Brexit outcome gamble

grey_gym_sock

ok, a brief update on how my referendum-related investing went (short version: badly). i was not looking at the markets immediately after, so no attempt to take any action at that point. which may be a good thing, since inaction usually makes one more money in investing ...

grey_gym_sock wrote: »

in the last 2 weeks, i've used c. 25% of £X to buy new holdings in 2 UK property companies (viz. LSR and UAI). the timing is because i expect "remain" to win, and i guess that these shares' prices would fall (in the short term) if "leave" wins, or recover if "remain" wins - and that they're currently a bit lower than they might be if there were no referendum. but i will continue to hold these shares regardless of the outcome.

so, as i predicted, LSR and UAI fell after a "leave" win. but as i failed to predict, "leave" won, so and i was down c. 15% by the end of june on those new investments (and down further today). continuing to hold, as planned.

however, overall my equities are up a little after the referendum. ex-UK did best, because of the falling £. some big UK companies, who do most of their business outside the UK, have also risen to new highs. the more UK-focused companies did worse, especially the smaller or more economically sensitive companies (i.e. companies that would be hit badly by a recession).

during the whole month of june, my overall equities were (in capital terms) up c. 2%, the same as the all-share index, but less than the 8% rise in the FTSE global all-cap index (due to the falling £). as i've said before, i should have more in ex-UK equities. and in this month, my relatively large weighting in property shares was a negative factor.

over the same month, my corporate bonds + preference shares were down 1%, compared to vanguard's investment-grade bond fund rising 2% (presumably because i have a lot of sub-investment grade). and gilts were up 6%! - perhaps i should have some of them, but not keen to buy at current prices ...

incidentally, while brexit could tip the UK recession (because many businesses will at least postpone making new investment decisions until the UK's future relationship will the EU is clarified), IMHO it is entirely within the UK's government's power to counter that by committing to a large-scale fiscal stimulus - i.e. the government can invest more to make up for the private sector investing less. stephen crabb seems to have grasped this idea: see http://www.bbc.co.uk/news/business-36700080 & http://www.taxresearch.org.uk/Blog/2016/07/05/stephen-crabb-half-way-to-peoples-qe/ ... ok, he probably won't be the next PM, so we'll have to wait and see what the actual new PM's policy will be. i fully expect them at least to abandon austerity; but how far they'll go with public investment remains to be seen.

meanwhile, at least 50% of £X is intended to go into overseas equities. and i'm waiting until after a "remain" vote, after which the pound will presumably recover, making overseas shares cheaper (in £), before i start buying any overseas shares. though i intend to do this gradually, anyway.

so this bit is a problem ... will wait at least a few months to see if there is a better opportunity to buy. except that the drip-feed into MYI (murray international investment trust), which i started in may, will continue; its price is higher now, but a useful discount (of c. 8%) has opened up.

if i am wrong, and "leave" wins, i will consider using part of £X to buy some additional UK shares (after they presumably crash). thinking of trading companies, rather than property companies (because i probably have enough of the latter now).

in line with this part of the plan, i've bought a new holding in LGEN (legal & general) today, after the price dipped again. which was my first investment action since the referendum. further purchases of other UK shares whose prices have been adversely affected by the "leave" vote may or may not follow ...

Thrugelmir

Seems a lot of noise at the moment. Waiting for the markets to settle down post the referendum. I'll continue to remain fully invested. As it's time in the market rather than timing the market that matters.

Kendall80

Thrugelmir wrote: »

Seems a lot of noise at the moment. Waiting for the markets to settle down post the referendum. I'll continue to remain fully invested. As it's time in the market rather than timing the market that matters.

Agreed but no harm in a little tinkering around the edges. I diverted a small amount as a hedge into Investec global gold and UK Gilts 1 week prior to the vote. Just sold the gold for a 22% gain. The Gilts fund is currently up 12% This must be the 1 time out of 10 I get it right. Unfortunately my Henderson UK property fund is doing its best to offset those gains and will likely be frozen in the next few days it would seem.


With almost everything going up recently it would be difficult not to make gains. Unless you're invested in just commercial property and a FTSE 250 tracker.

Ray_Singh-Blue

Bond funds keep going up. Why?

Take Vanguard's UK Gilt ETF VGOV, an effective yield of just 1.5%, less the fund charge of 0.12%. 39 bonds with an average maturity of 16.5 years.

The thing that puzzles me: people are prepared to pay over 20% more for this unexciting bond ETF today, than they were 2 years ago.

My rather bearish view is that Inflation is likely to rise with the increased cost of imported goods, since the devaluation of GBP. Accompanying rises in interest rates will trigger a sharp fall in the value of bond ETFs. I have held this view for 4+ years and clearly so far been spectacularly wrong!

moneyfoolish

Ray_Singh-Blue wrote: »

Bond funds keep going up. Why?

Take Vanguard's UK Gilt ETF VGOV, an effective yield of just 1.5%, less the fund charge of 0.12%. 39 bonds with an average maturity of 16.5 years.

The thing that puzzles me: people are prepared to pay over 20% more for this unexciting bond ETF today, than they were 2 years ago.

My rather bearish view is that Inflation is likely to rise with the increased cost of imported goods, since the devaluation of GBP. Accompanying rises in interest rates will trigger a sharp fall in the value of bond ETFs. I have held this view for 4+ years and clearly so far been spectacularly wrong!

That sounds logical except the BOE will not put up interest rates if it can possibly be avoided because of the bad debt disaster which would occur.

bigadaj

Ray_Singh-Blue wrote: »

Bond funds keep going up. Why?

Take Vanguard's UK Gilt ETF VGOV, an effective yield of just 1.5%, less the fund charge of 0.12%. 39 bonds with an average maturity of 16.5 years.

The thing that puzzles me: people are prepared to pay over 20% more for this unexciting bond ETF today, than they were 2 years ago.

My rather bearish view is that Inflation is likely to rise with the increased cost of imported goods, since the devaluation of GBP. Accompanying rises in interest rates will trigger a sharp fall in the value of bond ETFs. I have held this view for 4+ years and clearly so far been spectacularly wrong!

Well they are paying that much more for the underlying bonds I suppose.

I also thought bonds had hit highs and there was only one way, but if you keep printing funny money then people are prepared to pay for their money to be in a safe haven. Somewhat ironic that uk gilts go to a negative yield after the Brexit vote.

The root cause is still the gfc and the fact that debts all over the world haven't been written off eventhough there's little prospect of repayment.

bigadaj

moneyfoolish wrote: »

That sounds logical except the BOE will not put up interest rates if it can possibly be avoided because of the bad debt disaster which would occur.

So the consequence is that people are still buying over priced assets, property in particular, because of cheap money and you can't stop the cheap money because it would cause debt problems.

There's something wrong there methinks.

badger09

Kendall80 wrote: »

Agreed but no harm in a little tinkering around the edges. I diverted a small amount as a hedge into Investec global gold and UK Gilts 1 week prior to the vote. Just sold the gold for a 22% gain. The Gilts fund is currently up 12% This must be the 1 time out of 10 I get it right. Unfortunately my Henderson UK property fund is doing its best to offset those gains and will likely be frozen in the next few days it would seem.


With almost everything going up recently it would be difficult not to make gains. Unless you're invested in just commercial property and a FTSE 250 tracker.

Less than 24 hours

https://www.theguardian.com/business/live/2016/jul/06/brexit-fears-pound-slides-stock-markets-business-live

Kendall80

Fortunately I sold it down a bit last week. It comprises a very small proportion of my portfolio. However, my P2P investments are also skewed towards the commercial property sector so I may take a hit there on default rates over the coming months.