After a night of panicking, the 10-bagger stock plummeted by 20% in a year, and when I woke up, the market fell into a dead silence
Long-term solicitation
Text/Ye Tan Finance Team
In his book On Leadership, the late Kissinger argues that there are three qualities a leader needs to possess.
First, be courageous.
Being able to choose a path forward among complex and difficult options often involves changing the norm and overcoming the inertia of inertial thinking and inaction. A tough personality is the ability to stick to a path after choosing one, especially if the potential future benefits or dangers of this choice are not fully understood at the time.
Second, we must learn from history.
Because grand strategy cannot be experimented, reality only gives you one chance, many decisions cannot be reversed, there is no turning back when the bow is opened, and the only thing you can learn from is history.
Third, and most importantly, leaders need to be visionary.
Dare to drive change, not only to solve the problems of the moment tactically, but also to take a long-term view. For example, Kissinger said, in 1971, Nixon was able to see China's economic potential as a challenge to the United States and the rest of the world in the future. "Opening up to China, like all other strategic victories, is not just a response to the problems of the present, but also a ticket to the many challenges ahead," he said before his visit. ”
Respect reality, but not be bound by reality, aim high, but not detached from reality, know easy to do, and encourage you.
Below is the body of this week's Tan Article.
#01
The "artillery battle" between face and lining, there are other people who sacrifice
On April 19, a U.S. official confirmed to the Global Times, citing ABC, that an Israeli missile had hit a target in Iran. Israel's "Jerusalem Post" reported earlier on the 19th that explosions were heard in the Isfahan region of Iran, Suweida province in southern Syria, the Baghdad region of Iraq and the province of Babylon.
As soon as the news came out, gold, crude oil, and industrial metals rose rapidly, and related safe-haven assets rose and fell with the change in news.
The United States and Israel said that they had hit the target, but the Iranian side said that nothing had happened.
According to Wall Street News, Iran's semi-state media Tasnim (Tasnim), citing sources familiar with the matter, has not reported any foreign attacks on the central Iranian city of Isfahan and other regions.
After the rumors were released by Israel, the outside world was worried about the safety of Iran's nuclear facilities.
The IAEA said Iran's nuclear facilities were not damaged. The IAEA also said it was closely monitoring the situation, reiterating its call on all parties concerned to exercise restraint and reiterating that "nuclear facilities should never be the target of a military conflict."
Since Israel's attack on the Iranian embassy in Syria, both sides have been verbally bombarded, threatening to make the other side look good, but there have not been many substantive actions, and it is more of a battle for face.
It's a bit like the Middle Ages when two armies faced each other, setting up a battle and setting up cannons, but not hand-to-hand combat, but using extremely low-precision artillery to intimidate each other.
According to Justin Low, an analyst at the financial website Forexlive, citing a senior Iranian official, Iran has no immediate plans to retaliate, which continues earlier claims that the Iranian side downplayed the whole incident from the beginning.
Iran is an understatement, China, the United States, France, Germany, Russia, Turkey, Egypt and other countries are very nervous, and all kinds of shuttle diplomacy to manage risks.
Risks are concentrating, the dollar is rising, other currencies are suffering, and developing countries are the worst exchange rates, and this time is no exception. Non-US currencies have depreciated to varying degrees, with the Turkish lira, the Japanese yen, and the South Korean won depreciating the most.
In order to defend their country's exchange rate, many countries have publicly shouted and even taken direct action.
According to Nikkei Chinese, on April 1, Brazil's central bank implemented the first exchange rate intervention since the Lula government came to power. Local media reported that Bank Indonesia intervened in the exchange rate in early April. Turkey's central bank raised its benchmark interest rate by 5% to 50% in March in light of the depreciation of the lira and accelerating inflation.
The yen was originally a safe-haven currency, but since the improvement of the Japanese economy and the rise of the Japanese stock market and property market, the safe-haven attribute of the yen seems to have disappeared.
In this round of depreciation, the yen has been the most disappointing, and after falling below 150 against the dollar, there is still no sign of stabilization.
The Japanese government does not seem to be very concerned about the depreciation of the yen, and there is no action at 150, and there is still no action at 151, 152, 153, and 154. Now the market's psychological expectation is around 155, and there should be intervention measures from the Japanese government.
