Two Hours of Almost “Free” Money

Jackson Zhu1 Comment

This is NOT investment advice! Do your own due diligence.

Chinese equities suffered sharp selloffs due to policy-related concerns. KraneShares CSI China Internet ETF (“KWEB”), a popular Chinese ETF, declined by as much as 25% over the three-day period from last Friday to this Tuesday — a massive decline since KWEB has previously already declined by 40% from February to June! By Tuesday night, KWEB was down more than 55% from this year’s peak. See the chart above. What a financial “bloodshed”!

If one were watching the market close enough, he/she could discover an asymmetric opportunity during the Tuesday selloff. In a nutshell, between 11:30am and 1:30pm Tuesday (July 27, 2021), for KWEB, its exchange-listed long-dated call options were selling at a price so low that basically “guaranteed” investors great returns.

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SPCE | Virgin Galactic, an unpowered glide for now

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(source: company)

Virgin Galactic had a successful test flight on July 11, 2021. See the flight path above. After reaching its peak, VSS Unity came down through an unpowered glide. I believe the exact same has been happening on Virgin Galactic’s stock price (ticker: SPCE), peaking out during the test flight weekend and continuing its unpowered glide downward.

For SPCE, bullish arguments are obvious: large TAM, software business–like EBITDA margin, etc. The company even dedicated a section of its public filings to touting its TAM and potential profit margin levels.

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Takeaways from “The Code Breaker: Jennifer Doudna, Gene Editing, and the Future of the Human Race” by Walter Isaacson

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I recently read The Code Breaker: Jennifer Doudna, Gene Editing, and the Future of the Human Race by Walter Isaacson, the bestselling author of Steve Jobs. The book started at the story of Jennifer Doudna and expanded onto the potential applications of gene editing and what that technology could potentially mean for the human race. I highly recommend the book.

My key take-aways are as follows:

Curiosity-driven motives lead to unusual discoveries

The word “curiosity” appeared more than 30 times in the book. It reminds me of the principle that I always think about, “If you don’t have passion, you cannot win.”

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Re-read “Pioneering Portfolio Management” by David Swensen

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I re-read the copy of the book that I bought four years ago, when I was learning about investing at the Yale Endowment. My new takeaways are as follows.

Dare to be great

Human beings are a social species. To survive, we are inclined to huddle together and to imitate each other. For most investors, they care so much about how other people see them that they dare not say anything different or do anything new. If they do, they risk their job security, professional status, and social networks. Those behavioral inclinations are simply a natural part of us, and they are difficult to overcome – just like a software cannot debug itself. Most investors are conventional and do not have the ability to be different. Successful investors are unconventional, and so they are rare.

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My Learnings (2017 to 2021)

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It is a difficult decision for me, but I have determined that now is the time to leave my current position and to pursue a similar but not so similar path, something that is more true to my heart.

Reflecting upon the past four years, I distilled my key learnings into the following.

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Some Thoughts on Inflation

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Inflation is not a very “researchable” topic.  Most projections about inflation are condemned to be wrong. The Fed employs over 400 Ph.D. economists, yet its inflation projections have been consistently wrong for years. 

Scientists versus Water

I believe it is extremely difficult for humans to comprehend and predict the dynamics of a large complex system, even though we have perfect knowledge of all the individual elements in such a system. 

Let me draw an analogy, call it “Scientists versus Water”:  Scientists, in a laboratory environment, think they know everything about water.  Water is H2O; water can freeze, boil, and evaporate.  However, sitting in a lab, staring at water, these scientists could never imagine tides, waves, or tsunami, let alone trying to make predictions of when these phenomena could occur.  Yet, these are what water can do too!  The scientists who only study water in a lab will never know!

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A Few Thoughts From 2020

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“Culture eats strategy for lunch”

2020 laid bare the truth in that saying. To manage a pandemic, it is not about whether a country has the strategy, the money, or the technology to handle the virus; it is about the culture of its people.

My wife and I were in Beijing during the outbreak. The news broke out during dinner time on January 20, 2020. Within an hour or two of that news, as we left restaurant that night, some people were already wearing masks. By the second day, some 20% to 50% people we saw in Beijing and Shanghai were wearing masks. Mask wearing — it was a culture.

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Where are the 10 Baggers?

Jackson Zhu1 Comment

I analyzed all American and Chinese companies that were ever publicly traded from 1970s to today. I then grouped them into “U.S.” and “China” according to a company’s country of domicile. In total, my analysis covered over 21,000 listed stocks.

My findings can be summarized in the following tables. Here, the columns “Average ‘Baggers'” mean the number of times a stock has gone up (including dividends) during a given decade — for example, if that column shows 15, it means the average stock from that particular sector has gone up 15x during the given decade — i.e., your $1 of investment has turned into $15.

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