Li Xunlei: Three Signals to Judge When a Bubble Bursts—Providing Entry Opportunities for Those Who Haven’t Gotten In Yet

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Gold Finance reports that on July 2, Li Xunlei, Chief Economist of Zhongtai International, recently shared his observations and reflections on topics such as the K-shaped global divergence in the silicon-based era and new trends in wealth management.
He pointed out that with the arrival of the AI era, the global K-shaped divergence is intensifying. In the U.S. stock market, 1% of investors hold 50% of the market value, while the bottom 50% of investors hold only 1% of the total market value; the "Magnificent Seven" account for one-third of the S&P 500's market capitalization, most companies do not create value, and over the past 15 years, only 6.5% of stocks have covered all the net wealth created across the entire market, with the remaining 93.5% having offsetting positive and negative values resulting in zero.
Currently, low inflation, pressure from RMB appreciation, and low interest rates provide relatively ample fiscal policy space for China; U.S. Treasury interest payments account for as much as 16% of fiscal revenue, significantly limiting policy room.
In terms of asset allocation, Li Xunlei believes that the real estate market has long been suppressed by an aging population, slowing urbanization, and a declining total population, making its allocation value generally low; while there is still room for increasing the allocation ratio of equity assets in the capital market—Chinese households hold about 10% in stocks and funds, lower than the 32% in the U.S. and 14.5% in Japan.
How to judge whether the AI bubble has burst? Li Xunlei believes that the key is to look at cash flow, because AI companies are investing heavily, and if revenue cannot keep up, there will be a risk of cash flow disruption. Second, look at the unemployment rate, because the AI era may lead to massive job losses. Third, look at inflation; if inflation rises further, the Fed will have to raise interest rates, which will release risks in markets with relatively high valuations.
"But after all, it is still a silicon-based era, so I think that if the current AI bubble bursts, it should bring opportunities to investors who have not yet entered the AI industry." Li Xunlei believes that under the deglobalization cycle, China's competitiveness continues to improve, and industry chain links related to food security, energy security, and technology and military contain potential opportunities, and we should remain confident in China's future.
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