1. How to Manage Wealth

RMB can buy gold — what you purchase must be of finer quality than gold

by Shuzhimi@RynW1988

Color Legend for this Work

Acknowledgment to Editor-in-Chief C / Art Director Shuzhimi@Chaney

a. Body text / statements in black

b. Axioms / theorems in red

c. Explanations / supplements in blue italic

d. Corollaries / conclusions in orange

e. Facts / data / news in green (due to information locality and author limitations, not all sources are cited)

f. Conjectures / hypotheses, plus emotions / comments / rumors / anecdotes / metaphors / analogies and other popularized or literary expressions, in purple

g. Theoretical innovations in gray and highlighted

h. Bold means this proposition is important or the author finds it interesting

1.0 What Is Wealth Management

1.0.0 Wealth management is a technique by which non-professional individuals/organizations who do not specialize in asset management handle their accumulated daily wealth through investment

1.0.0.1 Wealth management solves how a person holding W₀ can deterministically achieve 20x growth (W₀→W₁)

a. W₀ denotes 1.5m, W₁ denotes 30m; same as Appendix The Track of Chapter 0

b. For brevity, no distinction between W₀ and the person holding W₀; same hereinafter

c. "m" for million; default currency unit is RMB as of 2504, same below

d. "20x" means 20 times; x denotes principal return multiple (inclusive), 1.2x = net profit 20%, 0x = total loss of principal, same below

e. W₀ fluctuation range (e⁻¹−1, e−1), amplitude e²; 20x does not fluctuate

1.0.0.2 A wealth management method exists

a. This work will present a wealth management method based on a deterministic analysis framework

- "Method" is a Buddhist concept referring to the most efficient way to accomplish something that has not yet become widely known

- Not following the method is much slower. Since wealth experience follows an exponential power law distribution, long-term differences can be order-of-magnitude in scale

1.0.0.3 The wealth management method cannot solve Wᵢᵣ → W₀

Giving everyone W₀ (colloquially "a nest egg") requires the wisdom and compassion of a great leader

a. Wᵢᵣ (ir for irrelevant) refers to a low-wealth state where any method is unnecessary because one's best life needs no wealth technique

- Below Wᵢᵣ, any wealth method is ineffective/unnecessary

- Above Wᵢᵣ, some optimal approach to financial goals begins to take effect

- Every era has many people who achieve excellence and greatness without needing any wealth, such as Master Hong Yi

b. W₀ as described above, also called first bucket of gold. Techniques for solving W₀ see Section 0.5

- It should be noted that while universal techniques for achieving W₀ do not exist, specialized techniques under specific conditions do exist

- Buffett gave a stock market version. He believes the world is large — search hard for mispriced securities (including foreign-listed ones) from small companies, and you can double your money at W₀ scale within two years

- "Search with passion, like a biologist looking for new species in the rainforest" (Buffett)

c. In 2020s China, W₀ is not an extraordinary starting point for wealth management

- Per 2020s Bank Z annual report, Bank Z alone has roughly 100k+ private banking accounts, whose average deposit happens to be about W₁; 500k+ jinkh accounts, after removing private bank accounts, average deposit happens to be about W₀

- Chinese households owning W₀ number in the millions, roughly mid-x%

1.0.0.4 For accessibility, examples will use publicly traded Chinese company stocks by default (same below)

a. Some concepts

- An investment product is an asset that can be purchased with cash and expected to be sold later for cash returns (such as physical gold)

- Unlike consumer goods, which are generally consumed upon purchase and cannot be resold/profited from (like fresh tomatoes)

- The object being invested in is called an investment target

- A stock is an ownership certificate of a company, typically one share one vote

- If a company issues 100 million shares, holding 1 million shares gives 1% ownership

- Holding stocks enables transfer/receiving dividends/voting at shareholder meetings

- Going public (IPO) means a company sells shares to the public for the first time

- Post-IPO, secondary market stock trading is called securities market trading, colloquially "stock trading"

b. Listed US companies and other investment products will occasionally appear; the principles apply equally through other investment targets

1.0.1 First Principles of Wealth Management

1.0.1.1 The first principle of wealth management is to pursue wealth that one can probably own and genuinely needs, rather than wealth that is hard to obtain or unneeded

a. "Can probably own" means respecting common sense — do not challenge negative-expectation/irrational trades out of greed

- Why define wealth management as W₀ → W₁?

- Because the positive-expectation trades available to wealth management have an upper limit on annualized return rate, and this limit is extremely solid

Unless otherwise specified, "return rate" or x% denoting return rate throughout this work refers to compound annualized return rate, precise to 1%

For example, return rate (or omitting "return rate" and writing percentage directly) 41.4% means doubling every two years

b. "Genuinely need" means Chapter 1 only solves wealth management needs

It cannot solve the need for "landing ashore"/obtaining Wₚ (RMB 300m, see Chapter 0 Appendix The Track)

- Only those carrying major responsibilities genuinely need large amounts of wealth

- For non-elite individuals, landing ashore cannot rely on the wealth management method or its enhancements either

An elephant weighs 15x what a pig weighs. Imagine scaling up a pig 15x — its legs would break, unable to produce elephant structure

- W₁ (30m RMB) in 2504 affords an excellent life in China

Per 2020s Bank Z annual report, its private banking clients exceed 100k, average deposits exactly at W₁

Chinese households with net worth above W₁ are estimated in the low hundreds of thousands, low x‰

1.0.1.2 The wealth management method is a technique that maximizes the probability of attaining the probable-limit financial return that one can reach

a. Therefore, the core element of the wealth management method is determinism

b. By definition, if enhancing the method does not help, it is better not enhanced

