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Portfolio Positioning For Brexit Vote

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lse:bta
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#21

Hi Again All,

Well 10:20 now and euphoria starting to wear off, FTSE down from 1.2% up to just over 1% now. Lloyds going well as expected though, price spiked to 59p quite a few times and is still going up. Have set a “sell limit” of 60p (previous ceiling, cant see it going above that myself) and a “stop loss” of 58.3, at ~58.6 right now. If it moves above 59p I shall up the stoploss to 59p. Looking at 1 min interval display on investing.com it looks like it keeps spiking up to 59p.

Hey if I manage to get 59p then I will have done almost as well as broadmoor, though I cant remember what his exact selling price was. Still a loss though sadly, but less of one than at 55p.

ATB

Pref


#22

Hi Pref,

It certainly makes a pleasant change to see an interesting new thread on this discussion board, and feel free to continue to use UPPER CASE characters, as we all know that each BLOCK of CAPITAL is really important to you!!!

I thought you had recently sold quite a few shares in order to be able to “pounce” when any significant downturn or (further) correction happens, and that your (recent) entry into ETFs was to reduce the impact of significant movements in any single stock, but obviously you need to take whatever further action keeps you feeling comfortable.

As previously mentioned, any intervention in the market costs money - dealing fees and stamp duty for any share purchases.

If the amounts traded are low, then a reasonable margin between selling and buying back is required just to “break-even”, but if substantial amounts are involved for each trade, a significant “paper profit” can be obtained on much smaller margins.

I will continue to be a “lazy” investor, just “sitting on my hands” and waiting to see what happens.

With recent (unexplained) volatility in markets, individual stocks, exchange rates and commodities, it is very difficult to (accurately) predict what will happen in any given scenario.

I certainly wasn’t expecting to see such a positive “bounce” across the banking sector when the markets opened today, including HSBC, which is currently trading above 670p.

I wish you well with your investment decisions, and how is your new grass doing?

Regards,

Steve


#23

Hi @steveshares,

I see that you are more active on LSE nowadays, I look there occasionally but dont have an account.

Yes I did sell a load of things and I dribbled the money into ETFs as the market moved down but have largely spent all of that cash now. I still track the old portfolio with the stocks I sold in it and Im about £1,500 ahead right now. Not a fortune but positive anyway.

Current situation is different though and caused by the brexit issue coming to a head and almost certainty (IMV) that it will get voted down. So I am selling out of investments that will likely suffer quite badly if the deal is voted down, LLOY being one such investment - it being one of THE most correlated brexit stock. I suspect it will be down in the low 50s again after the vote, just my guess you understand. Most other FTSE stocks will likely get clobbered too - as per the brexit referendum. So I figure its better to sell and avoid the loss and buyback after the dust has settled.

Personally I dont think HSBA will be affected as much as stocks such as LLOY, but suspect some damage to the SP is likely. Anyway I am continuing to hold my HSBA.

Grass is doing OK. Did the job in 3 parts (back garden, front right, front left). Back garden looking pretty lush now, front right almost as good. Last bit front left has green shoots (so has germinated) but has a way to go to catch up with the rest of it. Cost me ~40 bags of topsoil at £3 each and a big £35 bag of seed plus my effort obviously. So not a big deal really.

Still have a large area to the side of the house that I havent reseeded (its the same size as the whole front garden) so would need quite a lot of topsoil. That area is looking pretty sick by comparison, may have to do so work on that come the spring.

ATB

Pref


#24

Hi Pref,

I am not particularly active either here or on LSE, but congratulations on your good “detective” work!

I joined LSE first, several months before finding the old “iii” site, which I looked at quite often - before deciding to sign-up!

I think several other LSE members moved across to this site, but some of those no longer post on either discussion board, and I wonder what has happened to Monty?

I am glad that your new grass is growing nicely, and at least if it has all germinated, it should really grow well in the spring - especially with additional topsoil.

By the way, if you use the “@” function to contact members directly, you need to spell their usernames correctly!

Have a good week - I am unlikely to post again until after “close of play” on Friday, when I may give another month-end update.

Regards,

Steve


#25

Hi Again @StevesShares, well sorry if I got your username wrong - likely just a typo.

You always bang on about every intervention in the market having a cost (commission, stamp duty - not always, and spread). But I never make trade in quantities of less than £3,000 and the ETFs I am using dont attract stamp duty and have very low spreads so provided things move somewhat in the right direction it’s not that hard to make a profit.

