What Doesn’t Work in Investing

Jackson ZhuLeave a comment

I predicted negative oil prices in April 2020 — and from the data I have seen I was one of only a handful of investors to do so. Some people reached out to me and asked whether I am a dedicated short seller or a specialist in commodities or futures trading. My answer is NO!

I did not make that negative-oil prediction because I wanted to short something, nor because I wanted to do something global macro. I made that prediction because I study fundamentals. I think in “first principles,” which leads me to focus on the fundamental truth of a thing — and in this case, the supply and demand of crude oil, a study which eventually led me to conclude there would be a severe surplus of oil supply and the world would run out of storage space for crude oil, thus we would see negative oil prices.

Read More »

How I Successfully Predicted Negative Oil Prices and What I Learned From It

Jackson Zhu2 Comments

On April 19, 2020, I became convinced that over the next two days, prices of crude oil would drop below $0.  The next day, April 20, oil opened at $17.73 a barrel and closed the day at negative -$37.63 a barrel.

To help us appreciate the magnitude of that epic collapse, the oil price chart below showing the past 25 years would be helpful.  See that big plunge?

Read More »

It’s a volume game

Jackson ZhuLeave a comment

I am always intrigued by the question of “what are your interests?” I ask myself this question often. I also throw this question to others. One business school student answered: “my interest is to find an investment banking job.” Well, he was not really answering my question.

Many people see their short-term goals as their interests. This is a mistake and I believe this is why many high-achieving people don’t feel happy (even after they have attained their goals). By not seeking to know their own interests, people end up spending their entire life doing things they don’t like and they don’t care.

Read More »

Scientific Thinking and the Danger of Not Doing So

Jackson ZhuLeave a comment

As I wrote in December 2019, “Think Scientifically” was one of my five key takeaways from 2019. Of late, it has become increasingly obvious to me that there is great value in scientific thinking — and, not doing so is unusually dangerous.

To think scientifically, I believe, is to think independently, to be grounded in facts and free of preconceived notions. Scientific thinking seeks truth, not opinions. It welcomes different ideas, new ideas. It also encompasses the willingness to acknowledge that “I can be wrong.”

Read More »

Cultural Differences in the Handling of the Coronavirus

Jackson ZhuLeave a comment

In the evening of January 20, 2020, China’s respiratory expert Zhong Nanshan confirmed and announced to the public that the virus had passed from person-to-person. I was in Beijing that Monday evening.

By 9pm that day, when I looked out onto the street, many citizens already had surgical masks on. By the next day, as I was travelling through China on a high-speed train, somewhere between 20% to 50% of people I saw started wearing masks.

Within three days, on January 23, Wuhan was locked down. In the following few days, Chinese cities started requiring citizens to wear surgical masks and implementing other types of social distancing measures. For example, on January 26, 2020, Suzhou announced that all passengers using the city’s subway system must wear surgical masks.

Read More »

The Social Mobility of Stock Markets

Jackson ZhuLeave a comment

The Social Mobility of Stock Markets

— A Historical Perspective into the U.S. and Chinese Stock Markets

My previous piece A Decade of Inequality focused on the concept of “market cap gains.”  It reviewed the end results but paid little attention to how we got there — how did it happen that almost all the market cap gains were concentrated with the largest companies?  Was it because larger companies started bigger so their gains over a decade’s time naturally became bigger?  Or was it because smaller companies collectively never had a chance to grow big at all?

To put it differently, the question that my previous piece raised and that I am trying to answer in this piece is this: over the past few decades, have stock markets in the U.S. and China offered “social mobility” so that smaller companies can still achieve above-average returns relative to their larger peers?

Read More »

Differentiation Is Not A Moat

Jackson ZhuLeave a comment

If one were to compile a list of the most abused words in finance and investing, “differentiation” (or “being differentiated”) will certainly occupy a top place in that list. Most money managers tell clients that their investment processes are differentiated; most businesses claim their products or services are differentiated. It has now become unusual if a business does not sprinkle its client-facing talks with the word “differentiation.”

Wait… common sense tells us a business can only be run in a finite number of ways… if most players in a particular business claim themselves to be differentiated… That is an oxymoron!

Read More »

Some Thoughts on My Investment Philosophy

Jackson ZhuLeave a comment

For people who invest, their investment actions are usually guided by a philosophy of which investors themselves are consciously or unconsciously aware. It is like asking yourself to list out all items that are in your wallet now; unless you take a pause, open your wallet, one is usually not fully aware of what is in there. Similarly, it is a tall task to give a full answer to one’s investment philosophy. So, this blog piece is not meant to be a complete account, nor final or conclusive. As time goes by, as I age and gain more experience, I will likely abandon some beliefs that are stated below and form some that are new.

I first traded stocks when I was under 20 — I bought an A-share company listed in Shenzhen. Since then, I have invested in A-shares, Hong Kong–listed stocks, U.S. stocks, bonds, funds, real estates and other types of assets and financial contracts.

Read More »