1.1 Anchoring Limits

1.1.0 Two empirical limits on long-term compound returns, hereafter called "anchoring limits" (precise to 1%)

1.1.0.0 Fundamentally, anchoring limits reflect the empirical limits of human societal innovation growth and concentration at the top

a. The world's best investment products absorb all humanity's income growth power and can provide ~20% stable long-term returns

Hereafter Global Rₘ / GRₘ. Assets historically providing GRₘ returns include:

- World's best digital currency / BTC

- World's best listed company / Apple (hereinafter "Apple", similarly hereafter)

- World's best private equity funds / Bain Capital etc.

b. Regional best investment products absorb a certain nation/field's income growth power and can provide ~15% stable long-term returns

Hereafter Local Rₘ / LRₘ. Assets historically providing LRₘ returns include:

- China's finest traditional painting / Zhang Daqian's price-per-foot

- China's finest real estate / premium properties in core areas of Beijing-Shanghai-Guangzhou-Hangzhou-Shenzhen-Hong Kong

- China's finest listed company / Moutai/Tencent

GRₘ and LRₘ are collectively called Rₘ (specific meaning depends on context)

1.1.0.1 Human-known limits on long-lasting investment performance

a. Soros, 30 years ~30%

b. Buffett, 60 years ~20%

c. Nasdaq Composite, since inception ~8%

d. Dow Jones, 100 years ~6%

1.1.0.2 Human-known limits on long-lasting corporate performance

a. Mitsui & Co., major Japanese trading house since the 17th century

b. General Electric, Dow Jones component 1907–2018

c. Apple, up more than 2000x since 1980 IPO

1.1.0.3 Attempting to exceed the above means challenging limits, colloquially "planting a tree into heaven." If wealth management returns approach Rₘ, accumulating 20x takes only 15–20 years — less than most people's working lifetime, colloquially "scientific development"

In practice, completion time often comes far earlier due to efforts outside wealth management and the low-base effect

1.1.1 In layman's terms, what is the expected return of investing in a "good company"?

1.1.1.1 A "good company"'s ultra-long-term expected return is 0%

Throughout this work, "ultra-long-term" means >20 years, "long-term" >10 years, "mid-term" 5–10 years, "short-term" 1–5 years, ±50% tolerance, same below

1.1.1.2 In fact, having non-negative ultra-long-term shareholder returns is a very high standard, colloquially "start cautious, finish respectful"

Most companies, with probability 1, will cause total loss of principal when invested in over the long term

1.1.1.3 A company's existence is entropy-increasing — it consumes resources: it bears business risks, owners extract cash, managers self-actualize, employees demand high benefits, social responsibilities must be fulfilled...

1.1.1.4 Yet the supply-demand relationships its survival depends on cannot exist indefinitely

Buddhism teaches that everything arises, abides, decays, and ceases. When the "cause" for a company's existence vanishes, value should revert to zero — this is the way of things

1.1.1.5 In fact, the vast majority of companies' long-term shareholder net returns are massively negative

People universally over-expect during good times and over-finance. From founding to dissolution, most companies' cumulative total financing (including registered capital) far exceeds cumulative dividends

Companies where total dividends exceed total financing are so rare they can be ignored — they are quiet-deep-flowing low-entropy beasts

1.2 What Is Determinism?

1.2.0 Buying stocks means buying companies

1.2.0.1 For ultra-long-term investment judgments, the best simulation of returns from holding a small stake in a company is holding the entire company. Over the ultra-long term, the two converge

1.2.0.2 It is well known that when someone buys a company, they pass it to their children. Therefore

1.2.1 The standard for "determinism" is: someone buys a company, operates it for twenty years, and the company still exists with value that can be passed on to their children

1.2.1.1 It is well known that a CEO/large-scale resource allocator's essential work is choosing between 2 options or n options from among a few final choices presented by subordinates

Assuming no assumption about management quality, this is equivalent to replacing the CEO with a cat — hereafter the "cat CEO test"

A company that can withstand the cat CEO test is said to have "determinism"

1.2.1.2 In practice, most large-company CEOs perform worse than random-number generators (an agile cat). Main reasons include:

a. Management and shareholder interests are not fully aligned

b. Key forward-looking decision accuracy is not significantly above random-number-generator level

Becoming a large-company CEO usually takes a very long time, so on average they are far removed from the front lines

c. Most critically, trade-off decisions require substantial time and decision resources, frequently trapping one in the predicament of "because decision-making is slow, whatever you choose is wrong"

History's most famous CEOs were generally decisive, yet each made only single-digit correct major decisions in their lifetimes

1.2.1.3 Humanity's most important innovations frequently come from small companies/startup organizations — the preceding point is one of the root causes

"Preceding point" refers to the immediately preceding proposition of equal hierarchy level. For example, 1.2.1.3's preceding point is 1.2.1.2, same hereinafter

1.2.1.4 Note that physical gold's value does not depend on its holder — it passes the cat CEO test

Only companies of at least this caliber merit discussion of "determinism"

1.3 Four Examples of Investment Product Determinism

1.3.1 Determinism I: Large Nation Ideological Governance Needs

1.3.2 Determinism II: Strongest Innovation-Efficiency Platform

1.3.3 Determinism III: Broad Consensus from Mathematics/Physics/Natural Science

1.3.4 Determinism IV: Cultural Consensus from Human Historical Development Trajectory

1.3.1.1 Humans have tendencies toward belonging to collectives and loving their motherland

1.3.1.2 "There exist roughly 7 H-type Western nations in the world" (Buffett)

An H-type Western nation's state apparatus can in fact be maintained by just 5 true believers

1.3.1.3 In daily affairs, ideological work is no less important than maintaining the state apparatus

1.3.1.4 Shortcomings of Determinism I: omitted

1.3.2.1 Humanity has a future

1.3.2.2 Humans tend to pursue higher/faster/stronger. Over the ultra-long term, advancement equals determinism

a. Everyone, especially resource allocators, if for various reasons opposes this platform, faces a rational/moral question: "From Mars, would you choose to live in a world without it?" (hereafter the "Mars Test")

b. This progressive force over the long term even exceeds 1.3.1, possessing the strongest determinism — otherwise it violates 1.3.2.1

