The RWA sector is currently booming, with large whales entering the market. The pace in the cryptocurrency space will slow down to some extent. In this sector, corresponding equities, bonds, and derivatives RWA will need to focus on fundamentals. I hope everyone can achieve the Davis double play and attain wealth and freedom. Let me share which fundamental factors are driving the rise in prices of real stock assets:

First, on the price level, a long-term imbalance between buyers and sellers is the driving reason for its growth or decline. The rising channel of stocks is influenced by multiple factors that may lead to more buyers than sellers in the long run, including but not limited to:

a. Exceeding expected profit growth: This is the most basic driving factor, where a company's future earnings significantly exceed market expectations.

b. Price-to-earnings (P/E) ratio expansion: This reflects the growth of market optimism, where investors assign a higher valuation multiple to the company's earnings.

c. Mergers and acquisitions (M&A): Important new buyers (such as acquiring companies) increase demand for stocks.

d. Stock buybacks: Companies reduce the number of circulating shares by repurchasing stocks, acting as buyers while increasing earnings per share (EPS).

e. Loose monetary policy: The central bank's loose policies may inject liquidity into the market, driving funds into the stock market.

f. Increased fiscal spending: A surge in government spending can indirectly boost corporate revenues and support stock prices.

Conversely, if these factors move in the opposite direction, it may trigger a decline in stock prices.

Where does our profit as investors come from?

The success of investors mainly comes from two key strategies:

a. Discovering unique insights: It is crucial to identify one or two key growth opportunities within a company that are undervalued by the market ahead of time. If your viewpoint aligns with the majority—cheering along with others for well-known positive news—it is difficult to achieve significant value. Even if you are well-versed in trendy jargon or complex concepts, a lack of unique insights can yield nothing.

b. Capitalizing on low expectations: Entering the market when expectations are low (i.e., lower P/E ratios) allows investors to benefit from the dual effects of exceeding expected earnings and valuation increases (P/E ratio expansion). This dual effect is commonly known as the 'Davis double play'. This strategy can bring considerable returns.

Original text: https://x.com/USDesci/status/1912090820964131144