Markets - Minor Correction? (Edit: Question Answered)

ffacoffipawb

masonic said:

ffacoffipawb said:

Wouldn't it be ironic if Woodfords holdings were now the best performers. I doubt they are though.

I don't think there is any danger of that. WPCT, now SUPP, fell 75% from its peak to mid-February, but has still managed to fall another 18% in the last few weeks. Would you buy it now?

i was thinking about the Equity Income Fund.

bowlhead99

ffacoffipawb said:

masonic said:

ffacoffipawb said:

Wouldn't it be ironic if Woodfords holdings were now the best performers. I doubt they are though.

I don't think there is any danger of that. WPCT, now SUPP, fell 75% from its peak to mid-February, but has still managed to fall another 18% in the last few weeks. Would you buy it now?

i was thinking about the Equity Income Fund.

As that fund is in liquidation, the strategy of its current manager has to be to dispose of the less-liquid holdings as soon as practicable, so there is no chance of holding them for the length of time which might be required for them to develop into the best performers. The bottom falling out of the mainstream public equity markets and the fact that people across a whole range of industries will be unable or unwilling to go to work for parts of this year will not do anything to help the business prospects or the capital market for early early stage / illiquid / private holdings.

So, you are likely right to guess that the holdings purchased by Woodford and not already sold are unlikely to be the best performers over the period of time that the fund will hold them.

masonic

ffacoffipawb said:

i was thinking about the Equity Income Fund.

The trouble is both funds had quite a bit of overlap. At one time (not sure about now), WEIF held the investment trust as well as some of the constituents directly.

Thrugelmir

ffacoffipawb said:

Wouldn't it be ironic if Woodfords holdings were now the best performers. I doubt they are though.

All the liquid holdings were realised at better prices than now. As an example Woodford had a sizable holding in Crystal Amber. I know because co-incidentally I wanted to sell my holding last year. I rang the trading desk as unable to obtain an online price. The desk trader said that a large line of stock was being placed. Transpires Woodford held some 16% of the issued share capital. I sold at 185p. Safe to assume Woodford averaged somewhat lower. Today selling price was 83p. 

bowlhead99

masonic said:

ffacoffipawb said:

i was thinking about the Equity Income Fund.

The trouble is both funds had quite a bit of overlap. At one time (not sure about now), WEIF held the investment trust as well as some of the constituents directly.

The fund still holds ~9% of the investment trust (no notification has been filed to say they have reached a lower notifiable ownership threshold, only the one saying Link had become the manager from Woodford previously). They won't have been able to get anyone to buy a holding of that size at anywhere close to reported NAV, so will have been hanging on to it.

k6chris

It's worth keeping in mind that as of the this morning, the S&P 500 index is still nearly 10% higher than it was in December 2018.  But hey, that was 15 months ago.  This fall has been fast, but it hasn't been particularly far (yet).  

m_c_s

The S&P 500 index has fallen 27% from its highs of Feb this year. It is now at a normal valuation and broadly on trend with the historical average P/E of 15. A further 10% drop (2190 area) will get into the expected 10% earnings decline territory and a further drop to 1950 will start to reflect low valuations and a reduced earnings outlook. 

bowlhead99

The Dow close at 21200 yesterday and S&P500 at 2480 is summer 2017 territory (not including effects of dividends received).
If it went back to Jan/Feb 2016 levels (15980 /1880), that would be a fall of another quarter from here. 
Nobody is saying it will, but they are not saying it couldn't.

Worth noting that market prices are forward looking - what everyone in the market knows (or think they know) about what can or will happen. While people generally expect things to get worse from a virus impact / business and economic disruption perspective, that doesn't mean the markets will have lower prices when that happens, because markets already expect the disruption (partially offset by government stimulus/ assistance measures), which is why they've dropped by 20%+. 

Additional drops happen when the weight of investor thought tips over to, 'this is worse than anyone could have forseen' rather than 'this is just as bad as we were thinking it was going to be when we last reacted to reduce the share prices'.

DairyQueen

bowlhead99 said:

Additional drops happen when the weight of investor thought tips over to, 'this is worse than anyone could have forseen' rather than 'this is just as bad as we were thinking it was going to be when we last reacted to reduce the share prices'.

I suspect that moment may happen when the general public becomes considerably less complacent.

I have heard mention of all kinds of reasons why individuals assume they/family/neighbours/community/employers will be unaffected. Favourite ATM being "this is a rural area". Also, appreciation of the looming personal/national/global economic impact is practically zero.

Emperor's new clothes?

For my family the impact has been instant. Mr DQ is a self-employed consultant due to retire at the end of this year. Two of his clients have already cancelled their contracts (both companies rely on customer footfall - rapidly decreasing). One other is in the 'deep cleaning' industry so already trying to adjust to the volume of new business. The rest are more likely than not to cancel their contracts as the pandemic takes hold and their revenues shrink.

OH may (if lucky) retain one client over the next several months.

These are all the kind of privately-owned SMEs that are essential to our economic health, and have been targeted for government support, but directors/owners are already floundering as they struggle to deal with the juggernaut on the horizon. I believe that the scale of contraction of demand has yet to be priced-in to markets. Nor has the number of SMEs that will go under through lack of skilled management rather than compromised cash flow.

On the personal front ...
We are rapidly revising our retirement plans. The anticipated revenue from OH's company is now unlikely to materialise this year. Sequence of returns on our investment portfolio is likely to be bad-to-hideous. We are fortunate to have planned for a worst-case scenario which (of course) we never really believed would come about. Also, fortunate that OH has decent, currently deferred, DB pensions that could be put into payment at any time.

Unlike the majority, we are able to pull-up the drawbridge and hunker down. Our major concern is to get through this without losing any of those closest to us.

Have others already experienced or witnessed any professional/economic impact other than the obvious drop in investment values? It may help to see the wood through the investment trees by viewing the situation from the ground rather than the clouds as we progress through this.

cloud_dog

DairyQueen said:
Have others already experienced or witnessed any professional/economic impact other than the obvious drop in investment values? It may help to see the wood through the investment trees by viewing the situation from the ground rather than the clouds as we progress through this.

Traffic seems a lot lighter on the roads

Usually take me dear 'ole ma (food) shopping at the weekend and go for a coffee, I have suggested she stay at home.