1.3.2.3 Shortcomings of Determinism II

a. The strongest innovation-efficiency platform has never been fixed

b. Otherwise the innovation is predictable, not true innovation

c. The innovative culture and ample resources of advanced platforms somewhat extend this determinism

1.3.3.1 Humans seek truth — otherwise they violate 1.3.2.1

1.3.3.3 Shortcomings of Determinism III

a. Scientific laws themselves have determinism, but forming investable products requires good design

Investment/trading requires counterparties; few bet that 1+1≠2

1.3.4.1 Humans respect tradition and seek goodness/beauty

1.3.4.4 Shortcomings of Determinism IV

a. Human memory shifts; as information explodes, path-dependent cultural traditions are accelerating in weakening/rewriting

This includes all cultural objects, values, rules, traditions, beliefs, habits. "Ming-style furniture hasn't lost value since the Ming Dynasty — it won't suddenly become worthless now" (Ma Weidu)

1.3.5 Other sources of determinism certainly exist. For example, global energy security needs correspond to certain determinate assets

1.3.5 Personal Examples of Four Types of Investment Determinism

1.3.5.1 Determinism I: Moutai/Tencent/ByteDance; TikTok/Meta/X

1.3.5.2 Determinism II: Huawei/ByteDance; Apple/Tesla/Google/Meta/Nasdaq

1.3.5.3 Determinism III: BTC; key patents, scaling laws on the main technology tree

1.3.5.4 Determinism IV: World masterpieces/physical gold; Coca-Cola/Kweichow Moutai

1.3.6 As of 2504, among the above, only Moutai and Tencent are listed Chinese companies,we declare that Moutai and Tencent possess determinism — see Appendices On Moutai and On Tencent for details

1.4 The Wealth Management Method

For logical progression details, see Appendix Typical Beginner Operation Reference Table. We fast-forward directly to conclusions/sixth-grade level:

The Portfolio

1.4.1 The best stocks are the best long-term wealth management tools

1.4.2 Buy without timing — 2–5 types of top-tier investable products that you understand best and believe in most, possessing determinism (The Portfolio)

1.4.3 There are certainly more than 5 top-tier investment products, but you can only earn from The Portfolio you have faith in

1.4.3.1 Establishing this faith is very difficult, related to each individual's track record — it cannot be achieved simply by copying answers

A most basic test: if The Portfolio drops 50%, do you add to your position or reduce it?

1.4.3.2 Investors are not scarce — The Portfolio is scarce. Therefore, it is not investors selecting stocks. Dynamically speaking, the more essential description is that The Portfolio selects its own shareholders

Apple and Tencent spend vast amounts daily on stock buybacks; Moutai's shareholder count regularly declines

1.4.4 Why No Market Timing?

1.4.4.1 Value investing requires judging good companies/good people/good prices

1.4.4.2 Judging good companies: if B2C, usually just using their products suffices — W₀ can handle this

1.4.4.3 Judging good people: usually requires some knowledge of the Number One position — challenging for W₀

1.4.5 Judging Good Prices

1.4.5.1 Judging good prices requires Buffett-style odds assessment and cross-sectional global comparison

a. A good price is one with a margin of safety. Margin of safety means price is well below intrinsic value (DCF valuation output)

b. DCF valuation's core inputs are art, not science — can only be "rough estimate" (from Mr. Duan Yongping, hereafter Duan sir)

- Future free cash flow is dimensional; its inputs require understanding of market/economic environment, not just the company itself; WACC/Rf involves macro judgment

- More importantly, when stock A is cheap, stock B is often also cheap. Odds assessment and cross-comparison are needed to tell good prices

1.4.6 Here I present qualitative criteria for margin of safety based on the Deterministic Analysis Framework

1.4.6.1 Margin of safety is a price range for The Portfolio

Only companies with determinism merit discussion of margin of safety; otherwise regardless of how low the price, there is no safety

1.4.6.2 This price range reflects only product competitiveness, not yet the winner-take-all competitive potential after "determinism confirmation"

1.4.6.3 Two examples:

- Buffett invested in Apple for 16 years

- Jobs launched iPod in 01, iPod mini sold big in 04 — Apple had Mixue Bingcheng's product momentum even then

- From 04–16, Apple rose ~50x — why didn't Buffett buy in 04?

- My understanding: he felt Apple in 04 had not yet confirmed its determinism — "not yet seated at the table"

- 2504 Mixue Bingcheng

- Strong product momentum but a new company

- Duan sir says, "heard of it but don't understand it"

- My understanding: he believes this company's determinism has not yet been fully confirmed

1.4.6.4 Both logic and empirical statistics show that the vast majority of investors have absolutely no market-timing ability

1.5 Buffett Method

1.5.1 Buffett-style Value Investing Decision Process (hereafter "Buffett Method")

1.5.1.0 Berkshire Hathaway (Buffett's chairman-led investment firm, hereafter "Berkshire") can be structured as a powerful consumer brand — a steady stream of proactively approaching customers buying its core product: friendly ultra-long-term capital

a. Berkshire's core product is "ultra-long-term capital that wins together with acquirees." Consumers/acquirees pay with equity in their own businesses

b. Berkshire's core advantage is its powerful brand — excellent businesses continuously come to it seeking sale

- Buffett places great importance on long-term interest alignment with original shareholders/management of acquired/invested companies — "being a cheerleader"

- Most other elite secondary-market investors have zero-sum interests with trading counterparts

- Simons/Duan sir's gains/losses correspond to counterparts' losses/gains — settlement is immediate

- Brand synergy brought by Buffett can be strictly defined

- A company bought by Buffett long-term is worth V₂; sold to a PE/peer firm, worth only V₁

- The extra ΔV is actually extra value created through Buffett's brand — all parties' interests are positive-sum

c. This gives Buffett a superior pipeline exceeding his total investment capacity, available for unhurried selection

That is, the best investment opportunities are not scarce for him

1.5.1.1 Facing these opportunities, Buffett makes three rapid binary (0/1) judgments in sequence

Is management good? Is it a good business? Is extinction risk strictly zero (not merely slightly greater)?

