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First, the S&P 500 and the Dow Jones index hit a new high
On the evening of July 11, Beijing time, the S&P 500 broke through the historical high point of 2,132 points created in May 2015, and brushed the highest record of the S&P 500.
On the evening of July 12th, Beijing time, the Dow Jones Industrial Average closed at 18,347 points, breaking through the historical high point of 18,312 points created in May 2015. 
The 2008 subprime mortgage crisis caused the S&P 500 to plummet from 1567 to 683, and the Dow fell 6626 from 14,000. However, just two years later, the S&P 500 and the Dow Jones Index regained all the lost ground in the financial crisis. In 2012, they began a path of continuous innovation.
In contrast, A shares, after 7 years, are still around 3,000 points. After experiencing the stock market crash last year, I estimate that no one has raised the sword to 6124 points in a short time. 
Even with record highs, the overall PE of the S&P 500 is only about 24 times. In the past 40 years, the average price-earnings ratio of US stocks has been 16.8 times. 
But it is unreasonable to compare 24 times and 16.8 times directly, because you have not considered the interest rate problem in different periods.
As can be seen from the chart below, US interest rates have remained above 3% for most of the time. However, since 2008, the US interest rate is almost zero. Zero interest rate means that there is a flood of funds in the market, and a large amount of funds will flow into the stock market. Therefore, considering the zero interest rate, from the perspective of PE, 24 times PE is definitely not seriously overestimated. 
US interest rate chart
Second, the essence of the long-term big bull market is that after the first industrial revolution, mankind entered the era of modern civilization.
US stocks in the past 150 years can be called a big bull market, and the stock market has risen 2,000 times.
Behind this big bull market actually corresponds to human beings entering modern civilization.
Here I borrow the concept of Mr. Li Lu's modern 3.0 civilization era.
Let's briefly describe how this concept is going on.
Human civilization can be basically divided into three stages, collecting hunting civilization, or 1.0 civilization; agricultural animal husbandry civilization, or 2.0 civilization; science and technology civilization led by industrial revolution, or 3.0 civilization era. To understand the characteristics of these three civilizations, you can read the book, A Brief History of Humanity.
The 3.0 era and the two previous eras have a fundamental difference: in the 3.0 era, human society has shaken off the cycle of rising, rushing, and falling.
In the era of agricultural animal husbandry civilization, photosynthesis determines the ceiling of the entire human society. Because human society did not have efficient fertilizer at the time, the total amount of photosynthesis per year was certain. The total amount of photosynthesis is limited, which determines the total amount of food in the whole society is certain. Once the population breaks through a certain ceiling, the food of the whole society cannot support the surplus people, so there is a recession and war. This is also known as the Malthusian trap.
The whole human race is so cyclical in the era of agricultural civilization.
However, in the human 3.0 era, this cycle was completely broken. In the current era of civilization, the ceiling of mankind is human knowledge. This is because, after the industrial revolution, human productivity was perfectly linked to human knowledge. This is because humans have basic science for the first time. Humans have used the first law of thermodynamics, the law of conservation of energy, to create a steam engine, which enables humans to convert fossil energy into kinetic energy, greatly improving production efficiency. At the same time, humans have found fertilizer from fossil energy. The arrival of chemical fertilizers has completely broken through the ceiling of the human population.
I think that before the industrial revolution, humans could be said to be groping. We happened to find the telescope. We happened to find the compass. We happened to find gunpowder. However, after the industrial revolution, mankind began to use the basic theories of hard disciplines to transform reality.
Rockets, nuclear power plants, automobiles, and airplanes are all examples based on theoretical realities. We have the theory first, and then based on the theory to create tools to improve human life.
Imagine, if there is no theory of relativity, how can humans look for energy in fusion? If there is no law of thermodynamics, how do humans know how to convert thermal energy into kinetic energy and electrical energy? If there is no Newton's law, how can humans invent airplanes and how to break through the first acceleration of the universe to explore space?
Because productivity is linked to knowledge, as long as knowledge can continue to be created, our productivity will not stop, and knowledge is always passed on, and knowledge is theoretically infinite. As long as basic science continues to break through, we are in a sustainable development.
Some people say that human beings have always been limited by energy. Energy is the foundation for determining human society. Yes, yes, but I think the essence of energy mutation is the progress of human knowledge. For example, the recent shale oil shale gas revolution is precisely because our mining technology has risen, we can mine energy that was previously unexploitable, and this technology has greatly increased the amount of fossil energy that can be used by humans as a whole. . As long as our basic disciplines are advancing, humans can use solar energy in large areas sooner or later, and they can master fusion in the morning and evening.
This knowledge determines the characteristics of productivity and brings explosive wealth to mankind. 
In the thousands of years before the 19th century, the development of human society was basically a horizontal line, and there was no essential difference in the development of the entire East-West society. It was not until the 19th century that the industrial revolution began, and the Western society experienced explosive growth, far from the Eastern society.
