This article is adapted from the book "Cross-Border War" (published and on sale). Entering 2016, many people find that making money has become harder than before; in fact, the logic of making money has changed. Now China has entered a higher-level era of "capital economy." What is the era of "capital economy"? In short, it adds a "lever" to the market economy. In physics, a lever uses an "arm" to amplify "force," allowing a larger mass to be lifted. With this lever in the economy, its space for activity and flexibility greatly increase; this is also called "capital thinking." From now on, Chinese people must deeply understand and apply the tool of "capital thinking." Capital Thinking To learn "capital thinking," one must first deeply understand what "capital" is. Does "capital" merely mean money? No. Capital is the "right to control" resources. Using resource control to bring more control is called "capital operation." Through "capital operation," social wealth is optimized and allocated, achieving maximum social efficiency—this is the social value of "capital operation." Because capital has a profit-seeking and value-increasing nature, it pursues profit maximization. This drives the allocation of social resources toward maximum efficiency and benefit. Social resources will flow in turn to the most efficient countries and regions, the most efficient industries, the most efficient enterprises, the most efficient projects, and the most efficient individuals. The profit-seeking nature of capital promotes resource optimization; resource optimization in turn generates new capital and continuously creates new opportunities, thus cycling and expanding.
For example, in physics, graphite and diamond are allotropes; both are simple substances formed by carbon elements, but their physical properties are vastly different, and their values are as different as heaven and earth, simply because their structural arrangements differ.
Therefore, the essence of capital thinking is structural reorganization. That is, adjusting the space-time and structure of resource molecules, thereby producing the value-added effect from "graphite" to "diamond." At the macro level, capital operation is the reorganization of all social resources, such as China's state-owned enterprise restructuring, which will greatly change the structure of China's economy and improve the operational efficiency of the entire society. When a social economy operates on "capital operation," it steps into the era of "capital economy." Shuimuran's comment: From an economic perspective, from now on there will be only three types of people in society: First, resource owners. They are the most direct owners of resources, surviving by selling their own resources, such as farmers relying on farming, workers on physical strength, doctors on skills, writers on writing, as well as teachers, lawyers, etc. Second, allocators. It doesn't matter who owns the resources; the key is having the right to allocate resources. This type earns money by allocating resources, engaging in the work of resource input-integration-operation-output, mainly entrepreneurs; startups also belong to this category. Third, capitalists/investors. They are farthest from resources, but all resources are controlled by them; they only play operational games behind the scenes. Venture capitalists belong to this category, such as Masayoshi Son investing in Jack Ma, and Alibaba's listing brought him great success. Capitalists have no national boundaries; they can control the flow of global resources and can dominate many others' assets through the financial system. So, resources are nominally owned by resource owners, but in reality, they are owned by capitalists. To see how powerful a person is, the key is how many resources they can allocate. According to these three different roles, how will individuals obtain wealth in the future? There are only three channels: selling resources, allocating resources, and mastering capital. 1. Resource Owners (Ordinary People) "Resource owners" survive by selling their own resources, i.e., their skills, namely: time + physical strength. This is also the most numerous group in society. So ordinary people can only find a job in a company and sell themselves in exchange for wealth. However, ordinary people's time and physical strength are almost the same; the resources they can sell are similar. Therefore, to sell their resources at a good price, they can only improve their skill level and proficiency. A common practice at this point is to study; this is why parents hope their children study hard, and why graduates from Tsinghua and Peking University generally have higher starting salaries than those without education. But now the skill gap brought by diplomas is getting smaller and smaller. There is no essential difference between an ordinary first-tier university student and a second-tier student; instead, they are less valuable than someone who has learned excavator operation well at Lanxiang, because the former are numerous, the latter are few, and the latter focus more on practice. Supply and demand determine the price of resources, so the theory that "education is useless" has long been popular. So, if you