1.5.1.2 If all three answers are 1, the remaining question is good price/margin of safety

Quote from Alice Schroeder, author of The Snowball, 2008 interview

- Specifically, he gathers all financial data of the target and its competitors, quarter by quarter, until identifying one or two core drivers (not building models/full forecasts)

- Most financial data predictions and models are trivial arithmetic results; only one or two operational assumptions are core drivers

- Exert maximum effort making key predictions on these two indicators

- Apply inner scorecard, assessing odds like a racecourse bookmaker

- Based on this prediction, offer the best bid with adequate margin of safety

- Specifically, if key prediction materializes, earning 1.15x — he calls this Day1 Return

- Arrange long-term mechanisms aligned with original shareholders'/management interests

- Be a cheerleader

1.5.1.3 After investment, trust management to a considerable degree and enjoy long-term compound returns

1.5.1.4 The above "powerful brand, odds analysis, margin of safety, compound returns" form the core methodology of the Buffett Method

1.5.2 Comparison Between Buffett Method and Ordinary People (collectively W₀)

1.5.2.1 The fundamental difference is: Buffett can afford abundant selection from superior pipelines/positive-expectation trades. For specific targets, he can afford to time the market. In practice, he times to achieve Day1 Return of 1.15x

He waited nearly 7 years to buy Coca-Cola; he didn't even buy Apple before Jobs passed away

This is why Buffett doesn't encourage W₀ to index-invest. His implicit assumption is that everyone can learn his diligent attitude and Buffett Method. He has taught openly and tirelessly for fifty years

1.5.2.2 Ordinary people lack positive-expectation trade resources — they must use the wealth management method to buy The Portfolio without timing

1.5.2.3 W₀ cannot afford to time The Portfolio

"Sell to buy what?"

Duan sir manages assets at USD 10b+ scale, yet primarily manages wealth through Apple/Google/Moutai/Tencent

1.5.2.4 Duan sir believes: except for Day1 (individual-stock sense), never time the market

1.5.2.5 "Full-position doctrine — buy whenever you have cash"

1.5.3 Ordinary Day1 Timing: Use True Randomness to Break Even With Game Designers (The Black Swan)

1.5.3.1 Ordinary Day1 timing means: absent exogenous clear downside expectations (bull markets, range-bound markets, or unclear conditions), invoke How to Rolling Average to generate true randomness (see appendix)

Mathematically, The Portfolio with strict no-timing/Day1 full position is the optimal wealth management strategy

1.5.3.2 In practice, naturally you want to buy when Day1 Return>0, colloquially "find a low entry point" — but this is very difficult

1.5.3.3 Every day of buying/holding The Portfolio is a positive-expectation trade — predicting "relatively high, should wait" is difficult

a. Buffett and Duan Yongping did indeed time their Day1 entries, realizing Day1 Return>0

b. But for ordinary people, Apple rose nearly 7x in the past decade, max drawdown under e⁻¹ — Day1 timing is extremely high-risk

1.5.4 Extraordinary Day1 Timing: Don't Catch Falling Knives Bare-Handed

1.5.4.0 The only exception comes when you exogenously (for reasons other than price, see Chapter 5) develop a downside expectation for the broad market/The Portfolio; or when you confirm we are in an overall bear market/downtrend channel. Hereafter "exogenous bearish view"

Bear market/downtrend channel means a period when most securities market stocks/a given stock exhibit a continuous downtrend

1.5.4.1 Exogenous bearish views can indeed exist

a. The Portfolio may encounter unexpected events

- 2013 Moutai plasticizer incident, 2011 Jobs' passing

b. The entire market may experience anomalous periods

- Investment isn't the world's most important matter; unpredictable international economic/trade negatives arrive incessantly in 2504

- Fundamental valuation elements (e.g., risk-free rate) change dramatically

1.5.4.2 Extraordinary Day1 timing means: if you hold an exogenous bearish view, invoke How to Buy the Dip to improve win rate (see appendix)

1.5.4.3 Behavioral Finance foundations of How to Buy the Dip (hereafter "two claims")

a. A complete bull-bear cycle is roughly 7–10 years

- Complete macroeconomic cycles run roughly 50–60 years, called Kondratiev waves. Each major wave divides into four phases of 10–15 years each

- These claims have sociological foundations in the 2020s

- Productivity progress speed, macroeconomic cycles, political cycles, new investor emergence/bear-market memory decay cycles

- US stocks/Nasdaq additionally layer a long-term uptrend from sustained technological breakthroughs

b. In bear markets, "bottoms are W-shaped"

- This claim has behavioral finance foundations in the 2020s (inertia in human nature facing fear and greed)

- Example: when a stock drops 10–20%, most feel the discount is attractive

- But if it drops further to 50%, most sell indiscriminately regardless of cost

1.5.4.4 Day1 Bear-Market Hedging & How to Buy the Dip

a. It is generally believed that investment starting points carry extraordinary significance

- "Thiel's Law": startups with poor foundations cannot be saved (Zero to One)

b. More importantly, many investors' initial investments represent significant proportions of their total investment capital

c. Appendix How to Buy the Dip provides experience-based techniques to avoid bear-market rapid-downside phases based on two claims

