Investing 01: Start with Logic

I had been thinking about how to begin talking about investing. It just so happened that U.S. equities have been moving sideways for almost half a year, with the market looking fragile, as if it could fall apart at any moment, yet never quite doing so. So this feels like a good time to use it as a kick start.

What I want to talk about today is not which stocks to buy or sell, but the most important — and most easily overlooked — thing in investing: logic. (Of course, some people may ask: does the market even have logic? lol.)

Before we begin, one reminder: we are not Sam Altman, Dario Amodei, Elon Musk, or Jensen Huang. In this new world that is coming, how do you find a way to benefit from it amid the chaos?

We are just ordinary people trying to make money from the stock market. And because of that, more than grand visions, what we need is a line of reasoning that can convince ourselves.

Buying stocks is never about buying “the present.” It is about buying the future. So the real question is not what the world looks like today, but rather: what is the market worried about?

Let us look at a few assumptions.

If you look only at the Magnificent 7, aside from Tesla, the forward P/E ratios of the other giants are not particularly expensive — in fact, some may even look a bit cheap. If valuation is not the core issue, then what exactly is the market afraid of?

U.S. unemployment has indeed been creeping up since 2023. But the question is: is the economy truly contracting across the board, or is the economic structure simply transforming?

If this is mainly a structural shift between AI, technology, and traditional industries, then the story would look very different.

Inflation remains stubborn. Can the Federal Reserve still cut rates further? The answer is probably yes, but perhaps not by very much. The bigger question may be whether the U.S. is entering an era of structurally higher inflation.

If that is the case, then the long-term neutral level of interest rates may also need to be repriced.

What the market fears most is not that AI is too hot, but that one day a major company suddenly says: “We have decided to cut AI capital expenditure significantly.”

That would be the moment everyone realizes who has been swimming naked. But so far, none of the major players seems willing to put their swimsuits back on.

Among the Magnificent 7, there is one question that is actually worth asking yourself: which company is furthest from your daily life? In other words, without it, your life would not really change that much.

Very often, that question is more interesting than any valuation model.

When you begin to think through these assumptions and slowly search for answers, you are already starting to form your own investment direction.

My own background was in a traditional fund, specifically a long fund. For large funds, the most important thing was never short-term volatility, but whether there had been a fundamental change. If the core thesis had not changed, then much of the volatility was just noise. (Of course, more often than not, views also changed with the share price lol.)

At the moment, there does not seem to be any structural change. But at the same time, the market also lacks a clear upward catalyst.

Meanwhile, events around the world — geopolitics, interest rates, inflation, elections — are all introducing new downside risks. That is why the market is in this kind of condition today: full of anxiety, yet going nowhere.

Investing, or speculating, has never been easy.

If you do not want to study deeply, do not want to go through trial and error, and accept that you may lose to the market, then there is actually a very good approach: lazy investing. Buy the index, keep holding, and let time work for you.

But if you are the kind of person who refuses to admit defeat —
then let us continue next time.