are just an ordinary person, either obtain higher and rarer skill value through education, or improve your practical ability through thinking, being a good person, and lots of practice. In addition, for "resource owners," there are also naturally rare resources, such as appearance. An ordinary person with good looks can obtain a lot of extra wealth in daily marriage, work, and life; if good-looking and lucky, they can enter the entertainment industry, and after becoming a star, their resources become scarce, and the price of resources is far higher than ordinary people! But appearance generally cannot change the essential situation of a "resource owner"; it can only slightly improve it. Even with fitness, skincare, and professional styling, Wang Baoqiang cannot surpass Andy Lau in appearance, so he is a simpleton, and Andy Lau is a master thief. Moreover, appearance as a resource is not necessarily the prettier the better; Wang Baoqiang and Huang Bo's appearance traits are also indispensable parts of their success. All ordinary workers, white-collar workers, professional managers, even the former "working emperor" Tang Jun, and major stars, belong to "resource owners." The characteristic of this type is that their wealth is limited. Sometimes they work hard all their lives, but if a family member gets seriously ill, they almost collapse; some have to work three jobs to support children or patients, which is very heartbreaking. Professional managers earn a lot but it's countable; past-their-prime stars live worse than ordinary people. Of course, some people are born with scarce resources. For example, the rich second generation can inherit a legacy, a scarce resource. Another example is children of stars, who are born with the scarce resource of media attention. Another example is someone living in a shabby courtyard in the city center; as long as demolition occurs, they can get a large fortune; they are born with the scarce resource of location. Or if you are very lucky and win the lottery, you also enjoy the scarce resource of "good luck." This kind of wealth is a matter of chance and can only be obtained by luck. Moreover, these lucky "resource owners" often do not know how to manage resources; their wealth is not sustainable, cannot appreciate or expand, and is often wasted. Stars and rich second generations may take drugs when lonely, inheritances can be eaten away, lottery winnings can be squandered, and demolition money is often used for gambling... Of course, there is one last channel not mentioned: selling risk. If you are willing to bear the risk of prison or death, you can steal, rob, or cheat. I once saw a news story about someone who robbed a bank and got millions, then fled, changed his name, and started a real estate business. A few years later, his family assets exceeded 100 million, but he was also caught. So if you make money through this channel, your wealth will increase, but the risk you bear will also increase, and in the end, it's not worth it. 2. Allocators (Business Owners) This type does not directly own resources; they often use their brains to design resource allocation and make money by optimizing resources. Entrepreneurs belong to this category. In slave society, the most important factor of production was "manpower" (i.e., slaves); in feudal times, the most important factor was "land," and in the capital era, the most important factor is "capital," whose essence is resource allocation. By definition, entrepreneurs are those who organize and manage resources and bear operational risks. Their income is proportional to their allocation efficiency, with no upper limit. But at the same time, they must bear the risk of their resource allocation, with bankruptcy as the lower limit. Why do many people want to start a business? It is because they want to climb from the first type to the second type. Once upgraded from "resource owner" to "allocator," it means no longer selling your skills but starting to operate your thoughts and wisdom, achieving personal and economic freedom, and thus realizing freedom of personality. But not all "resource owners" are suitable for entrepreneurship. They need a certain culture, vision, courage, innovation, opportunity, and capital. Allocators are the most important group in society; their quality and quantity determine the efficiency of social resource allocation and represent the level of productive forces. Allocators very much need the spirit of innovation; so-called innovation is their development of new products, new markets, new production methods, new organizations, and control and allocation of new raw material sources. Here we need to mention the generational change of Chinese entrepreneurs. More than 30 years ago, China began its first reform and opening up. At that time, the whole country was in ruins, and the big environment was the best opportunity. As long as you boldly came out to explore, even without education or insight, you became an entrepreneur. This was caused by the environment at that time. But now, China is deepening its reform and opening up. At this time, China has undergone earth-shaking changes, and higher requirements are placed on the quality of entrepreneurs. For