Recently, I've been thinking about a pretty interesting phenomenon: why do the same stories keep repeating during every bull market, just with a different disguise?

At the beginning of last year, the Guotou Ruixin Silver LOF product was extremely popular. The so-called LOF means Listed Open-End Fund, which is simply a product that can be subscribed and redeemed like a fund, but also traded on the stock exchange like a stock. This Silver LOF was the only fund in China that could invest in silver futures, and it gained 263% in a year, ranking first. Sounds very tempting, right?

Here's the problem. I dare say you've all seen the scene back then: brokerage forums, Xiaohongshu, various wealth management accounts all full of arbitrage tutorials. The logic was simple—use 100 yuan to subscribe to the Silver LOF, sell it two days later like a stock, and earn a 50 yuan discount difference. Making six or seven hundred yuan in a month, faster than working part-time. So you saw 4 million people participating in this "feast" every day.

But most people overlooked the premise of all this: silver prices cannot fluctuate wildly.

The result was predictable. Last month, silver spot prices plummeted 26% in one day, hitting a record low. After the Silver LOF was suspended and reopened, it directly hit the limit down. Even more heartbreaking, Guotou Ruixin announced that night that they would change the valuation method, calculating net asset value based on international futures prices, which caused the NAV to drop by -31.5%. This was the largest single-day decline in the history of public mutual funds. If they had used the original valuation method, the maximum drop would have been 17%. This change cost investors 14.5%.

Those hoping to get rich through arbitrage were completely stunned. Even more despairing, they could still redeem according to the rules the day before, but the next day, the rules changed. It was as absurd as suddenly abolishing the offside rule in the middle of the Champions League final.

The fund company's explanation was: if they announced the change in advance, it might be seen as discouraging redemptions, causing panic and runs among investors. Also, if they continued to allow redemptions based on the original valuation, large arbitrageurs would quickly sell off, potentially causing liquidity risks. So they chose to change the rules suddenly at 10 pm. It sounds reasonable, but for those who had already placed redemption orders, it was a backstab.

This scene reminded me of 2015. That year's leveraged ETFs (B-shares) experienced a similar nightmare. Many people didn't understand the meaning of LOF or the mechanisms of various structured funds. At that time, B-shares of leveraged funds were extremely popular because they could amplify returns. But no one thought about the fact that amplifying returns also amplifies risks.

After the bull market peaked in June 2015, a large number of B-shares started hitting the limit down consecutively. Even worse, the net asset value of B-shares fell 20%-30% daily, but their trading prices could only drop 10% (due to daily limit). As a result, the discount rate soared over 100%. Holders were locked at the limit-down price and couldn’t sell. Moreover, B-shares had a downward liquidation mechanism—if the NAV fell below 0.25, they would be forcibly liquidated. The B-shares you bought at 0.5 yuan would be settled at their true NAV, instantly evaporating.

How many people knew about this mechanism at the time? Probably even the fund companies didn’t expect so many retail investors to rush in. All those risk warnings were just boilerplate—"market risk, liquidity risk"—saying nothing. When the crisis hit, these warnings became worthless.

Today’s Silver LOF arbitrage is like the B-share arbitrage back then—both betting on a hypothesis being true. The Silver LOF doesn’t have built-in leverage, but silver’s high volatility is essentially a form of leverage. Plus, the exchange’s daily limit rules and the free fluctuation of international futures create a minefield in the product design itself.

Interestingly, the driving force behind both events was FOMO (Fear of Missing Out). In 2015, leveraged funds’ assets surged to 5 trillion yuan, with 41 leveraged funds doubling in half a year. Private equity big shots’创业板 B-shares multiplied several times. Everyone’s social media was full of stories about making money—you looked envious and couldn’t help jumping in. Now, the Silver LOF is the same—Xiaohongshu tutorials, screenshots of friends’ gains, group discussions—everyone talking about how much they’ve made.

But that’s the essence of a bull market: excess liquidity and extreme euphoria. When this emotion peaks, no purchase restrictions can stop it. In 2016, despite strict real estate purchase limits, some people still fake divorces or fake income proofs to buy houses. In 2021, even with fund purchase restrictions, some borrowed money to subscribe anyway.

Every generation has its own "leverage product." In 2015, it was B-shares; now it’s the Silver LOF; next time, it might be something else. The key is whether we can learn from history. When you see signals like "crazy behavior that no restrictions can stop," ask yourself: Do I really understand this product? Can I bear a 50% loss? The best approach is to put down your phone, stop scrolling social media, and give yourself some rational space.

The college entrance exam questions change every year, but practicing past papers for three or five years is still useful. Investing is the same—history repeats itself in different forms, but the patterns are the same.