So where does this explosive growth manifest itself?
This explosive growth is manifested in our productivity and the prosperity of business activities.
So what is the nature of business prosperity?
This starts with the definition of business.
Business refers to an organized act of providing goods and services that customers need.
Therefore, the essence of business is exchange.
The so-called commercial prosperity naturally means that the frequency of exchange is very high and the efficiency is very high.
Therefore, for a country, the true business prosperity represents a very strong spending power, while there are a large number of high-quality companies that can provide consumption or services.
Third, the United States led the human civilization 3.0
Since World War II, it is indeed the progress of the United States in leading the entire human knowledge. Since the 1930s, the number of American scientists has increased dramatically. In the past 30 years, the United States has accounted for more than half of the Nobel Prize in physics, chemistry, physiology or medicine. There is no doubt that the United States has almost monopolized the Nobel Prize in Science.
The high cost of research in the United States is also horrifying, and the investment in scientific research accounts for half of the world’s research costs.
The reason why the United States has such strong scientific research capabilities is not because Americans are born to be smarter than others.
To be honest, it is because the United States is lucky. The most grateful person for scientific development in the United States after World War II was Hitler.
During World War II, Hitler directly drove most of the European science elite to the United States. Before the Second World War, the scientific level of the United States was at most two or three streams. There was no way to compete with the United Kingdom and the Soviet Union. Perhaps even Japan could not match.
However, since the United States was basically not affected by any World War II, during the Second World War, many famous European sciences, such as Einstein, von Carmen, von Braun, Pierre, Gödel, Aden, Ke Lang, etc., immigrated to The United States continues to do its own research work. These scientists are basically the kind of genius scientists who can play 10,000. It was given to the United States in vain.
Therefore, the entire 20th world, the United States' ability to innovate is the strongest. The United States has gathered the world's most and best scientific and technological talents. As of 2009, 40% of the world's Nobel Prize winners came from the United States. The dominant position of the United States in global technological advancement is also reflected in the high output of papers and patents.
According to research by the China Institute of Science and Technology Information, in 2008, the three major international search systems SCI, EI, and ISTP included 625,000 American author papers, accounting for 26.6% of the world's total, including 406,000 SCI papers, accounting for the total number of papers in the world. 28.3%, the number of American authors in the three major international search systems ranked first in the world. According to the Basic Scientific Indicators (ESI), between 2000 and 2010, the number of citations in the United States was more than 41.92 million times ahead of other countries.
Advances in technology have indeed spurred the prosperity of American business, with about 70% of US GDP coming from consumption. 
The total GDP of the United States in 2015 was 18.55 trillion US dollars. This also means that the US has about 12.59 trillion yuan of GDP from national consumption. The United States has only a population of 300 million.
This is why the S&P 500's movements are almost in perfect match with the S&P 500's earnings per share and the overall US GDP. 
Speaking of this, many people may understand that the reason why US stocks are so strong is essentially that since the Second World War, the United States has led the innovation of human knowledge, and this knowledge has promoted the prosperity of business through the carrier of the enterprise. The strength of the US stock market is only a manifestation of the improvement of human productivity and the prosperity of the US economy.
Fourth, the essence of investment is to follow the trend, against the small trend
I think the essence of investment is: to follow the trend and to reverse the trend.
These two sentences are indispensable.
The so-called general trend refers to the law of human development, or the law of the development of the entire country.
The so-called small trend refers to the embarrassment in the development process.
The general trend is that mankind is still making progress, basic disciplines are still developing, and the economic level of the entire human race is still improving.
The small trend is the so-called financial crisis, 911, the British Brexit. So to some extent, these small offers provide opportunities.
Many people think that Buffett is mainly lucky, born in the United States, and has followed the general trend of the United States. Buffett himself admits that he is an "ovarian lottery" and is very lucky to be able to vote in the United States.
I think that Buffett is not only the general trend of the United States, but the general trend of mankind. Only in the past 60 years, the general trend of mankind has been led by the United States. If the future of humanity is determined by China, smart investors will definitely come to China.
It is precisely because we consider the characteristics of the times we are in, we can determine our investment characteristics. If we are not in the era of civilization 3.0, but in the agricultural society. How do we invest?
The most ideal investment method is the band, because the development model of the agricultural society is rising, topping, and recession. The fool will buy and hold.
Only in the era of modern civilization 3.0, it is a reasonable strategy to buy a good company and hold it. In this sense, Li Ka-shing and Buffett are doing the same thing, asset allocation, and putting money into a good company.
Since I mentioned Buffett, let me spit a few words.
In China, almost all investors equate the investment philosophy of “buy a good company and hold†with value investment.
From this perspective, those who have no brain propaganda Buffett are really a lot of people who know a lot about it.