example, in Europe, America, and Japan, entrepreneurs are always the elite class of society. In the coming China, without a certain cultural literacy, ideal pursuit, and deep understanding of innovation, it will be difficult to become a "allocator" of society. Therefore, Chinese entrepreneurs are undergoing generational change; some post-90s entrepreneurs are coming into our view, and many old entrepreneurs voluntarily withdraw from the historical stage. This is the development of the times and an inevitability! Of course, these qualities can also be created through后天 effort. Bill Gates had been a programmer for 7 years before he became rich. With all后天 efforts, "resource owners" can completely transform into "allocators." However, obtaining wealth is only one of their signs of success; loyalty to the cause and responsibility to society are the "peak experience" and inexhaustible motivation of entrepreneurs. 3. Capitalists/Investors (Behind-the-Scenes Controllers) The wealth of this society seems to belong to the scattered "resource owners," but in fact, it is enjoyed by "allocators." But in essence, it belongs more to capitalists! The definition of a capitalist is: a person who engages in capital operation as a profession. After the Second Industrial Revolution, entrepreneurs who mastered technology and applications could quickly accumulate huge wealth. Their enterprises had a great impact on a country, and these enterprises formed the economic lifeline of the country. To obtain high profits, enterprises manipulated and controlled the production, sales, and prices of goods in one or several sectors through mutual agreements or alliances, thus forming monopolies. At this time, "entrepreneurs" began to sit behind the scenes and manipulate all this, evolving into "capitalists." The biggest difference between "capitalists" and "entrepreneurs" is that capitalists do not directly participate in the operation and management of enterprises but manipulate the macro thinking of enterprises behind the scenes. The products of enterprises are various consumer goods, while the products of capitalists are the enterprises themselves. Through investment, shareholding, mergers and acquisitions, and restructuring, they control the future of an enterprise. Masayoshi Son invested in Jack Ma and helped Alibaba; Jack Ma is an entrepreneur, and Masayoshi Son is a capitalist. Masayoshi Son has N Jack Mas in his hands and became the richest man in Japan. Another example is Buffett, who sits in his hometown and makes investment layouts; he is also a capitalist. The United States is a free market economy, but why is it called a "capitalist" society rather than a "free market" society? Because in such a society, "capital" is the standard that measures and determines everything. In ancient China, it was useless to be extremely wealthy; officials could confiscate your property at any time. If you had money, you had to bribe officials or buy official positions. But if you had power, even if you were penniless, you could live a rich life without worries. So that was an official-oriented society. A certain company once said that it never does R&D; it lets small companies in the market do R&D. If successful, it buys the technology; if not sold, it hires away the core people. This is capitalism. (Of course, ignoring intellectual property is problematic; the correct approach is to buy it.) If you have 100 million yuan in capital, you can spend 10 million to hire the smartest people in the country to turn your capital from 100 million to 200 million, and you earn 90 million while lying in bed. And all this is because you are engaged in capital operation; you only need to be smart and bold, no need for strength, no need to spend time, and no need to be good-looking. We need to understand: the third type earns more than the second, and the second earns more than the first. Therefore, the first type is trying to evolve into the second, and the second is desperately evolving into the third. In China, very few people are born with capital; most of the third type evolved from the first or second type. Although this evolution is becoming increasingly difficult, it is not hopeless, because it will be even harder in the future. This is the solidification of class and the reduction of mobility between classes. Everyone is desperately exploring methods; some succeed, some fail. The reasons are only two: How smart is your mind? Or how much capital have you accumulated? You think of an idea to improve a mobile phone, and you think this idea can make a lot of money. Then you have to ask yourself: do you have the funds to operate this idea? The same idea, Samsung and Huawei can allocate more funds, hire better engineers, and promote better. Are you sure you are not just clearing the way for these capital owners? Or are you heading down a dead end that countless people have already walked? For example, if you do software development, will an angel investor ask you: "What if a giant copies you?" You want to open an online store; do you have the capital to promote it and stock up? If your strength is insufficient, either you can't sell at all, or if you can sell, more powerful sellers will knock