At around 10:50 a.m. on April 19, the shadow of the yen defense battle was finally seen, although it did not last long.
The South Korean won depreciated slightly better than the yen, so the South Korean government is currently mainly intervening verbally.
According to Yonhap News Agency on April 16, at the time of the depreciation of the won against the dollar, South Korea's foreign exchange department took "verbal intervention" measures, and the South Korean Ministry of Finance and the Bank of Korea (central bank) said in a text message to reporters on the same day that the foreign exchange management agency is particularly vigilant about exchange rate movements, foreign exchange supply and demand, and is paying close attention to the relevant situation.
In addition, as allies of the United States, Japan and South Korea also use special channels to express their concerns about the foreign exchange market directly to the United States.
According to Caixin on April 17, the finance ministers of the United States, Japan and South Korea issued a joint statement, saying that the three countries will continue to cooperate to promote sustainable economic growth, financial stability, and the orderly and well-functioning financial markets. The United States, Japan and South Korea will also continue to consult closely on the dynamics of the foreign exchange market and expressed concern about the recent sharp depreciation of the yen and the South Korean won.
The renminbi has been relatively strong compared to other currencies during this period, with ups and downs in April, but it has hardly depreciated in a single month.
On April 18, Zhu Hexin, deputy governor of the People's Bank of China and director of the State Administration of Foreign Exchange, said at a press conference of the State Council Information Office that the basic stability of the RMB exchange rate has a solid foundation at both the macro and micro levels.
"The People's Bank of China and the State Administration of Foreign Exchange will take into account the 'internal and external balance', not only pay attention to the decisive role of the market in the formation of the exchange rate, but also continue to implement comprehensive policies, stabilize expectations, pay close attention to changes in the foreign exchange market situation, resolutely correct pro-cyclical behavior, prevent the market from forming unilateral expectations and self-reinforcing, and resolutely prevent the risk of exchange rate overshoot. ”
The central bank's attitude is similar to that of the past, simply put, depreciation can be, but it cannot form an expectation of rapid depreciation, and once there are signs of large-scale shorting of the yuan, the central bank will intervene.
Interestingly, despite the slight depreciation of the renminbi in March, this did not prevent the share of the renminbi in global trade from continuing to increase.
According to Bloomberg news on April 18, the transaction data compiled by the Society for Worldwide Interbank Financial Telecommunication (Swift) shows that the share of RMB in international payments is increasing, and the proportion of transactions involving RMB rose to 4.7% in March, the highest level since Swift established a new benchmark in July last year.
The renminbi is not the dollar, but the euro.
According to Swift statistics, while the share of the renminbi has risen, the share of the euro has continued to decline. In March, the euro's share fell below 22%, down from 24.4% when Swift launched its new benchmark.
It is reported that the euro area has a high probability of cutting interest rates in June, but the euro's largest counterparty, the dollar, is becoming more and more out of reach.
On 16 April, Fed Chair Jerome Powell hawkishly said that recent data suggest that inflation is lacking further progress and that it may take longer to gain confidence in inflation, and that it may be appropriate to let higher interest rate policy work for longer.
After Fed Chair Jerome Powell's hawkish release, on April 18, the Fed's third-in-command, New York Fed President Williams, who has permanent voting rights, warned that the Fed would raise interest rates if the data showed that the Fed would need to raise interest rates to achieve its goals.
You know, a few days ago Williams also said that if inflation continues to gradually come down, the Fed may start cutting interest rates this year.
From starting to cutting rates to raising interest rates, Fed officials are becoming more hawkish.
The turmoil in the Middle East has stimulated the price of crude oil and commodities and will undoubtedly further disrupt the pace of the Fed's monetary policy.
It's true that I didn't kill Beren, but Beren died because of me.
#02
Trade policy is aimed at China, and a new round of confrontation has begun
There has been a lot of news about trade policy this week, mostly in China.
On April 18, according to Reuters, the Mexican government refused to provide incentives such as low-cost public land or tax cuts under U.S. pressure in an attempt to distance itself from Chinese electric vehicle makers, according to three Mexican officials familiar with the matter.