- As of 2504, Berkshire's cash position reached a record USD 0.3t, roughly 30% of its net assets

- My understanding: Buffett holds a significantly exogenous bearish view at this time, and is doing his utmost to time the market

d. Exogenous bearish views may prove false post-hoc ("this isn't a bear market!") — just admit error and buy back The Portfolio

1.5.5 After Day1, Timing Matters Less for W₀

a. Statistics show institutional investors hold no obvious edge over individuals in timing

b. Day1's specialness lies in: your first trade should ideally be profitable — a smooth start

Many consider sacrificing several positive-expectation trading days' expected returns worthwhile for higher win rate

c. Since The Portfolio likely rises over the long term, and limited by my reading volume, there is no "top-escaping method" to effectively improve returns

"Don't say goodbye to old friends often" (Buffett)

1.6 Reference Bibliography for the Wealth Management Method

1.6.1 Conclusions of the wealth management method are stable

1.6.1.1 If you already believe, reference books are unnecessary for operational purposes

1.6.1.2 But reading these hundreds of thousands of words is worthwhile. It is what greatness is all about

1.6.2 Reference bibliography

1.6.2.1 Ordered from shallow to deep:

a. N.G. Mankiw's Ten Principles of Economics, Ray Dalio How the Economy Works, Nassim Taleb The Black Swan, Peter Thiel Zero to One

b. Duan Yongping's Xueqiu posts (Xueqiu ID: Dawudawuxingwoyouxing)

c. Buffett shareholder letters, speeches/interviews, and other value investing classics such as The Intelligent Investor

d. Wang Xing/Huang Zheng/Boss Liang and YM — findable speeches/interviews

They are not professional investors, but What Makes a Great Company is the superordinate principle of What Makes a Great Investment

1.7 How to Exit / Cash Out

1.7.1 The wealth management method can be used repeatedly over the long term

1.7.1.1 Duan Sir has demonstrated operations publicly on Xueqiu for ten consecutive years, answering questions without threshold. Transmission is accurate, greatly benefiting all beings

1.7.2 No investment target possesses determinism forever

1.7.2.1 When determinism is lost, decisively sell and cash out

1.7.2.2 When signs of losing determinism appear, decisively sell and cash out

1.7.2.3 Never earn the last e⁻¹ of gain or time

If a business yields 70% profit to others, 60% to the Li family suffices — never take the last copper coin (Li Ka-shing)

Non-Elite Version Appendix to Chapter 1: On Moutai, Tencent, Financial Data, Growth Investing

1.8 On Moutai

1.8.0 Moutai is flesh-and-blood connected to China's founding history, possessing perfect Determinism IV

1.8.0.1 In China's founding history, Moutai symbolizes beauty and victory

a. During the Red Army Long March, the Zunyi Conference was held, confirming the Chairman's military leadership. He subsequently commanded his lifelong military masterpiece — the four crossings of the Chishui River. During the third crossing, Red Army troops passed through Maotai Town

b. Moutai liquor relieved soldiers' fatigue and dressed wounds, becoming tangible revolutionary contribution and the white moonlight of perilous times in early founders' hearts

c. After the third Chishui crossing, our Party's history marched from victory to victory. Especially the People's Army, with virtually no defeats thereafter

1.8.0.2 Post-founding, Moutai was designated state banquet liquor,and is still widely used in diplomacy/domestic politics' most important occasions

A concept deity's power depends on how many worship it

Moutai's cultural influence depends on the population recognizing and transmitting its cultural value, including Premier Zhou Enlai and his successors

This is a vital cultural tradition PRC rulers must uphold

In China, only PKU/THU can compare

1.8.0.3 This cultural consensus transcends individual gains and losses

If Tencent botches a business, say Golden Spade loses to Eggy Party, it simply tries again

A batch of Moutai liquor sitting unsold does not affect brand connotation at all — unsold inventory slowly becomes "aged liquor"

1.8.1 Moutai is Chinese people's sole positive-energy stranger-relationship-management tool, possessing perfect Determinism I

1.8.1.1 Societies/large organizations need governance, which requires stranger-relationship-management tools

Undoubtedly, China hosts many qualifying large organizations

1.8.1.2 In China, the lowest-cost way to express "I think you are important" to a stranger is drinking Moutai together

a. Acquiring a company suddenly adds dozens of unfamiliar middle managers — how to identify who is willing to cooperate positively?

b. 2020s China: the common approach is that those who have drunk Moutai together are expressing willingness to cooperate

c. This is almost the only universally accepted positive-energy option. Chinese people find all alternatives insufficiently proper/decent

1.8.2 This tool is luminous, even highly efficient

1.8.2.1 Foreigners managing stranger relationships choose joining the same camp or supporting the same local organization

a. Many companies arriving in Washington/New York/Boston: first priority is not business communication but researching How to Make Donations

b. WH's Middle East staff once researched what breeds of prestigious dogs local lords keep

1.8.2.2 Many decades-old or century-old Western corporations have internal sub-organization/activity traditions, such as country clubs/golf societies

a. Managers can repeatedly heart-to-heart with new unfamiliar employees in these settings, gradually examining and screening

b. Jack Welch's autobiography vividly describes how he was chosen as GE's CEO and how he chose GE's CEO

1.8.2.3 Many Western large organizations barely need to manage stranger relationships

a. Buffett mentioned at shareholder meetings that some shareholders' grandfathers and fathers were also shareholders

b. The US has double-digit presidents/vice-presidents/secretaries of state who are direct relatives/spouses of each other

1.8.3 Empirical Verification of Moutai's Determinism

1.8.3.1 Moutai genuinely passed the cat CEO test

1.8.3.2 Since its 2003 IPO to date, Moutai has seen three chairmen fall, yet stock price appreciation + cumulative dividends exceeded 100x