you out with the same product in no time. At the same time, this also answers another question: there are thousands of ways to make money, why choose "working for someone else"? The answer is: if you don't work, what can you do? Do you think you can make money doing something else? A few years ago, the internet was full of news that delivering packages earns a lot; I scoffed at it. An industry without barriers cannot earn much. If you are willing to earn 10,000 doing this, I can find someone willing to earn 9,000 in a minute, and then someone willing to earn 8,000. In the end, whether you deliver packages, set up a stall, sell roujiamo, or work in IT, you will be pulled to an average income for the threshold. Because IT requires learning, it pays more; delivery is hard, pays less than IT, but still more than cleaning. That's how it is. So how exactly do you evolve from the first type to the third type? Step one, you need to accumulate capital. Whether you are willing to work for someone else or make your own product (some people think they are starting a business), first complete capital accumulation. This step is the most important and is the time to use your imagination and strength: setting up a stall, opening a Taobao store, making a website, making an APP, trading stocks, overseas purchasing, opening a design studio, selling roujiamo, photographing for kindergartens, etc. There is no best, only better. In one sentence, this step is selling your personal resources; it depends on whether you can sell at a good price. Study more, even if not for a diploma; work hard, as long as it's not at the expense of health. Step two, make good use of capital, use capital to make money. How to use capital to make money? Ask yourself a question and you'll understand. If your family runs a small restaurant that earns 10,000 a month, but needs a chef. Your own cooking skills are excellent. If you are the chef, the restaurant nets 10,000 a month; if you hire a chef for 8,000 a month, the restaurant nets 2,000. How do you choose? Answer: Hire a chef! Then, as long as you can get a loan with 1,000 monthly interest, you can take over another restaurant, and that restaurant can also net 1,000. (Supplement: this restaurant earns 2,000, pays 1,000 interest, nets 1,000. For those bad at math, don't leave comments again; is Zhihu the same level as Weibo?) And you, just by taking over 100 such restaurants, can net 100,000 a month, while you are traveling abroad, becoming the third type. Many people have been working for others all their lives; they haven't become the third type, which is easy to understand. But after reform and opening up, many people who did business still have no money, because they themselves are the chef, their sister is the waitress, and their mother is the cashier. That's all. So, in the future, when asking yourself how to become the third type, it's one sentence: "Don't cook yourself; hire a chef." If you can use capital to earn 1 yuan, it is more in line with financial thinking than selling your physical strength to earn 100 yuan. In addition, if you have only one of intelligence and capital, remember to find someone with the other to cooperate; they are also waiting for you! Furthermore, even among people with the same characteristics, wealth differs. Those who sell their labor or have the same capital but put in different mental and physical effort will receive different returns. That is, two identical workers or super-rich second generations: one thinks hard and works hard, the other plays games and sleeps all day; the former will have more wealth than the latter. But a smart and hardworking worker comparing himself to a super-rich second generation who plays games and sleeps is just adding trouble to his life. Improvement for Ordinary People At the same time, emphasize again: if you are an ordinary person, or consider yourself ordinary, but have ambition, it's better to be pragmatic and move forward steadily. There was a PR manager at a company whose son was 5 years old. She had to work, do housework, and take care of the child every day. But she had a second-level interpretation certificate from the personnel department, had conference interpretation tasks from all over the country every month, and also served as a mentor at the interpretation center. Opening her blog, it had been updated with over 500 pages and more than 2,000 posts, all articles she wrote for daily interpretation practice, averaging two long and one short per day. She had been doing this for nearly 10 years. She was not a professional but had been working hard because of her love for English. She said that 10 years ago, she saw a survey report that to master a skill and become an expert, one needs to practice continuously for 10,000 hours. At that time, she calculated: if you practice 5 hours a day, 300 days a year, it takes 7 years to master a skill. She said: "Fortunately, I know what skill I want to master; I just need to start doing it immediately. I don't have 5 hours a day; I can only study 3 hours a day. It's been nearly 10 years now, and I think I've almost mastered this skill." Another example: the Beatles had already performed 1,200 shows before they became