But in the end yes you are taking a gamble and you have to be sufficiently confident in the supporting rationale for your trade for it to be worthwhile doing it.

Take the brexit vote for example, I reckon the FTSE could drop between 2 and 5% when (if ?) the deal gets voted down. Immediately after the referendum vote the move down was even greater than that. So on a sizeable sum invested that’s a lot to lose AND if it does drop and you buyback lower you can make a significant profit. Contrast that with the situation if the deal DID get voted through, well my guess is that might be worth a 1-2% rise at best. Let’s face it the markets are already factoring that in. So as far as I am concerned this move is a no brainer.

So as I’ve said quite often lately, my approach is based on capital preservation and loss avoidance. And in situations such as this IMV sitting on your hands isn’t a good idea, as doing so will just result in your capital disappearing before your eyes. Yes you will probably get it back long term, but better not to lose it all IMHO.

ATB

Pref


#26

Hi Again @StevesShares, Of course I forgot that you are still operating with paper certificates and it would take you many days to perform a trade. In that time the market could easily move against you negating the trade you were trying to do. So I can see why you are inclined to do nothing.

I don’t have that problem though, I can trade instantly and I don’t even have to wait for settlement to complete before I can reinvest the funds elsewhere. It has many advantages but yes some risks as well.

ATB

Pref


#27

@PrefInvestor1,
You make the assumption that the market has already priced in the deal getting voted through. Why do you make this assumption? The data appears to show that currently there is a higher proportion against the deal, hence it would appear that the markets are already pricing in failure in getting the deal through. In fact from my perspective it appears more likely that the vote will go against the deal and this is more likely to be factored in to the markets currently.

Whilst your speculation about the level of change when the result of the parliamentary vote is known could be correct, the important part is what level this change will be applied to, i.e. one has to guess what the FTSE and markets in general will do between now and the vote. The movement after the Referendum was the result of a completely unexpected result, that is completely different from today’s scenario.

If one has a balanced portfolio there is a good chance that gains and losses will be balanced out, which could also be the same result if one tries to guess on which way the markets will jump in general and in particular stocks.

I wish you the best with your choice of churning your portfolio, but just because somebody else does not follow your view does not make their position invalid. In the end it just comes down to personal choice, individual selections and most important of all timing.


#28

The greatest problem for most people will not be making the “wrong” decision, but, not making any decision at all. When you push people into a corner you usually get “oh in the long term it should be ok” or “I’ll wait and see what happens”. How many people actually have a clear, defined trade plan?

When you wait for confirmation it’s too late. Let me point out the opportunity cost of not holding euros for the last 18 months 5.5% (1.19 - 1.125). I reiterate, why is anyone holding Sterling?

You all had a shot at getting out of Sterling at 1.15 a few days ago (Hit 1.154)


#29

Hi @bowman,

I am not assuming that the deal going thru is priced in, though I do think that today’s move in the markets is at least partly to do with that. I agree that the vote is likely to go against the deal, hence my proposed course of action.

It is not my intention to try and convince anybody else to follow my lead, only to solicit informed comment. I have conversed with @Stevesshares on many occasions dating back quite a long time to when we were still using the old style boards. My post was addressed specifically at him. He is always commenting on my trading and the fact that this must be costing me money. I am merely putting my counter argument to him in response to his earlier post here where he has raised that point again.

We are each entitled to our own view of how best to manage our investments. But SteveShares has commented on my approach and I am merely responding. Feel free to disagree by all means. But as I say it is not my intention to exhort anybody else to follow my lead - in fact I normally go to great lengths when posting here to tell people NOT to do that.

I wish you well with your balanced portfolio in the days ahead.

ATB

Pref


#30

@macbonzo,

Personally I do not play the foreign exchanges. A holding of a particular currency is akin to a holding in any stock, unless one prefers to put all ones egs in one basket.

So if I had sold everything and put the funds into Euros I would have made 5.5%. However, if I had ignored the currency markets and put my funds into a good Investment Trust I could have got almost 20%. The IT I have in mind is SMT, which was 400 18 months ago and is today 476. Although the holding is quoted in GBP, the Trust has profited from its large overseas holdings.

In fact I have held SMT for much longer than 18 months, and my return currently stands at ~150%, which is fraction better than if I had relied on individual foreign currency pairing.

