Let's talk about yesterday's World Cup match between Argentina and Saudi Arabia. Before the match, Saudi Arabia's odds were 31, and Argentina's odds were 1.09. People who bought Argentina thought they had bought principal-guaranteed financial products, but they didn't expect that the so-called "principal-guaranteed" financial products could all go bankrupt. Looking at the bond market last week, there was also a large retracement. Many friends in the investment circle who thought that bond investment was a "principal-guaranteed" financial product exclaimed that they had "stepped on a thunderbolt." The bond market is just like what he said in the Huang Laoshi Investment Exchange Group: "I personally don't like bonds. Fixed income, unlimited risk. High-yield bonds are still worth doing at certain times. Economic recovery is established, and the interest rate gap between China and the United States is large, so bonds will fall." From the perspective of my personal circle of competence, I don't touch bond products (including underlying asset investment in municipal investment bonds and corporate bonds, excluding convertible bonds and treasury bonds) or snowball products. I have also explained this in the not to do list before. Many fans exclaimed that they were shocked by the game yesterday, and even broke out a joke about "smashing the TV". Some TV manufacturers also took advantage of the popularity. I am not a football fan, but in my opinion, uncertainty is one of the charms of football, the world's largest sport. The "Saudi Arabia counterattack" is the occurrence of the tail risk of the decision to bet big on Argentina's victory. Combining these two events, I would like to share my understanding:
1. What happened?
There are many types of "fixed income + products" involved in this so-called bond "mine-stepping", including pure bond funds, fixed income + products, and bank wealth management with bonds as underlying assets. Taking the most conservative and stable ten-year treasury bond products as an example is more universal. As of November 10, the ten-year treasury bond ETF has increased by 3.32% this year. From November 11 to November 16, the ten-year treasury bond ETF fell by 1.17%, and lost 1/3 of the previous 10-month gains in 4 trading days. Under normal circumstances, long-term bonds fluctuate more violently than short-term bonds, but last week's short-term bond products fell by 3.88% in a week, and there were huge redemptions. I think it should be a problem of the ability circle of individual fund managers rather than a systemic problem. Looking back at the past history of the bond market, the last time was in November 2016.
But this time, the impact is obviously more cautious, because 2018 happened to be the year when I invested in private equity funds, and the new asset management regulations were issued, requiring all financial institutions to manage their products in a net value manner and disclose their performance regularly. (Compared to the amortized cost method used by bank wealth management before), most bond investors have not experienced similar risk events. So I personally think this is a normal fluctuation, but most people don’t have the patience to look through history and understand the real risks of the underlying assets of bond investments.
2. Convertible bonds and government bonds
I have also mentioned in my previous investment notes that my investment in bonds is mainly convertible bonds and treasury bonds. I have talked about several classic cases of convertible bond issuance and trading before, such as "Daqin Convertible Bonds";
Why do I only invest in treasury bonds except convertible bonds? Because these products have no credit risk, only interest rate risk, and interest rate risk is more or less, and there will be no thunderstorms. Other corporate bonds and municipal investment bonds all have credit risk, including some debt-based private equity funds that issue "fallen angels" (the net value curve will be unusually bright) and other junk bond products. At the end of last year, in order to retain a certain amount of cash flow, I invested in arbitrage funds, currencies, and basic and long-term treasury bond products.
3. Ending
Yesterday, there was a joke in crypto: "CZ and Zhao Changpeng are classmates, one has a platform, the other has a smooth flow, and has the support of big sharks", "It is well known that Zhou Shuren and Lu Xun are pen pals". As time goes by and the bear market deepens, many rumors are spreading. Many previous cognitions, such as "bank financial management guarantees principal, and housing prices will not fall until they rise", are like crocodiles. Humans have a memory like crocodiles. If you flip through history books, you can see that there will be more traditional investment experiences that will be overturned in the future. As a professional or amateur investor, the first thing to understand is what the underlying assets of each type of product are and what its biggest risk is. I believe that with the ups and downs of the capital market in the past two years and the new challenges to be faced in the future, our investment capabilities and cognition of the world will continue to evolve.