famous. But why have you been a civil servant for 10 years and still a small clerk? Why have you cooked at home for 7 years and not become a master chef, but instead found your marriage hitting the seven-year itch? That's because you haven't invested energy and passion to practice a skill. Going to work every day just to read newspapers, surf the internet, and deal with trivial tasks; cooking every day just to keep the family running, not looking at it with a professional eye. Stop lamenting that you lost your major after graduation. If you count from junior high school, 12 years of school education, even if you study a skill 2 hours a day, 300 days a year, you only have 7,200 hours, with a gap of 2,800 hours; even if you practice 1 hour a day after graduation, you need 10 years. Why are science and engineering people more likely to succeed? As long as they work in their field after graduation, doing the same thing, they are practicing 8 hours a day. This 2,800 hours can be filled in just over a year. But many of us, our work content is not practicing skills; most is dealing with trivial people and things; in fact, we are wasting our lives. You might say, I am an ordinary person, I don't want to become an expert, I just want to live a peaceful life. That's just your illusion. Time is passing; the behaviors you repeat day after day are shaping you. You don't want to become someone, but you are destined to become someone. 5 hours a day: if you use it to watch Korean dramas, browse your phone, or play games, then after 7 years, you will become a bystander of life. Your best skill will be recounting others' successes and failures, but you won't find anything to say about yourself. Take 1 minute to think: what did you most want to do? Then do it every day. After 7 years, you will find you can make a living from it. Even if you like shopping, try setting a rule to shop 3 hours a day. At first, you might be happy; but doing it every day, you'll find it boring. If you persist, you'll start thinking: what else can I discover while shopping? What new tricks can I come up with? Persist, and after 7 years, you might become a fashionista, image design expert, street photographer, clothing buyer... How will you spend the next 7 years of your life, the next 10,000 hours? vcpema comment: Capital thinking is beneficial to everyone. Ordinary people, even if they can't become "capitalists" with huge wealth, can become excellent individual investors, thus achieving a counterattack. In the future, as per capita wealth increases, everyone should become an investor. Extended Reading:
New Logic of Asset Rotation: Finding the Next Bubble
Since 2012, when the economy faced downward trend pressure, whether the economy breaks down no longer follows its own cycle but depends entirely on the strength of stable growth. The economic cycle is artificially smoothed and lengthened, liquidity floods accelerate, forming a situation where asset-side yields fall rapidly, liability-side costs decline slowly, and expectations are unclear, inevitably leading to short-term and leveraged investor behavior. In this case, liquidity rotates disorderly among various assets, the experience of the investment clock fails, replaced by the new logic of asset rotation: the flood of liquidity will flow to all value depressions and quickly submerge them; chips must be grabbed frantically. The next bubble and leverage field is likely the capitalization of intangible assets.
1. The Golden Age of Ten Years Ago Is Hard to Repeat
History is always strikingly similar, but never simply repeats; the golden age of ten years ago is hard to come again. The current economy inevitably reminds people of 2002, which was also beset by internal and external difficulties, but then ushered in a five-year average high growth of 11%. We can't help but ask: will the golden age of that time come again? What factors have changed? There are many similarities between the present and the turning point of 2002:
Economic growth is at the bottom of a decade: GDP growth is currently 6.8%, the average over the past decade is 9.56%; in 2002 it was 8.7%, and the decade average then was 10.37%.
Prices are mainly deflationary upstream, but marginally improving. Currently, PPI has been negative for 50 consecutive months; since January, the decline has narrowed to -4.9%. In 2002, PPI declines narrowed, totaling 21 months of negative.
Long-term interest rates are at historical lows: currently around 2.84%, then as low as around 2.4%.
Overseas economy and politics are clouded: currently, the recovery in developed countries is weak, emerging markets' resource-sold currencies keep having problems, populism is rising, and terrorism is frequent; then, the US internet bubble burst, emerging markets were hit by the Asian financial crisis, 911 terrorism, and global financial market risk appetite fell sharply.
The dollar's marginal tightening with low oil prices: currently, after the Fed rate hike, the dollar index peaked and weakened after hitting 100, with oil prices around $38; then, it was the midpoint between the end of the rate cut cycle and the start of the rate hike cycle, with the index peaking around 120 and falling, and oil prices around $28.
