Category: lenS & thoughtS

Is it like internet bubble?

The dot-com bubble burst in March 2000, despite being called a bubble for quite some time. Indeed, the legend Tiger Management lost a lot shorting this intern bubble and handed money back to LPs in 2000.

What happened? What defining elements mark the peak?

Here are the three important events back then:

1/ March 20, 2000 – Barron’s Burning Up article

2/ March 21, 2000, Fed hiked another 25bp to 6%; hiked to 6.5% in May 2000

3/ Apr 3, 2000, “Conclusions of Law” released; Judge Jackson ruled Microsoft violated the Sherman Antitrust Act (Sections 1 & 2)

Where are we now?

For (1), actually there are many more warning before bubble burst, through 1998-1999. So if people say the FT illustration of $1tn OpenAI deal and The Information article of Oracle losing money on Nvidia chips will lead to the bubble burst, I don’t think so.

Fed – we are still in rate cutting cycle.

Gov regulations – not seeing any real destructive rules.

Party is still on.

Stay stunned.

亚洲的赌性 Asian’s appetite for gambling

If the majority of a game’s participants are keen to gamble, they may push the risk/reward of the game to a negative territory.

If this game is the stock market, you may observe the valuation as not attractive at all.

What’s worse, as a whole, these participants collectively are more likely to lose in the long run!

The game designer or host must be very happy though.

Gambling is all over the world, but why Asians are more vulnerable to gambling?

Probably due to the slim chance of a normal enjoyable life.

Chinese consumers and Chinese cultural products

From Black Myth: Wuong last summer, to Labubu, to Ne Zha 2 this year, Chinese cultural products are making amazing progresses.

They make records in different categories:

Black Myth: Wukong is widely regarded as the first successful AAA game from the Chinese video game industry, and is “one of the fastest-selling games of all time“.

Labubu is a fashion toy that is popularizing across the world.

Ne Zha 2 is an animated film, and is the highest-grossing animated film globally and the highest-grossing film in China.

They are all very successful in China.

They are not all very successful globally – Ne Zha 2 didn’t resonate a lot with the ex-China market. It is made for the Chinese market.

Black Myth: Wukong is made for global markets and it does resonate with gamers globally, but the appealing is less so for ex-China market. Chinese gamers who know the novel (nearly everyone) would enjoy it more.

Labubu doesn’t have a target audience in mind. It’s a “fashion” that can be even more popular in certain regions ex-China than China.

Their importance are different.

Ne Zha 2 and Black Myth: Wukong are in traditional industries. They can be considered the “best ever” for an average Chinese consumer for has never been exposed to global cultural products; but on a global standard, they are not significantly better than other cultural products.

Labubu is more in its own game.

Btw, both movie and games are regulated in China. But toy is less regulated.

On IP ownership: both Ne Zha 2 and Black Myth: Wukong borrowed IP from traditional Chinese tales. Labubu IP is created contemporarily and is owned by the company.

 

Is pharmaceutical and biotech industry “technology”?

My rule of thumb is that technology is deflationary.

Via technology improvement, people get more for the same price.

This is evident in chip technology, where the same amount of money buys you  newer chips with better performance each year. It’s more obvious when you notice that the “best” chips of previous years will always cost less if you wait.

It’s not always the case in other industries.

The same can of coke will cost you more over the years!

Pharmaceutical and biotech can be technology.

One example is the genome sequencing cost, which has dropped significantly.

Over the years, a drug normally will see its price drop significantly, thus patients shall pay much less for the exact same product.

However, during the period of a few years, drug price may increase, before the price erosion. This period is coke-like.

New forms of bank

Banking can be done in forms not like the traditional banks.

How?

1/ crypto / stable coins

Investors/Buyers of stable coins are like traditional depositors.

In return, they can get some interest on their balances.

They can also enter into “staking” which is just like a “formal” version of deposit.

The crypto exchange or custodians are acting like banks. They can use the deposits to buy yield generating assets or lend out.

2/ private credits

LPs are like depositors.

GP setup lending vehicles like banks – LP put money into the vehicle and GP find projects to loan out the money.

China version of German premium cars

It’s weird to me that the BMW 5 Series, Audi A6, and Benz E Series are priced much cheaper than their foreign original version.

The gap can be 1/3 – BMW 5 Series will cost ~$60k (maybe 8% dealer discount) vs slightly above $40k in China.

They don’t look exactly the same, but the China version will be even “longer” / “larger”.

This is weird again as I would assume bigger cars cost more – e.g. BMW 5 Series is bigger than BMW 3 Series.

I can only assume that the components used in China version are different from the original version, thus cost is lower.

But still, it’s hard to imagine a good things is priced lower in China vs abroad.

Typically, a “real good thing” can be priced higher in China due to large population base and thus is short in supply.

Update

China’s BMW 525Li is weaker than German BMW 520i.

Audi’s and Benz’s is similar performance across China and German.

Why yield has been less relevant to stocks?

1/ top companies are cash rich and don’t rely on debt – interest rate doesn’t directly affect interest expenses. And these companies have bigger weight in the index.

2/ top companies have huge pricing power – when real yield doesn’t change and nominal yield mostly reflects inflation, top companies will have higher earnings if inflation is high. So higher nominal yield or discount rate is offset by higher free cash flow.

Investing in AI age (2)

Look for the “contexture” – unquantifiable traits.

You don’t want to compete with AI on quantifiable data. Same as news, AI should be able to record and analyze data at amazing speed.

In order to know what’s unquantifiable, you need to be on the AI side first. AI would want to make more info quantifiable. If you are on the AI side, you will know what kind of traits is hard to quantify.

Investing in AI age (1)

Don’t trade on news.

Human won’t be able to compete with AI on speed (of reading news) and breath – AI can consume a lot of news in a second.

What should human investors do?

Look for any discrepancies vs reality – a) some are just fake news, b) some are partially made up based on leads, c) some are true but not important, etc.

“Technology”

Technology company isn’t necessarily asset-light.

GE was also a leading “technology” company in its days.

A technology company has no boundary.

It’s a group of brightest minds that bind together and shine wherever they sees darkness.

The TAM expansion is what makes “technology” companies amazing investments.

Tesla is not asset light.

Tesla is a technology company that is expanding its TAM.

Engineers that can only make cars make a company a car company. But if these engineers can do all sorts of designs and create new stuff, they make a tech company.