In fact, the more you know about Buffett, the more you will find that there is no possibility of copying Buffett. What Buffett tells you in essence is this truth: To succeed in a great way, you must be a great, unusual person.
There are many people who like to pursue reproducibility. In fact, anything that can be easily copied has no competitive advantage.
Especially in the stock market, the market will slowly eliminate any opportunities to make money that can be easily copied.
So if you want to be a great investor, you have to find the right way for you.
Even Buffett did not completely copy Graham, but chose to develop his own route and manage funds in his own way and with his own rules.
Therefore, investment requires you to learn one thing in a unique way.
Most value investors around the world agree with Buffett's investment philosophy of buying a good company, but few other investment masters completely copy this idea.
why? Because good companies are particularly difficult to pick, and this is only suitable for investors with a large amount of funds.
In a sense, Li Ka-shing and Buffett are the same. The way they make their homes may be different, but the last thing they do is asset allocation, and the money in the hands is allocated to the best companies to generate returns, because this is the most sensible decision.
The essence of value investment is not the so-called buying and holding of a good company. Its essence is actually looking for assets that are misunderstood, and can also be understood as investment opportunities with wrong odds.
In other words, value investing is actually looking for loopholes in the market.
In the United States, a large number of value investors are engaged in areas such as junk bonds, bankruptcy reorganizations, splits, event investments, mergers and acquisitions, and other areas of general interest to investors, as these areas tend to periodically appear undervalued assets.
In this perspective, Wang Yawei is a typical value investor. Because he found an inefficient investment area that is not of interest to the entire market. But the problem is that with his success, more and more people are entering the field, and he faces more competitors. When these competitors are more than one degree, this investment strategy is likely to fail for a short time until the field is no longer crowded.
V. Conclusion
In the 3.0 era of modern civilization, human knowledge determines human productivity. There is no doubt that the United States has led the advancement of human knowledge throughout the past 60 years.
The fundamental logic for the rise of US stocks is:
Scientists first create theoretical knowledge, and then adventurers use theoretical knowledge to transform reality, increase productivity and profitability of enterprises, thereby stimulating economic prosperity and stock market growth.
Ask yourself, our past economic development is mainly based on cheap labor, and it is not based on our independent innovation. In a sense, our economic development has certain contingency. If we have not been reforming and opening up, have we been shutting down the country?
You have to know that if we reform and open up 20 years later, maybe we don't have cheap labor, because family planning is destined to mean that we will face a serious population aging on a certain day. If it is reformed and opened at that time, it is already late.
Moreover, calmly, our current economy has not yet entered the US model of independent research and development. Our GDP is still built on coal, cement, steel, real estate, heavy industry and other industries. Most of these industries are highly polluting and energy intensive. In order to increase GDP growth, we must develop these things because we have too few independent innovations.
From this perspective, the volatility of A-shares is understandable, and the role of A-shares is not to let investors share economic growth.
However, as a country that started very late and has a very low starting point, it is very stupid to engage in independent innovation. The road we originally chose should be correct, but the path of cheap labor is ultimately unsustainable. From the current point of view, the road of cheap labor has come to an end.
Objectively speaking, although our economic volume is not much different from that of the United States, China’s overall scientific research strength is far from being comparable to that of the United States. It is undeniable that we have world-class levels in many important areas, such as aerospace, missiles, and nuclear fusion. Our technology has a strong ability to attack. For example, Musk SpaceX's Falcon rocket uses friction stir welding, which is not long, and our researchers have broken through this technology. In fact, this technology is not a new technology, Musk dare to use, we will dare to use immediately. Not to mention the rocket recycling, we have not been willing to try the concept that has been denied. After SpaceX recycling is successful, we dare to set up the project. This dare and dare is often fatal.
As far as the Internet is concerned, our Internet actually develops better than the United States, but why do most of the new gadgets come from the United States? Like the recent game Pokemon Go, you can't do this game? impossible. When can we develop a product that is popular all over the world? Isn't it good to earn money from around the world?
As our GDP increases, as our per capita income is close to that of the United States, the labor force is no longer cheap, and the road of replicating the latest US technology is definitely not going to work. We need more, wider and deeper independent research and development.
In the era of human civilization 3.0, who can lead the advancement of human knowledge is the king. The real strong sign of China is not that our GDP transcends the United States, but that we replace the United States to lead the advancement of human knowledge.
As we gradually transition into a consumer-led economy, as we move from a government-led market economy to a government-assisted free market economy, as we define the stock market's attributes as allowing investors to share economic results, A-shares It will no longer be such a situation lying on the ground, it will form a spontaneous big bull market.
Benefits The content and opinions of this article represent only the author's personal views. The author does not hold the company's stock. The information and analysis provided by the author is for investors' reference only. According to this, the market is at your own risk!
Article source: WeChat public account Hong Kong stocks that matter (Editor: Liu Suyuan HN091)
November 18, 2022