Pessimistic expectations for the periphery and excessive attention to CPI. Currently, there is widespread doubt about the recovery in developed markets, expectations of a slower Fed rate hike, excessive attention to CPI rises, and even excessive worry about stagflation; in 2002, there was also pessimism about the overseas economy, especially after 911, escalating to fears of a world recession, and due to CPI declines, irrational attention was triggered, leading to excessive pursuit of long-term interest rates. The lost youth is hard to repeat; high growth becomes the most familiar stranger:
The high growth of 2002-2007 relied on the three-wheel drive of "real estate + exports + infrastructure." After the crisis, under economic policy stimulus, it barely turned into a two-wheel drive of "real estate + infrastructure." Now only "infrastructure" remains, staggering on one wheel.
- The demographic dividend is gone; real estate bids farewell to the golden age.
The population aged 20-29, the just-needed buyers, has been declining since 2013. Even if we estimate the 6.8 billion square meters of inventory based on the 2013 record sales of 1.3 billion square meters, it would take 5 years to digest. Moreover, new construction has been higher than sales area, so the so-called destocking has not actually begun. The once booming real estate era is hard to come again.
- The WTO dividend is gone; exports can hardly shoulder the heavy responsibility again.
From 2002 to 2008, the WTO opened the door to external demand and opened up incremental markets. Export growth averaged 28.5%, with a peak contribution to GDP growth of about 14%. Now, with the three waves of the financial crisis and global trade rebalancing pressure, export growth over the past 12 months was -8%. It is already not easy to avoid dragging down GDP growth in the future.
- The government leverage dividend is gone; infrastructure can support but not pull up.
In the past, local financing platforms had soft constraints, official assessment based on GDP as the behavioral incentive, and fiscal revenue was worry-free due to land appreciation. Now, Document No. 43 and local debt management have hardened constraints, the anti-corruption wave has basically broken the incentive chain for officials, and the decline of the real estate era has dragged fiscal revenue into misery. Although the above three aspects have marginally loosened and improved this year due to the pressure of stable growth, it is difficult to form a reversal. The era of barbaric expansion is gone forever. Infrastructure can only be an indispensable crutch, not a universal ladder to heaven.
2. Assets Played with by Liquidity Over the Years
Since 2012, when the economy faced downward trend pressure, whether the economy breaks down no longer follows its own cycle but depends entirely on the strength of stable growth. The economic cycle is artificially smoothed and lengthened, while liquidity floods at a rate more than double that of the economy. Unclear expectations and policy fluctuations lead to short-term and leveraged investor behavior. Because leveraged funds are inherently unstable, once expectations of asset price rises change, adding leverage quickly turns into deleveraging, bringing rapid rotation of liquidity among various assets. The experience of the investment clock fails, replaced by the new logic of asset rotation: the flood of liquidity will flow to all value depressions and quickly submerge them; chips must be grabbed frantically, otherwise you won't catch up with appreciation and may even be trapped at high points.
From 2012 to 2013, we saw trust products with 20% returns everywhere:
The trust market was extremely hot in 2012-2013. At the end of 2013, trust asset balances reached about 11 trillion yuan, an increase of 126.69% from the end of 2011, with an average annual growth of 50.56% over two years.
After 2014, trust growth declined rapidly, replaced by a bull market in stocks:
After 2014, the total scale of trust assets continued to grow, but the growth rate declined rapidly. In Q4 2015, it only grew 16.62% year-on-year.
At the same time, the stock market began to rise. The ChiNext index rose from 1302.67 points at the end of 2013 to a high of 4037.96 points in June 2015, an increase of 209.98%; the CSI 300 rose from 2330.03 points at the end of 2013 to a high of 5288.34 points in June, an increase of 126.96%.
After the stock market deleveraging in 2015, we saw a bond bull market, with 10-year government bond yields breaking 3%:
After the abnormal stock market fluctuations in mid-2015, the stock market deleveraged, accompanied by bond market leveraging. The 10-year government bond yield fell from 3.5814% in June 2015 to 2.7237% on January 13, 2016, a decrease of 0.86%.
