companies have closed down one after another, the aviation industry is almost paralyzed, layoffs are massive, famous hotels are closing, and oil prices have dropped from $60 a barrel to as low as $20. How many oil companies will go bankrupt? You must know that many companies actually borrow money from banks to conduct business. If the company goes bankrupt and the debt cannot be returned to the bank… the bank will have to write off the debt. If HSBC does not pay dividends, it is foreseeable that the situation of bank stocks will be very serious in the next six months. I believe there will be more bank stocks that will not pay dividends. Banks are the mother of all industries, and every country wants to rescue banks. If they do not fail or are liquidated, it does not mean that they are a good investment.
“If you have foreseen that a stock will not bring you any profit at all in the next two months or even six months, what should you do if you buy it?”
The editor asked again: “How can I buy such oily stocks? I see that there are signs of rebounding recently!”
Oil belongs to another Topic, which is a raw material commodity. The recent rise and fall of oil are based on political reasons more than anything else. Saudi Arabia and Russia are fighting to lower oil prices, but it is really unusual to be as low as $19. Coupled with the epidemic, the aviation industry has cut off a large number of flights, and the demand for oil has plummeted. Likewise, we don’t see the possibility of a V-shaped rebound in oil. However, with oil prices below $20, oil ETFs are being absorbed in stages. In the long term, the risks are very small, but it will take a year and a half before all walks of life digest the current oil stockpiles before they have the opportunity to return to the normal $35-$40.
The editor was so anxious that he said: “It’s impossible to do this, and I can’t do anything. What can I buy against the market?”
Stay calm and look at the situation from an ordinary person’s perspective. Don’t think that if you don’t buy, it will definitely be a loss. Think clearly before making a move, so I will worry about the opportunity falling during this period of time, so the foreign exchange rate… (Editor: next, do you have to be patient?) But you don’t necessarily know the trend of the Australian paper by looking at this picture.
The highest level of Australian paper in the past few years has been 6.3 Hong Kong dollars. It has been two months since it dropped to 5 Hong Kong dollars. It recently dropped to 4.3. The value of currency has a certain benchmark, because there will always be people using it. Recently, I have been playing foreign exchange. The so-called cash is king, and foreign currencies are also cash. However, these are currencies with short-term volatility and will be strong in the long-term. We have already tightened our grip! If there is a global recession, another safe-haven currency may also be attracted: the yen.
Gold is stable enough! Is this shop for buying gold?
I think back in 2008 and 2009, I started my career by speculating in gold. When the market deteriorated, many people would buy gold as a hedge. But in March, the U.S. stock market fell to the limit late, and some gold actually fell instead of rising. Because everyone lost money, they went to sell some gold! Imagine that many people borrow money to buy stocks. When they buy a stock worth 10 yuan, they borrow 9 yuan to buy it, and the price drops to 6 yuan. You will be forced to pay back the money! So if you own gold, of course you can redeem it and repay the money. This is why the stock market plummeted in early March and gold also fell with it. Although risk aversion has eased recently, the stock market and debt are now full of landmines, so I am still optimistic about gold. Every time it falls, I can absorb high-quality gold stocks in stages, with the goal of rising above historical highs.
Summary: It is easier to convert between foreign currencies, be conservative, and have more cash flow. The investment funds must not use your own emergency funds (suddenly no longer have a job, which can sustain living expenses for 5-6 months). Anyone who does not want to gamble in the long term and wants to receive interest can buy CLP. Hong Kong Electric (this type does not practice at all) has little fluctuation in stock price and good dividends.
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