1.8.4 Additional Explanation of Determinism I

1.8.4.1 China has numerous central SOEs/state-owned large financial institutions — clearly all contain Determinism I

1.8.4.2 While Moutai is strongest, others include many top-tier investment products such as Shenhua/CTG

1.8.4.3 Note: possessing Determinism I does not automatically make something a top-tier investment product

1.9 On Tencent

1.9.1 Tencent possesses perfect Determinism I

1.9.1.1 Great-power governance: ideological work ranks second only to basic livelihood

1.9.1.2 WeChat is a national-level instant messaging tool (1.4 billion DAU) of incomparable importance to ideological work

1.9.2 Determinism of Tencent's Products and Business

1.9.2.1 Moutai is a concept deity transcending business scope; Tencent's business determinism falls short of Moutai's

If the primary real-time communication medium becomes VR glasses, new IM tools may emerge on them

1.9.2.2 Historically, Tencent has consistently executed competently across businesses, though not always originally

WeChat/QQ, Mini Programs/Official Accounts/Video Accounts, gaming/live streaming/Yuewen/music, Tencent Cloud/Yuanbao, browsers/email/input methods, WeChat Pay/Weilidai, investments in Pinduoduo/Meituan/JD/Xiaohongshu/Didi/Bilibili...

Tencent never misses a beat. Current management is humble, smart, and capable

1.9.2.3 WeChat is a national-level gateway empowering any product — domestic internet peers find it hard to match

2504 Yuanbao is based on ds, but since it dialogues directly inside WeChat, it enjoys asymmetric competitive advantage

If WeChat feeds chat history to Yuanbao in the future, even if not originally created by Tencent, asymmetric advantage persists

1.9.2.4 In summary, due to WeChat's existence, Tencent keeps pace with everything in China

1.9.3 Empirical Verification of Tencent's Determinism

1.9.3.1 Tencent has not changed its Number One since IPO. Most founding team except Number One retired; Tencent survived 3Q Battle, antitrust investigation, AI revolution — three major commercial risks, with both old and new management safely navigating through

1.9.3.2 Objectively, cat CEO test/determinism is inferior to Moutai's as management turnover has not yet been tested

1.9.3.3 Conversely, volatility delivers better financial returns from investing in Tencent — since 2004 IPO, appreciation far exceeded 100x

1.9.3.4 Is Tencent China's only tech company with determinism?

a. No — Huawei, ByteDance, ds all possess irreplaceable advancement/determinism. As of 2504, none are publicly traded

1.10 On Financial Data

1.10.1 Why Does the Author Not Discuss Moutai/Tencent's Financial/Valuation Information?

1.10.1.1 As of 2504, neither company's financials/valuations are abnormal

1.10.1.2 At ultra-long-term scales, only determinism ranks first in importance — valuation/other monetization metrics are arguably irrelevant

1.10.2 Using 2504 Tencent as Example: A Rough Estimate Using Short-Term Financial Data

1.10.2.1 We demonstrate that 28Q1 stock returning to HKD 700 is highly probable (defaulting to RMB below)

a. Investment business historical cost 0.5t, rough estimate ten-year double: 24Q4 1.0t; assume 15% annual growth, 27Q4 1.5t

b. Three operating businesses: gaming/B2B + finance/advertising, Y24 earns 0.23t; assume 5% annual growth, 27Q4 0.26t

c. Video Account ad revenue just began accelerating (Douyin hundred-billion revenue vs Video Account ten-billion revenue; WeChat DAU is 2x Douyin's)

d. Rough estimate: this segment annual profit between 10–50b; assume adding 20b/year, 27Q4 0.26+0.04=0.3t

e. 28Q1 HKD 700 implies (6–0.15)/0.3=P/E 15x — a near-impossible price

1.10.3 Rough Estimation Is Non-Trivial for Ordinary People

1.10.3.1 "Rough estimation" requires you to bravely estimate one or two core business assumptions within (–50%, 100%) precision

a. This example's determinism lies in Video Account ad revenue being one order of magnitude lower than Douyin's being unsustainable

b. Buffett and Duan Yongping essentially use this method with financial data

1.10.3.2 The wealth management method serves ordinary people. If you look further ahead, you'll realize analyzing all this is redundant

Is 2504 Tencent at a long-term high? Probably not — if not Tencent, then what?

1.11 On Growth Investing

1.11.1 What Is Growth Investing? Why Is Anthony Bolton Missing from the Anchoring Limits?

1.11.1.1 Growth investing is the technique of selecting high-growth-potential companies to invest in, obtaining returns through high growth

1.11.1.2 Bolton achieved 30 years ~20% — but his primary return source was actually mean-reversion investing (see Chapter 2 appendix)

1.11.2 2504 Is a Super Matthew-Effect World — Determinism Equals Long-Term Growth Potential

1.11.2.1 Companies with determinism (passing the cat CEO test) in 2504 have long-term expected returns approaching Rₘ, not 0%

a. 2504 low-entropy entities stagnate or regress; once core business slows, recovery is nearly impossible — nearing extinction

- "Century-old shops unchanged forever" relies on a unique preservationist craftsman culture — a Kyoto century-old shop could be considered new

b. Companies that haven't slowed in 20 years made many right decisions, accumulated massive resources, and defeated multiple cycles' low-entropy beasts

- Some counterexamples exist (Hanwang/Meitu), yet these are accidental — they constantly face elimination risk but somehow make the right moves at the final moment

1.11.3 Anthony Bolton's era featured low-profile high-growth undervalued opportunities that barely exist in 2504 mainstream markets

1.11.3.1 Bolton's secret: board chain formats when same-store cash flow turns positive — ride the certain growth from 4 stores to 100 stores