Starting in 2015, housing prices in first-tier cities soared:
The average price of residential housing in 100 cities rose from 10,564 yuan in January 2015 to 11,303 yuan in March 2016, an increase of 7%; among them, first-tier cities rose from 28,283 yuan in January 2015 to 35,200 yuan in March 2016, an increase of 24.46%; among these, Shenzhen's housing price index rose 57% year-on-year as of February.
3. The Big Era of Wealth Management
In the big era of wealth management, the old pools have resistance and cannot carry the load. Currently, private investable assets are about 100 trillion yuan, and are expected to expand at an annual rate of 12-15%, but the old asset pools cannot carry such flooding liquidity. Real estate: The asset stock is about 200 trillion yuan. The overall size is large enough, but it is already past dusk. With the demographic turning point and high inventory, even relying solely on first-tier cities has limited capacity. Stock market: Currently, the market value of listed companies in China is 40.3 trillion yuan, and our securitization rate is only 60%, compared with the US (132%) and Japan (121%), there is still room. But from specific sectors, the P/E ratio of the CSI 300 is 11.31 times, while the P/E ratios of the SME board and ChiNext are 62.86 times and 75.08 times, respectively, with P/E percentiles of 89.4% and 75.2%. Even after several rounds of stock market crashes, the high valuations of growth sectors representing future economic development have not been alleviated. Bond market: Local government bonds have a balance of 5.8 trillion yuan, urban investment bonds 5.6 trillion, credit bonds 9.8 trillion. The overall bond market capacity is insufficient. At the same time, since the stock market volatility last year, the bond market has mainly relied on short-duration leverage to earn returns. The 10-year government bond yield has broken 3%. Combined with the sustained effects of stable growth since last year, CPI remains high in Q2, and future bond risks outweigh opportunities. New Third Board market: In the next three to five years, the New Third Board, as the largest increment in Chinese equity investment, can absorb some liquidity. First, the underlying assets on the New Third Board are basically free of bubbles, with a P/E of only 29 times, 40% of the ChiNext. Second, the policy dividend space of the New Third Board is large; the innovation layer will become the experimental field for China's registration system, and flexible transfer and exit mechanisms will help attract more excellent enterprises and investors to choose the New Third Board. But considering the total market value of the New Third Board is only 1.8 trillion yuan, less than 4% of the A-share market, the pool space is limited. PPP: In 2016, with a growth bottom line of 6.5%, infrastructure investment needs at least 15.7 trillion yuan, corresponding to an investment growth rate of 18.7%. According to the 2016 government work report, the budget funds for infrastructure investment of 500 billion yuan this year only increased by 4.7% over 2015. In the future, infrastructure will rely more on social capital participating through PPP. As of the end of 2015, the total amount of demonstrated and promoted projects was at least 5 trillion yuan, but the signed scale was 1.7 trillion yuan, only 34%. In the future, as PPP-related legal mechanisms are straightened out, operations become transparent, and exit mechanisms improve, PPP can be a good place for long-term stable income funds, but currently the carrying capacity is limited. Art market: As of the first half of 2015, transaction volume was 24.4 billion yuan, an absolute scale is small, and the art market lacks standardization, has high thresholds, and has greater resistance to liquidity inflow.