Prior to the announcement, the U.S. had raised concerns about Chinese electric vehicle companies' intention to invest in Mexico. China believes that China-Mexico practical cooperation is a matter between two sovereign states, and is a normal business activity conducted by enterprises of both sides in accordance with international rules and market principles, and no third party has the right to interfere. But the United States remains worried.
There are more and more countries caught between China and the United States, and each country has its own trade-offs.
The United States has a market, China has manufacturing, the United States has lip service, and China has benefits, and the best result is to be "pursued" by China and the United States and reap the benefits of the fisherman.
For Mexico, it is a good option to use US pressure to reduce the preferential treatment given to Chinese companies.
Chinese companies are eager to go to sea, and Mexico is one of the best places to go to sea, even if there are no discounts, they have to go hard. If the Mexican government settles on this, the cost of Chinese companies going overseas will become higher and higher.
Mexico is still on the right and left, and the United States will ignore it and attack directly.
According to Reuters, in the early morning of April 18, according to two sources familiar with the White House plan by Reuters, the Biden administration is expected to approve the application of South Korean PV company Qcells (Hanwha) to revoke the two-year import duty exemption for China and other countries in the field of PV bifacial modules.
According to Titanium Media, Hanwha petitioned the U.S. Trade Representative as early as February 23 to revoke the exemption for bifacial PV modules and reinstate solar tariffs.
Several of the leading US PV manufacturers, First Solar, Heliene, Suniva, Silfab, Crossroads Solar, Mission Solar and Auxin Solar, also signed the petition.
Unlike in the past, Southeast Asia and other places where the entrepot trade of Chinese photovoltaic products is concentrated is likely to be included in the additional tariffs. In June, the two-year anti-dumping exemption period for photovoltaic modules in four Southeast Asian countries is coming to an end, and in the context of the general election, the possibility of extending the exemption is getting lower and lower.
At present, the four Southeast Asian countries account for 80% of the module supply in the US, mainly driven by Chinese companies.
Compared with the direct intervention of the United States, the EU's measures are relatively modest.
On April 15, 2024, according to the European Energy Economic Observer (European Commission), the energy ministers of 23 EU member states, including Germany, France, the Netherlands, Spain and other countries, and about 100 representatives from the European solar industry signed the European Solar Charter in Brussels.
In the background statement of the European Solar Charter, China is specifically mentioned:
Most of Europe's demand for solar modules comes from imports from a single supplier, China, and this concentration poses short-term risks to the resilience of the value chain, as well as long-term risks to the price stability of solar panels due to dependence on suppliers outside Europe. Therefore, access to affordable solar modules from a variety of sources, as well as a resilient, sustainable and competitive European solar value chain, is necessary to achieve deployment rates in line with the above targets, while improving security of supply and reducing the risk of supply chain disruptions.
The EU wants to be more independent in PV manufacturing and does not want to be overly dependent on a single country, which is more pertinent considering that European PV products are mainly imported from China.
This charter is not a mandatory industrial policy, and it is much softer than the measures taken by the United States.
Nevertheless, we should not underestimate the charter, which, on the one hand, reaffirms the attitude of the European Union, and on the other hand, it has a strong correlation with other EU policies, such as the Foreign Subsidies Regulation.
In the future, EU countries can make personalized choices in terms of market access, tariffs, bidding and other aspects according to their own conditions.
On April 10, the European Union issued a 712-page new energy report, pointing out that 80% of the world's photovoltaic products and 60% of wind turbines are produced in China, believing that "this is mainly due to the government's intervention in related industries, resulting in Chinese companies dominating these industries."
From the perspective of industrial policy, China's new energy policy is undoubtedly successful, and globally competitive giants have emerged in all aspects. This competitiveness is reflected in China, which is an unprecedented involution, with prices from polysilicon to modules falling and no one making money.
The loss in the embankment is replenished outside the embankment, and going to sea has become the way to survive.
According to the summary of the carbon catch, in 2022 and 2023, the most important regions for China's photovoltaic exports are Europe, Asia, and Latin America. North America doesn't look like much, but Southeast Asian exports correspond to North America.