Personally I do have a plan and it involves maintaining my long-term average return on my protfolio (which includes ~30% of cash) at about ~10% per annum, and for me a decision to do nothing (i.e. to maintain the holdings I have) is a clear decision made within the scope of my “Plan”. I have made tweaks to my holdings and I will continue to do so, but they will not involve making major changes to the way I make investment decisions or on what I invest in. This is what I have been doing since I started investing back in the early 1980’s.


#31

@macbonzo,

Now it could be said that SMT benefitted from foreign exchange movements, which would tend to support you view that GBP should be ignored, i.e. best to be somewhere else.

I have another purely GBP based example that shows one can safely ignore the foreign exchanges and in fact make more money remaining in GBP based assets. Take WJG for example; a purely UK based construction company in the business of building houses and flats. 18 months ago WJG was at 180. Today’s price is 206.5, or ~15% higher. Now in my view a 15% increase in value significantly out-performs the £/€ currency pairing (and this ignores the addition of dividends).

I might also suggest that if you had decided to exit Sterling 18 months ago then you had already missed the boat, since the £/€ rate 3 years ago was ~1.45. However, one should take pity on anybody that existed Sterling in late 2008 when the rate was ~1.03, or ~8% lower than today.

Timing is always key, as is the choice of alternative.


#32

There’s only one thing worse than having a clear, defined trade plan… and that’s having a a wrong trade plan.


#33

I completely disgree with that. Having any plan is better than no plan. At least if you are wrong you can use stops, hedges, opportunity cost or time to exit re evaluate or preserve capital. With no plan you never have to account to anyone, you can buy to hold as long as you like with no regard to opportunity cost. You can always use the “it will work in the long term” excuse.

That said, I accept people have done well with Sterling based investments. I suppose what I am trying to say, is you could do even better with USD based investments. For me the elephant in the room is your biggest asset. It is denominated in Sterling. Has anyone contemplated selling up and putting the proceeds elsewhere? So much is possible.


#34

Apart from running cash flow in my current account, I never hold any real currency. I did buy EUR when we discussed this scenario a year or so ago, then sold for little profit and bought something else.

loss is not just in terms of dwarfing buying capacity of sterling, one has to add the rise in product prices - in effect its double inflation - which is a physics term but have to use here.


#35

Great point. I should also mention inheritance tax which is double taxation. In Italy IHT nil rate band is 1,000,000 Euros.

I have a pretty big issue with UK IHT.


#36

that bit doesnt apply to me yet, my family estate whatever it is will get taxed - I do have a trick. move parents assetts abroad, sell and transfer cash -

UK Economy isnt primed for next generation, we will end up being an off shore tax haven to rich Yanks and that’s about it.

When Russians take their money out, that will be brexit plus plus


#37

That’s quite apt considering what’s happened with the UK Leaving the EU.

I wasn’t suggesting that it’s never a good idea to have a trading “plan” and to trade attempting to make a profit… that’s why almost everybody is here on ii after all.
I’m merely suggesting that to have a Trade Plan under all scenarios rather than stay invested (or not… each to their own) means that all have to keep watching their crystal balls all the time.
The only sure thing about the next few weeks in particular but more likely months is that there will be high volatility. Trying to predict events and therefore the movements of SP before those events happen is likely to end in failure for many. Yes, you can use stops, limits etc but if the SP moves the wrong way from your “plan” then you are only going to stem your losses.

For many, staying invested is a “plan”.

All that said, I’ve been trading Brexit since June 2016… and very profitable it has been too. Wish we could have a Brexit every few years… and we probably will.


#38

Agreed on the quoted percentages to a degree.

But the level of change would be applied to the sale price on the day of Pref or whoever is selling and not in relation to the drop on the vote result. ie if pref sells today at 58.5, we should guesstimate percentages from that known figure to our estimated resulting price.

I can see a vote down dropping sp to 54p, potentially 51p. Vote up could have a rise to 60+ and possibly 63p within a week.


#39

You chaps might prove to be right but I think it’s more more nuanced than that and it might catch people out. A Vote against the Deal (including the subsequent inevitably tweaked amendment… they will be holding something back for sure) doesn’t just raise the spectre of No Deal… but more likely invites #BrexitRef2 and the likely outcome of that would be a vote to Remain in the EU later in 2019… which would be a very beneficial thing for the markets.


#40

Personally I do not plan to be out of the market for very long. I will sell ahead of the vote to preserve my capital and aim to buyback again in the immediate aftermath, hopefully at reduced prices. If the vote passes and prices rise I may lose out - I am prepared to take that chance.

ATB

Pref