In the previous article, I mentioned that in recent years, there have been fewer and fewer topics for articles, noting that the original and native projects in the cryptocurrency ecosystem that truly pique my interest are too scarce, so there have been few fresh things to write about in the cryptocurrency ecosystem in recent years.

Now, stepping away from specific micro-investments and looking at the macro environment, are there aspects worth writing about?

For example, in the past, I would occasionally write some predictions and feelings regarding the macro economy, and I would also write some guesses about crises, as I believed these factors would influence investment decisions and judgments.

But in recent years, after reading "Buffett," Munger, and especially Duan Yongping's book, I've written fewer and fewer articles on this topic.

Why?

Because I now believe that those predictions about the macro economy and crises are not as important when it comes to specific investments. I am starting to understand why Buffett does not care much about many macro events, such as when the Federal Reserve raises interest rates or when the Treasury Department releases major measures...

The viewpoint I have formed today is still influenced by Duan Yongping's book "Q&A."

Duan Yongping has shared on multiple occasions the criteria for assessing the investment value of a company, most importantly: corporate culture, business model, and reasonable pricing.

He has shared specific judgment details for each of these three elements:

For example, a good corporate culture will reward investors (through stock buybacks and cash dividends), treat employees well, and operate with integrity;

A good business model has a wide moat, sufficient cash flow, and a healthy balance sheet (with a very low debt ratio);

Good pricing means that the company's market value should ideally be lower than the discounted total of future free cash flows, and the lower, the better.

Let me examine the so-called "analysis of macroeconomics" and "predictions of economic crises" in terms of the impact on investment based on the points listed above.

Why are many people (including my past self) very eager to predict economic crises (including analyzing macroeconomics)?

The ultimate focus usually results in two points:

One is to avoid an economic crisis, exiting at a high point before the crisis occurs and then buying in during or after the crisis to "pick up bargains." Through such so-called "buying low and selling high," they aim to make big profits.

The second is that they are particularly worried that if a crisis occurs, the companies or assets they hold won't withstand the crisis and will collapse. Thus, they try every means to predict a crisis, selling off their stocks or assets before it happens and waiting to see after the crisis.

Let's first look at the first point.

"Exiting at a high point before a crisis occurs," the key here is judging whether the price of the company/asset is at a high point.

According to Duan Yongping's method, determining whether the price of a company is high is something an investor should constantly consider after buying its stock, regardless of whether a crisis occurs.

Even in the absence of an economic crisis, if a company's price is far above its intrinsic value, the investor should sell.

For example, in today's US stock market, at least there is no crisis happening, right? If Apple's stock price right now were not what it is but ten times that, I believe Duan Yongping would also sell.

"Then buying in during or after the crisis to 'pick up bargains,'" this point's key lies in judging whether the price of the company/asset is at a low point.

In the same way, determining whether the price of a company is low is something an investor should always consider before buying its stock, which has no relation to whether an economic crisis occurs.

Even without an economic crisis, if a company's price is far below its intrinsic value, the investor can also buy.

So do these two operations of buying and selling fundamentally relate to whether an economic crisis occurs?

No.

Then what are they related to?

They are only related to whether the investor can understand and roughly assess the discounted total of a company's future free cash flows.

If they can understand, then the investor can immediately compare the company's market value with this discounted value to see whether it is suitable to buy, sell, or just hold. There is no need to predict whether an economic crisis might occur.

Of course, summarizing historical patterns, we can say that generally, the occurrence of economic crises creates very good selling and buying points: before a crisis, bubbles will inflate company prices to extremely high levels; after a crisis, market panic will drive company prices to extremely undervalued levels.

These good selling and buying points are easier to discern and detect than when there is no crisis.

But that’s all there is to it.

Now let’s look at the second point.

"Particularly worried that if a crisis occurs, the companies or assets purchased won't withstand the crisis and will collapse."

Under what circumstances would a company or asset not withstand a crisis and collapse?

Basically, it amounts to one situation: the company lacks the ability to generate sufficient free cash flow and has excessive debt and leverage.

This indicates a typical problem with the business model.

Shouldn't this be something an investor carefully examines and considers before buying into the company?

Shouldn't they think about these issues before buying and only start worrying when an economic crisis is about to happen?

In this regard, Buffett, Munger, and Duan Yongping have provided classic cases.

Before the 2008 financial crisis, Buffett and Munger sold stocks of the two distressed entities (Fannie Mae and Freddie Mac) that were heavily impacted during the crisis. The two gentlemen have repeatedly stated that it was not because they predicted a crisis was about to occur, but because they noticed that in the years leading up to the crisis, the debts and investments of these two companies began to grow abnormally, leading them to believe that there was a problem with the companies' business models.

Duan Yongping is even more direct; he said (in essence) that if a company's debts are significant, he simply does not consider investing.

So does this point have a direct relationship with whether an economic crisis occurs? No, it does not.

This is something investors should always pay attention to. Even when there is no economic crisis, if a company's business model has issues, investors should still sell. There is no need to wait until they predict an economic crisis to start worrying about these issues.

In other words, if investors have invested in a company with a good business model, even if a financial crisis occurs, they shouldn’t worry at all. Because such companies will certainly endure the crisis and reach new highs again. Conversely, if investors notice that the company they've invested in is starting to have issues with its business model or corporate culture, they should sell even if an economic crisis does not occur, and naturally, this decision will also help them avoid the economic crisis.

Therefore, for investors, being diligent and honest in assessing and investing in companies based on the methods of determining their investment value is sufficient.

The occurrence of an economic crisis does not affect investors' important decisions.

After this shift in thinking, I write much less about macro or economic crisis topics.

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