As can be seen from the chart, the European market is the largest single overseas market in China's photovoltaic industry, and its importance is self-evident.
Due to factors such as demand changes, protectionism and price wars, China's PV exports to Europe have declined in 2023. According to the statistics of Catch Carbon, in 2023, the mainland's photovoltaic exports to Europe will drop by 3.5 billion US dollars, and the European market will account for 41.14% of the total export from 45.66% in 2022.
From an economic point of view, the industrial policies of European and American countries are not reasonable, because the cost performance of Chinese goods cannot be surpassed.
China is the most cost-competitive location for all module manufacturing in the solar PV supply chain, with costs 10% lower than India, 20% lower than the US and 35% lower than Europe, according to the International Energy Agency (IEA).
However, there is politics behind the economy, business and consumption are two lines, and the confrontation between economy and security, games and checks and balances is inevitable.
#03
GDP exceeds expectations, and it is more important to feel the truth
Many economic data in the first quarter exceeded expectations, with GDP growth of 5.3%, making many people feel that they are lagging behind. The gap between real perception and data is more important than analyzing GDP itself.
Tianfeng Securities has an interesting point of view, they believe that the nominal GDP in the first quarter may be closer to people's real feelings. Nominal GDP in the first quarter of 2024 is 4%, 1.3% lower than real GDP.
The nominal GDP growth rate was also closer to the 3.1% growth rate of total retail sales in the first quarter.
What is nominal GDP? Simply put, it is the GDP figure that takes inflation into account.
In the past, China's CPI was above zero for a long time, and nominal GDP was often higher than real GDP. But what is happening today is that the CPI has been very weak, with an inversion between nominal and real GDP.
For enterprises, this kind of inversion means exchanging price for volume, increasing revenue but not increasing profits. In the first two months, the revenue of industrial enterprises above designated size increased by 1.6% year-on-year, but the profit was negative by 7.8%.
The meaning of statistics changes with the times, and in the age of inflation, excluding the price factor, it may be closer to the "truth".
However, in the case of sluggish domestic demand and relative deflation, price has become a more real embodiment than quantity.
Recently, in the journal Comparison, there was an article about the importance of nominal GDP. The author of the article is Scott Sumner, who is known for promoting the nominal GDP target.
In the article, he pointed out that to judge the stance of monetary policy, we must look at the results of the policy, not the input of the policy. Nominal GDP is important for two reasons:
First, nominal GDP is the total income that can be used to pay nominal wages, and most wage contracts are concluded on nominal rather than real wages.
Second, nominal GDP is the income that can be used to service nominal debt, and the vast majority of debt in most countries is nominal debt.
In his opinion, the growth of nominal GDP is the best indicator of monetary policy.
In many cases, balance sheet collapse is caused by a decline in nominal GDP caused by monetary policy. Scott Sumner believes that Japan's ability to get out of the bubble era is to use the power of inflation to boost nominal GDP growth and get Japan out of the quagmire.
After the three arrows of Abenomics, the Keynesian view is that the Japanese economy should slow down, and according to Scott Sumner, it should continue to grow.
The greatest value of Scott Sumner's article is that it teaches us how important it is for data to be close to reality.
For China's economy today, finding the truth and being close to the truth may be far more important than the pretty numbers themselves.
#04
The U.S. and Japanese stock markets have fallen one after another, when did Tesla fall below $100?
On April 19, Tesla's stock price fell below a key level to close at $147.05, marking the sixth consecutive day of decline.
On April 20, Tesla's official U.S. website showed that the price of Tesla's Model Y was lowered to $42,990, the price of the Model Y long-range version was reduced to $47,990, and the price of the Model Y high-performance version was reduced to $51,490.
It seems that the old prescription is used, and the stock market will be good if it doesn't work.
Considering Tesla's sales and unfavorable news such as the recall, Katie Stockton, founder of Fairlead Strategies, said that Tesla's stock price is down 41% this year, falling below the technical support level of $149, and the next important support level is around $100. He believes that if Musk fails to deliver on his promises, a drop to $100 is just around the corner.
Tesla is surrounded by strong enemies.