1.11.3.2 2504 features information explosion and developed capital. This opportunity belongs to elite VCs; if public, stock prices at 4 stores already price in 8–20 store potential (√400~√400), colloquially "priced in one go," "surge then pause"

1.11.3.3 This means you always miss the entry price of high-growth targets, hereafter "Day1 price"

1.11.3.4 Such opportunities still exist in non-mainstream markets. Buffett advises W₀ to search hard among (foreign) small companies, see 1.0.0.3.b

1.11.4 Three Traps of the Davis Double-Play Paradigm

1.11.4.0 Typical growth stocks: companies realizing high growth within 3–5 years; investors expect Davis Double-Play paradigm

1.11.4.1 First trap: earnings fail to materialize or financial fraud

1.11.4.2 Second trap: feast is already over

a. Can see 3–5 years of high growth but rarely twenty-year determinism. Then 3 years may accelerate to √3 years (speed-doubling realization), yet current year/observation year is already year 2–3

1.11.4.3 Third trap: crisis of trust

a. Gale doesn't last till night, torrent doesn't last till morning; Rₘ is light-speed in this domain — nearly impossible to exceed continuously for many years

b. This natural distrust means even if targets deliver years of high growth, you can't hold on or position size is insufficient

1.11.5 The Only Opportunity to Buy at Day1 Price Comes from a Company's Growth Exceeding Its Own Expectations Ex-Post

1.11.5.1 This requires understanding the company's future better than its founder — otherwise the company tells its own story and front-runs the stock price

1.11.5.2 This is possible — requires extensive reading to grasp Chapter 5 How to Predict the Future

a. Take Pop Mart: as of 2504, China lacks comparable Disney/Universal Studios companies

b. Both rely entirely on IP and large amusement equipment. As of 2504, almost no intelligent interactivity exists — unable to satisfy increasingly mature psychological needs of child customers

c. Pop Mart may genuinely possess an opportunity (perhaps beyond Wang Ning's expectations) to surpass Disney theme parks

1.11.5.3 Ordinary people cannot chase shore-landing via angel/VC/growth investing — see Chapter 2 for details

a. Former's expected return is strictly 0x/–100%; latter's deterministic returns insufficient to offset triple-trap risks

Non-Elite Version Appendix to Chapter 1

Typical Beginner Operation Reference Table

Also called Personal Investor Self-Assessment Table

Creating this table carries no academic significance, but comparing against beginners' mindsets/operations offers popularization/education/entertainment value

by Shuzhimi@RynW1988

1.12.0 Hello World

1.12.0.0 In securities markets, if an individual investor derives all income from trading (i.e., creates no goods/services) yet expects returns exceeding Rₘ, then ta is a beginner

1.12.0.1 Beginners come to securities markets not for wealth management but for gambling/enjoying game fun — typical operation: buying stocks they know best/have tips on

1.12.0.2 The long-term expected return multiple of the above operations is 0x — negative-expectation but conforming to human nature; stops only when principal is fully lost

1.12.0.3 Beginners face trading disadvantages on all fronts — e.g., domestic quant trading can execute up to 299 times per second

1.12.1 Pre-School Grade

1.12.1.1 Due to resource scarcity, in all rule designs of human society, any activity conforming to human nature is necessarily consumption

Human-nature-conforming activities cannot be accumulation/investment — otherwise resources would rapidly allocate entirely to this domain

Hitler's blitzkrieg, being both thrilling and profitable, would have continued until his destruction

1.12.1.2 Like game design, the securities market "game" has designers

Historical stock markets worldwide were not originally designed for investor wealth generation. "Giving people the experience of property income" requires "letting" — it takes work

1.12.1.3 Watching the screen means paying up

Screen-watching triggers conformist operations (chasing rises, cutting losses, short-term trading) and accepting unfavorable trading positions (e.g., paying quant taxes); combined, these producesevere negative expectation

1.12.2 First Grade

1.12.2.1 Acknowledge that the ceiling of the wealth management method is Rₘ

1.12.2.2 Accept that the wealth management method cannot achieve shore-landing

1.12.3 Second Grade

1.12.3.1 Nearly 100% of investment products are inferior to physical gold

1.12.3.2 Buy targets with "determinism" — quality must surpass physical gold

The proposition "Physical Gold Is Wealth" condenses millennia of human consensus — check gold prices periodically, frequent surprises await

1.12.3.3 Can we settle for general "good companies" instead of extreme "determinism"?

As of 2504, MN showed no perceptible day-to-day changes, expanding supermarket distribution and launching new cheese-stick products

Yet profits dropped 98% in one year; stock fell 75% in two years

1.12.4 Third Grade

1.12.4.1 Buying stocks means buying companies — buy companies with determinism; default requirement: global Top 20

1.12.5 Fourth Grade

As of 2504, among listed Chinese companies, only Moutai/Tencent satisfy "determinism" requirements

1.12.5.1 Moutai benefits from everything in China

a. See appendix On Moutai

b. Moutai's determinism cycle aligns with China's cultural tradition where Moutai symbolizes respect

c. If Moutai engages in excessive co-branding/dilutes brand such that it no longer symbolizes respect in China, determinism expires

- Note: the above is an extremely low-probability event; if it occurs, it would be stopped

1.12.5.2 Tencent keeps pace with everything in China

a. See appendix On Tencent

b. Tencent's determinism cycle aligns with WeChat's

- Compared with contemporaries, remove WeChat from Tencent, and it's roughly AL-level

1.12.6 Fifth Grade

1.12.6.0 Bear markets are inevitably opportunities for position-building; bull markets are inevitably opportunities for correcting errors/bottom-of-basket orange-cutting

"Bottom-of-basket oranges" refer to stocks of companies lacking determinism

1.12.6.1 Moutai bought in bear markets rises in bull markets; bear-market purchases are cheaper

If you're a long-term net buyer of Moutai (beef) and don't produce it, you should celebrate when Moutai (beef) drops 50%

