In the current moment when A-shares and Hong Kong stocks are soaring, perhaps every investor needs to take a look at this video, a segment from Warren Buffett's interview in 1985 on "Adam Smith's Money World." If you're interested, you can watch the full version on YouTube; I've extracted a highlight! See below 👇

In the video, Buffett says that the most important ability in investing is not intelligence, because investing does not inherently require much intelligence. What is more important is temperament (emotional control ability).

How to understand this 'temperament'? The English annotations translate it as: disposition/mentality/nature/emotional control. My understanding is: the ability to filter out noise and return to the essence.

Buffett also provides a brief explanation in the video; he follows the value investment theory of his mentor, Graham. When I buy a company's stock, I focus solely on the intrinsic value of that company. I do not pay attention to what price its stock has reached in the past, nor do I care how much it has risen last month. I do not care whether my thoughts align with the majority of the market or are contrary to it. These things have nothing to do with me. When you have good emotional control, you only need to focus on less information and take fewer actions. Just like the home runs in Buffett's office, you only swing when the ball is in your hitting range; at other times, you patiently wait!

This reminds me of a classic business battle story involving China's Buffett, Duan Yongping. He represented BBK and competed against Hu Zhibiao from another VCD company, Aido, for the advertising king title on CCTV. At that time, Duan Yongping bid 200 million, but ultimately lost to Hu Zhibiao, who won the CCTV ad spot for 210 million. Many people were puzzled, wondering if BBK was really just short of that 10 million. Why not fight for it?

Years later, Duan Yongping recalled this bidding incident in an interview. He said that this so-called dragon and tiger fight was merely media hype. He did not feel he was competing for any title; he had a psychological valuation of that ad spot on CCTV at 200 million, so he bid that amount. If it went higher, he would not pursue it.

In Duan Yongping's eyes, it was about ignoring competition and disregarding the title of 'advertising king.' This logic is similar to Buffett's: you ignore everything unrelated to the essence of the matter and return to the simplest common sense, using the most basic principles to make a judgment.

It sounds simple, but executing it is particularly difficult. In real life, we are tempted by various interests and reputations. When we arrive at the scene, we can be swept away by those non-essential factors, losing our usual calm and deviating from the essence of the matter.

Investing is not about defeating others in someone else's game, but about controlling oneself in one's own game. As Li Dan wrote in "The Stand-Up Comedy Handbook": if your goal is for this stand-up show to be a hit, then preparation will always be in vain. If your goal is to become a better and stronger stand-up comedian, then always prepare well.

Good emotional control is fundamentally about being well-prepared and continuously improving through learning. For instance, in this round of A-shares and Hong Kong stocks, if you only think about opening an account and depositing money at the last minute, you will have missed the first opportunity. If you do not study the listed companies in A-shares and Hong Kong stocks and the significance and value driven by policies regularly, then your expectations and judgments about market returns will also be in vain. The media merely amplifies the situation, and only by recognizing the essence can one proceed steadily and far.

Finally, let's talk about the essence of this round of A-share initiation: the goal of this bull market is twofold. First, to transfer debt to retail investors (most of those who can afford to trade stocks are middle class or above). Second, to transfer deposits into the market. This artificial bull market is primarily targeting the 300 trillion yuan in bank deposits. Currently, banks cannot lend out money and have to pay a large amount in deposit interest, which they cannot sustain!

History is always remarkably consistent; it’s just the same medicine in a different bottle. The current playbook is almost identical to that of 2008 and 2015: first, accounts have no money; second, residents save money without spending; third, the economy is not doing well. So what to do?

Then, we create an artificial bull market to stimulate, with the media collaborating to create a frenzy, only allowing bullish sentiments while banning bearish ones. Early entrants profit, while latecomers suffer; the final outcome is bound to be bleak. Institutional investors have various tools to hedge, so the impact is minimal. But retail investors can only buy long and must deal with T+1. An artificial bull market can indeed quench immediate thirst; companies have money, can pay salaries, residents consume, the government collects taxes, houses are bought, GDP grows, and the future looks bright, but the only thing lacking is residents' deposits!

Now many people are shouting to sell their houses and go all in, or to max out their credit cards and go all in. Do not make such foolish moves, as this goes against the most important principle for investors: the ability to maintain emotional stability. Once there is leverage or borrowing, any investor will only focus on returns, rather than on the growth and skill acquisition from their investments! Remember this!

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