According to Tridens, in the first quarter of 2024, Tesla delivered 386,800 electric vehicles, significantly lower than the previous agency's forecast of 430,000, down 8.3% year-on-year and 20.1% quarter-on-quarter.
This data did not satisfy the appetite of the market, just like an excellent student who did well in the exam, but still had to be scolded.
What's more, Tesla is also facing fierce competition from China's cost-effective electric vehicles. According to official information, from 2021 to 2023, Tesla's sales in the Chinese market will be 320,700 units, 439,800 units and 603,700 units respectively, a year-on-year increase of 133%, 37.1% and 37.3%, respectively.
At this stage, Tesla's protagonist filter in the Chinese market is gradually disappearing, and their price cuts are no longer impactful.
In January 2024, Tesla's sales in China were only 71,400 units, a year-on-year growth rate of 8%, while China's new energy vehicle sales in the same period were 629,000 units, a year-on-year increase of 93.3%.
While Tesla still dominates the U.S. EV market in 2023 with a 3.26% share, EV sales are lower than in 2022.
Tesla's highest price in 2021 came to more than $400, and since then it has fallen without hesitation, as long as there is no new breakthrough and no bright profits, it is a bit difficult for the concept of electric vehicles to return to popularity.
As with electric vehicles, the chip concept fell en masse.
On April 19, ultra-micro computer (SMCI), a "ten-bagger stock in one year", plunged more than 20%, and its stock price closed down 23%, hitting a new low in more than two months, dragged down by this, Nvidia fell 10%.
Everyone doesn't think that the chip is not saved, and is still hedging. Nvidia options were actively traded, with a total of 3,387,800 options traded on the day, of which put options accounted for 46.08% of the total trading volume and call options accounted for 53.92%.
The stock price is too high, the rise is too long, the market is a bit of a cup, and the hype is the expectation of the next few days, a quarter or even the end of the year, as long as it is not satisfactory, I will throw it to you.
On April 30, Supermicro Computer will announce its third-quarter results, breaking the previous practice of providing preliminary results, triggering investors to reduce their holdings wildly. Nvidia's quarterly report will be released in October, which has also raised questions about whether the market can quickly boost demand to match the pace of its product iterations.
Other reasons have also stimulated the market, with European lithography giant ASML announcing earlier this week a sharper-than-expected drop in orders, TSMC lowering growth expectations for the semiconductor industry other than memory chips, and Apple being designing its own AI server processor, which has repeatedly hit chip stock expectations.
The market rises to a certain time, and if it rises for too long, a little news will be full of soldiers.
The sweetest section of the market's sugar cane has been chewed to pulp, and now it is getting harder and harder to chew.
The background of market volatility is that due to the hawkish storage of U.S. stocks, U.S. stocks and Japanese stocks fell.
Japanese stocks follow U.S. stocks, and the two are mirror images of each other.
Investors are withdrawing money from the U.S. stock market, with Bank of America citing EPFR Global data saying that investors redeemed US$21.1 billion (about 150 billion yuan) from equity funds in the two weeks to April 17, the largest redemption amount since December 2022, while the bond market received US$5.7 billion in inflows during the same period. Some people are in the bag for safety, the pursuit of safety.
This does not mean that the bear market in the United States and Japan has begun, now the Japanese stock market depends on foreign capital, if Buffett continues to go to the Japanese market, it means that the bear road is not so fast, and there is still a bit of drama in the future.
Finally, I will share a paper from the journal Science.
According to inature, on April 18, 2024, Peking University Tao Shengli's team published a research paper entitled "A national-scale assessment of land subsidence in China's major cities" online in Science, which used spaceborne synthetic aperture radar interferometry technology to systematically assess land subsidence in major cities in China from 2015 to 2022.
Of the surveyed urban land, 45% of the land is sinking at a rate of more than 3 mm per year, and 16% is sinking at a rate of more than 10 mm per year, affecting 29% and 7% of the urban population, respectively. The subsidence appears to be related to a range of factors such as groundwater pumping and the weight of the building.
I don't know how many people still remember that we were taught from childhood that China is a water-scarce country and we need to conserve water.
This paper reminds us that it is urgent to save water, otherwise water bills will rise again.