4. Where Is the Next Bubble?
Where is the next bubble? The capitalization of intangible assets. Traditional major asset classes, due to high leverage, high bubbles, or small carrying space, have begun to show signs of liquidity flowing into intangible capital, including traditional intangible assets such as patents and goodwill, as well as emerging intangible assets such as IP, intelligence, and appearance. According to current market forms and hot spots, IP capitalization, appearance capitalization, and goodwill capitalization are currently hot, causing some assets to generate bubble premiums, while intelligence capitalization, because it has not yet formed a mature monetization model, is still in a valuation depression. Goodwill capitalization: The high valuation of A-shares and the decline in real profits have increased the motivation for listed companies to acquire at high prices. The valuation of acquired assets significantly exceeds their book value, causing the ratio of goodwill to net assets in the A-share market to rise rapidly since 2013. For all A-shares, the goodwill/net assets ratio has risen from 1.1% in 2013 to 2% in Q3 2015; for ChiNext, it has soared from 3.46% to 13.35%. Specifically, in industries such as media, internet, and information services, goodwill accounts for as high as 20% of net assets. In the future, impairment of goodwill will pose greater risks to company profits. IP capitalization: The IP concept covers a wide range. Common IPs in the market include: story-type IPs with plots and content such as novels and games, image-type IPs such as artists and stars, song and music IPs, short phrases and sentences IPs, etc. IP capitalization entered a white-hot stage in 2015, with IP asset prices rising sharply. Taking a relatively pure IP capitalization target, Nanpai Investment, the company owned by Nanpai Sanshu, the leader of tomb-raiding literature, as an example: in September 2015, Nanpai Investment received A-round investment from Xiaomi, Shunwei Capital, and LeEco, with financing reaching 100 million yuan. In January this year, Nanpai Investment again received 100 million yuan from Xiaoka Investment, with a valuation reaching 1.5 billion yuan. "Appearance" capitalization: Appearance capital is purer than artist IP capital, following the idol route. Its characteristic is that "appearance" idols or individuals have high appearance that meets contemporary aesthetics. Representative examples include girl groups, boy groups, internet celebrities, idols, and video live streaming. Among them, the representative target of appearance capitalization, the girl group SNH48's corresponding A-share target—Fuchun Communications—currently has a 2015 P/E of 150, and a 2016 estimated P/E of 26. Intelligence capitalization: Intelligence capital refers to the knowledge and skills possessed by people. Since no mature monetization model has yet emerged, it is still in a relatively low market awareness and valuation depression. Its representative target is the website "Zhihu," known for the "intelligence sharing economy." It has already received C-round financing of $55 million, introducing strategic investors Tencent and Sogou, with a valuation between $300-400 million. It also includes the capitalization of some think tanks and research institutions, which will set off a wave in the future.
5. Besides Bubbles, What Else?
Besides bubbles, what else? The current economic problems are the future potential. In the long run, China's economy has many structural problems, but these problems are precisely the huge potential for the future. Facing the economic crisis, "this time is different" is a common mistake made by most researchers. But if we can release the following dividends, we will surely usher in a different round of high-quality prosperity. 1) The dividend of making up for shortcomings brought by "gaps": China still has gaps in many aspects: the economic development gap between east and west, the gap between urban and rural economic development, the gap in technological innovation and high-end manufacturing between domestic and foreign, etc. Catching up on these gaps can release a lot of space. 2) The institutional dividend of deregulation: At present, many growth drivers are still in cages, such as film, culture, and media industries. Further streamlining administration and delegating power is needed to release vitality. 3) The reform dividend under a single system: Fully leveraging the advantages of a single system, we can avoid being swayed by interest groups and implement deep reforms more efficiently. 4) The dividend of supply-side reform: Among major global economies, China currently has the most space for supply-side reform. On the one hand, monetary policy has not yet fallen into zero interest rates, leaving room for further easing and lubrication; on the other hand, China's absolute economic growth rate is relatively high, providing a high buffer and ample room for maneuver. -END- The best FMCG distributor learning platform in China Focusing on providing professional, practical, and applicable tutorials for distributors and enterprises Committed to helping Chinese FMCG distributors grow rapidly The most professional and practical knowledge base in the FMCG industry Reply with the red number below to get the corresponding content Reply with number 1 to view the complete knowledge base | 001 Excellent article selection | 002 Distributor market operation | 003 Terminal visit management | 004 Sales supervisor skills | 005 Sales improvement techniques | 006 Channel expansion | 007 Managing distributors | 008 Distributor development | 009 Distributor internal operation management | 010 Team management | 011 Efficient distribution techniques | 012 Sales manager's eighteen skills | 013 KA operation methods and strategies | 014 First lesson for new sales | 015 Internet, brand | 016 Distributor B2B transformation | [Long press QR code to follow]