1.12.6.2 Bottom-of-basket oranges bought in bear markets differ

Bottom-of-basket orange cost 100, current price 30, real value is zero. Because in bear markets you probably won't cut — the money is useless

Only in bull markets are bottom-of-basket oranges truly worth 30 — because you actually will cut

1.12.6.3 If buying bottom-of-basket oranges in bull markets, return to pre-school grade for re-education

1.12.7 Sixth Grade: The Portfolio — i.e., Graduation from The Wealth Management Method

Non-Elite Version Appendix to Chapter 1: How to Rolling Average, How to Buy the Dip

1.12A How to Rolling Average

1.12A.0 The best practice for rolling average is hereafter called "true-random method"

1.12A.1 True-Random Method: Three-Year Rolling Average Purchase of The Portfolio, Buy Every Six Months, Delete App After Purchasing

1.12A.2 How to Calculate Rolling Average

1.12A.2.1 Assume this is year n. The current market value (NOT historical cost!) of actual new purchases in years n–1 and n–2 is Aₙ₋₁ and Aₙ₋₂. Your exogenous/original investment budget for year n is Xₙ

1.12A.2.2 Then this year's new purchase amount Aₙ = (Aₙ₋₂ + Aₙ₋₁ + Xₙ)/3. For n ≤ 2, set A₁ = A₂ = 0

1.12A.2.3 Note the existence of cash reserve Cₙ = Σ(Xₙ − Aₙ), whose stable value is approximately one year's budget Xₙ

1.12A.2.4 Confirm W's right wing (definition follows), can split Cₙ into two additional investments within 18 months

1.12A.2.5 For the market, your inputs A₀/A₁ and Xₙ are exogenous. Thus output Aₙ is truly random to the market, and smooth/friendly/sustainable for you

1.12A.3 Why Three-Year Rolling Average? Why Buy Every Six Months?

1.12A.3.1 Why Three Years

- Market cycles empirically run 7–8 years — hence three-year rolling-average position-building

- Within three years, Xₙ is easier for individuals to predict

1.12A.3.2 Why Every Six Months

- Six months can digest personal and market emotions — combating "screen-watching means paying up"

- One year allows timing/playing twice — playing feels good

1.12A.3.3 In practice, steadfast full-position doctrine wouldn't mean buying daily anyway

- Longer intervals make subsequent position additions more conformist and easier to execute

- As of 2504, one lot of Moutai costs roughly RMB 150k. If six months later 180k is needed, the extra 30k is profit

- If only 120k needed six months later, even better

1.12B How to Buy the Dip

1.12B.0 Buying the dip means bear-market hedging technology under exogenous bearish-view conditions

1.12B.1 Its best practice is called "dip-buying method"

a. The dip-buying method rests on one behavioral finance claim: bottoms are W-shaped (see diagram below, also called W-Downtrend Paradigm)

📈 W-Downtrend Paradigm Diagram: Five stages separated by red vertical lines.

"By here you should still have half your money"* — marked at stage 5 starting point

1.12B.1 Buy The Portfolio When Buying the Dip

1.12B.1.1 Dip-buying targets must be The Portfolio; bottom-of-basket oranges have no W shape — only L shape

1.12B.1.2 A complete bear market typically lasts no less than 6 months — patience required

1.12B.1.3 Can the W-Downtrend Paradigm fail? Of course possible — without bullish-side collapse, it's not a bear market

a. Not a bear market means no dip-buying; if judgment proves wrong, admit error and buy back

b. At this point only normal Rₘ returns apply, no dip-buying bonus

1.12B.2 First Principles of the Dip-Buying Method

1.12B.2.0 The first principle of dip-buying is: don't catch falling knives bare-handed

1.12B.2.1 During market anomalies, negative shocks arrive unpredictably — no idea how deep or where the drop ends

1.12B.2.2 Therefore, wait for the storm to settle before re-entering — resist the temptation of initial bear-market declines

a. Is Moutai at 1300 cheap in 2504? Can only tell after the knife has passed

b. Investment isn't the world's biggest deal — when major events arrive, Moutai halving is entirely possible

1.12B.3 Stage Morphology of the W-Downtrend Paradigm

For reader convenience, repeating the W-Downtrend Paradigm diagram

📈 (Same W-Downtrend Paradigm diagram, five stages 1–5)

1.12B.3.1 Falling-Knife Phase

a. Rapid decline driven solely by emotion and risk aversion

b. "Wolf! Wolf! Doesn't matter why — just run!"

1.12B.3.2 Bull Struggle Phase

a. Bad news eases. Repeated attempts to test previous highs — this phase has trading volume

b. Most people who haven't learned this method start dip-buying in this phase

1.12B.3.3 Bull Collapse Phase

a. Net direction determined by contending factors is collapse — bear market confirmed

b. Without this condition, it's not a bottom. Bottoms require complete bullish exhaustion

c. Most people psychologically lose balance here — delete the app

1.12B.3.4 Prolonged Arc-Shaped Bottom

a. Zero volume. Buy and get stuck — never rises. Nobody discusses, nobody watches

b. The preceding condition is identifiable — arc-shaped bottoms are identifiable; cycle duration uncertain

c. Before the arc-shaped bottom appears, at most squander half your position on the left side

Resist temptation. Generally: slower buying = more profits

1.12B.3.5 Right Wing of W: Bottom Volume Expansion, Pattern Confirmation

a. Stock price cautiously tests new highs repeatedly. Each new price high accompanies new volume highs

b. Slowly heating up — bull market arrives

c. Valuation recovers rapidly in this phase; duration extremely brief, often just 1 month to half a year. Most are completely out of the market/not watching screens

d. By here you need to still have half your money — enter slowly. You graduate from How to Buy the Dip