1. Is there something big brewing in the current financial market?
This is a message from a reader at the end of the article on September 12.
My view on the overall situation in our country has not changed: that is, if the country does not introduce major policies to pull up the stock market before the end of December 2025, then we must pray together for God to bless China.
There is no other way.
If we want to boost the stock market, we must implement various strong stimuli.
So we can wait and see what happens in this country by the end of 2025 at the latest.
Everyone saw what happened later - various central ministries and commissions held press conferences one after another, all of which were closely related to the economy.
There have been an endless stream of media reports and short articles at home and abroad on these receptions, with all kinds of opinions, but I feel that there are not many truly in-depth analyses among these articles.
Why?
Because many articles are deliberately mysterious and go around in circles without seeming to grasp what I think is a very basic idea, namely:
- To boost the stock market, it cannot be a short-term (a few months) action, but at least a medium-term (at least a year) action. And to make the stock market continue to rise in the medium term, it must not be a sudden rise or fall, but must try to keep warming and moving forward in waves.
In this case, as investors and analysts, you certainly don't need to pay too much attention to short-term fluctuations, but rather pay attention to medium-term trends.
- Although boosting the stock market is at least a medium-term goal, the country will face a considerable uncertainty in the short term when planning and implementing policies: the US presidential election.
Why?
Because when the Republicans and the Democrats come to power, the economic policies, trade policies, and foreign policies they adopt, as well as the series of geopolitical and economic relations that are triggered by them, are obviously different.
For the two obviously different sets of policies, the measures that the central government will take will definitely be quite different.
Following this line of thought, let’s look at the measures that the central government may take. I estimate that only after the official results of the US presidential election are announced on November 5 will the central government gradually come up with clearer ideas and plans, and the policies at that time will have more detailed numbers and scales.
So the real trend of the market will probably only be seen later. Now this period is just a preparation and testing.
2. How do you determine the intrinsic value of, for example, Apple’s stock?
Mr. Buffett has mentioned many times in his shareholder Q&A sessions how to judge the intrinsic value of a stock. In summary, evaluating the intrinsic value of a stock is to evaluate the intrinsic value of the company behind it.
The evaluation of the intrinsic value of a company is to predict the total cash flow that the company can generate from now to the end of its existence, discounted to the current value according to a discount rate. This discount rate can be selected from the risk-free interest rate - the US Treasury bond rate.
This is the old gentleman’s basic idea.
Of course, how to evaluate the company's annual cash flow and determine the company's possible survival time depends on one's understanding of the industry and the company.
Specifically speaking of Apple, the old man has repeatedly explained the reasons why he invested in Apple during the Q&A session at the shareholders' meeting.
To us, Apple may be labeled as a "technology company". But in the eyes of the old man, Apple is a consumer product production company that can continuously generate cash flow, but the consumer products it produces have technological content.
Therefore, the old man's evaluation criteria for Apple are different from those of general Wall Street evaluation of technology companies:
Wall Street may be more concerned about what new products, new models, new technologies Apple may have in the future and the resulting "imagination space".
The old man is more concerned about how much cash flow Apple can continue to generate in the future based on its current moat.
