Hello, this is Pazz.
Starting from today, the day before Jensen Huang's visit (?), things already looked ominous during the day session, and stocks began falling in earnest during the after-hours session. Whether this will end as a short one or two-day correction, a one or two-month correction, or whether our KOSPI has truly hit a historic peak and is transitioning into a major bear market — honestly, I'm not sure myself.
Personally, the current stock market valuations look so precarious that I've been maintaining a portfolio that is over 70% cash for both Korean and U.S. markets, and from here on out I'm investing with the mindset that any further gains are not meant for me.
That's because after investing in stocks for a long time, one of the things I've come to realize is that not losing is more important than earning. The paper value shown in your account is not your money until you cash it out. Where people get confused is that they look at the paper value in their account and mistakenly believe they've already made that much money.
With the Korean stock market booming, most retail investors have seen their paper gains multiply several times over, and I've seen many posts showing proof of this — but I'm genuinely curious how many of those retail investors will still have that money intact two or three years from now. In reality, looking at the long-term track record of stock investing, only roughly 5–10% of people make any meaningful money in the market. The remaining 90% end up handing over the money they've earned through hard work and sweat to that small minority.
As long as the Korean stock market exists, stocks like Samsung Electronics or SK Hynix will sit in someone's account even when a major downturn begins, and someone will have to watch the paper value of their account shrink day after day as the decline plays out.
That is precisely why U.S. financial institutions put their lives on the line when it comes to risk management.
Even after making good money for years, getting caught on the wrong side of just one bear market — and bear in mind that while prices tend to rise slowly, declines often come swiftly — is more than enough to wipe out everything you've earned up to that point.
Many people think that when a downturn comes, they'll be able to get out in time. But as long as you're in the market, getting out exactly when you plan to is genuinely very difficult. Whether the decline that began yesterday and today will end as a brief correction or mark the start of a major bear market is something no one can know right now. If you think it's just a brief correction and hold on, but the market keeps grinding lower month after month for two or three months, psychologically you'll find it impossible to sell at a loss — and ultimately the market always reverts, which is just the nature of stock markets. It's also the ending that most retail investors end up experiencing.
Gambling is the same way. The number of people who win money at the start and walk away from the table right then and there is truly tiny. I'm sure most of you have heard plenty of stories about people who keep playing, gradually losing more than they realize, and eventually leaving the casino having lost even their principal. Of course, I'm not saying the stock market and a casino are the same thing.
The re-rating of the memory market, a future that looks nothing but bright, brokerage reports raising target prices day after day without pause...
Just one year ago, these same people — the so-called analysts — were saying "Winter is coming" and talking about the collapse of the memory market. They're human too, so they ride the mood of the market when writing their reports (saying "no" in a market like this would get you stoned, so it's not easy) and keep raising their target prices.
Honestly, I have no idea how much longer the current memory craze will last. Next year? The year after? But I am certain of one thing: the memory market is cyclical, and this will end at some point.
It just seems clear that AI has brought about a mega-cycle that is historically rare to witness.
Because the memory industry is a cyclical one, it was originally a market valued on PBR — but now the narrative has shifted to PER, and target prices are being raised aggressively. How much longer this can go on, I don't know. Memory companies are already trading at more than double their historical valuations on a PBR basis.
Some say the memory boom will last at least until 2028, so there's nothing to worry about until next year. Honestly, I think that's possible too. But it might not be. After spending so many years in the stock market, I've learned through hard experience that there is absolutely no such thing as "absolutely."
Because memory company stock prices already price in forward expectations (at least 6 months to over a year out), the moment the AI narrative shows even the slightest crack, there is a very high probability that all hell will break loose. Especially in a situation like this bull run where the narrative is shifting from PBR to PER, the impact looks like it could be even greater.
Looking at past cycles, the peak in Samsung's stock price came when the PER was around 4–5. That's because during an up-cycle profits surged so enormously that the stock price couldn't keep up, pushing the PER very low — and that was the peak. Doesn't the current situation look somewhat similar? And the bottom of Samsung's stock price came when earnings were a mess and the PER was very high. That's a little counterintuitive. That's just how the stock market works.
Let me say it again: I genuinely have no idea how much longer this memory company frenzy will last. The scenario I personally consider most likely is that after a correction period around June–July, the KOSPI breaks through 10,000 and trends upward until around autumn — but I'm not a fortune teller, so I really don't know, and I intend to respond to market conditions with a high cash weighting.
Anyway, the reason I wrote this was to say that managing risk according to your own situation is extremely important. And I wanted to remind you that until you sell, it's not your money — knowing when to leave is also important.
In particular, I hear many people talking about making long-term investments in memory companies — please don't do that. A cyclical industry is not something you hold for the long term; it's an industry where you have to ride the waves well. It's possible that the peak prices for Samsung and Hynix that may be set this year will never be seen again for a very long time. (I personally think that's a real possibility.)
Thank you for reading.
