Economy crash =/= stock market crash?

masonic

anonmoose said:

Sorry can someone briefly explain currency risk?  So for example I have Vanguard Global all cap, but that is in GBP so does that mean I don't have to consider currency risk even though its a global tracker?  Or is the currency risk still there at the price you buy?

What examples of funds are exposed to currency risk?  Or is this nothing for the novice DIY investor using vanguard to be concerned.  

Apologies I know this is probably a stupid question but I am new to all this and learning all the time on this forum.

Vanguard FTSE Global All Cap invests in large and smaller companies globally, so it will have exposure to various different currencies to the extent that those underlying global businesses buy and sell goods and services in those currencies. Over the long term, currency fluctuations don't make much difference as prices adjust to compensate, but it can create short term advantages and disadvantages to trade. The fact the fund is priced in GBP is convenient to a UK investor, but all this means is that it collects and distributes money in GBP. It doesn't affect the investments within the fund. Currency risk adds some volatility to the fund, but it is insignificant compared with the volatility of the investments it holds.

John464

I guess this is why they say you should only look at your share prices once a year - when you have to do for your tax return & annual rebalance.
If I hadn't looked at my MSCI World ETF for a year and looked at it today I would think nothing much of it.  Because the price is about what it was last year at this time.

masonic

Type_45 said:

masonic said:

Type_45 said:

masonic said:

Type_45 said:

There is nowhere to hide today.  Not even gold/silver.  Cash is king!

S&P500 now in a bear market. RICA is my only holding not in the red today.

My portfolio, and the assets I monitor, look like a murder scene.

This is why a decent cash allocation is important. Not simply for days like today to protect money, but because one of these days bargains will be available. And I'm looking at gold/silver when they collapse in price too, as I'd expect them to bounce back strongly and make a good profit.

The VIX index is now up in the mid-30s, approaching its one year high and not far of levels not seen since the Covid crash (where it peaked at 66). Fear is really starting to take hold.

The trouble with holding a lot of cash is that the pound is again on the slide, and with UK inflation predicted to be more persistent here than other developed economies, then it pays to diversify and avoid local currency risk where your normal investments wouldn't be exposed to sterling. The difficulty has been choosing wisely within the fixed interest sector, or elsewhere. I'd normally have a decent bond holding, but am glad not to have stuck with that in recent years. Gold has done ok in general, but not as well as some might have believed; crypto can be once and for all discarded as an inflation hedge; TIPS have been the star of bond markets; REITs have had mixed results, but property valuations are set to come under pressure. I personally loaded up on wealth preservation funds and these have not disappointed so far, but anything could happen in the coming weeks and months. I'll need to do some rebalancing soon, but not yet.

It has to be gold. I know it hasn't performed as well as would be expected, but it's the one thing almost everyone agrees on.

Gold has performed slightly better than Capital Gearing Trust today.

I think it will crash along with everything else, though, so perhaps some SGLN (or preferably physical sovereigns/Britannias) would be a good opportunity at that stage. Along with SSLN and silver Britannias (although the VAT on physical silver puts me off).

I'm never one to put all my eggs in one basket, so I hold a couple of other funds besides CGT, and a separate slug of gold. It would be unfair to judge CGT based on one day's performance, as it employs some longer term strategies to boost performance which are realised in the short to medium term. Of course in part I am paying for a fund manager with an appropriate record and outlook to navigate the minefield of lower risk assets for me.

I would be surprised to see gold fall while equities are on the ropes. It has traditionally fallen during bear market rallies, although that's after it soared during the crash, which hasn't really happened this time. If you are right about a 1970s style situation playing out, I'd have thought gold would be a bargain at today's price and unlikely to fall from these levels.

Notepad_Phil

Sea_Shell said:

IanManc said:

Expotter said:

Swipe said:

You guys are actually taking pleasure in this? 

I'm not enjoying it, actually getting scared now. The Fed and Bank of England due to increase interest rates this week, will that make it even worse as it makes a recession even more likely? I'm not a seasoned investor, just an ordinary peasant with a shrinking pension pot, from which I was planning on taking a lump sum this financial year in order to use my annual tax allowance. Not looking good now as I'd probably just end up crystallising any losses, might end up not being worth it for the £2500 or so I'd save in tax. Any advice?

Not advice, but an opinion: I wouldn't take money out of a pension pot "to use my annual allowance".. I'd leave mine invested unless I needed to take money out of it to live on.

It depends what you do with the money.  You could immediately reinvest it, in an identical fund within an ISA, for example.   Yes, you'd be out the market for a couple of days, but as your PA is "use it or lose it" it could be of benefit to do.   

Now I know that on average the wins and losses from being out of the market for a few days would even out, but If you've got a cash buffer outside of the pension then one of its advantages is that you can add the cash into the ISA prior to starting the drawdown. That way you can time your sale and purchase instructions so they use the same valuation point (assuming this is an OIEC or similar type fund) - saves the worry of the market falling by 3% just before the sale instruction goes through, followed by an immediate market rise before the corresponding purchase goes through, at which point you suddenly lose a small but not insignificant chunk of your drawdown value. 

Type_45

masonic said:

Type_45 said:

masonic said:

Type_45 said:

masonic said:

Type_45 said:

There is nowhere to hide today.  Not even gold/silver.  Cash is king!

S&P500 now in a bear market. RICA is my only holding not in the red today.

My portfolio, and the assets I monitor, look like a murder scene.

This is why a decent cash allocation is important. Not simply for days like today to protect money, but because one of these days bargains will be available. And I'm looking at gold/silver when they collapse in price too, as I'd expect them to bounce back strongly and make a good profit.

The VIX index is now up in the mid-30s, approaching its one year high and not far of levels not seen since the Covid crash (where it peaked at 66). Fear is really starting to take hold.

The trouble with holding a lot of cash is that the pound is again on the slide, and with UK inflation predicted to be more persistent here than other developed economies, then it pays to diversify and avoid local currency risk where your normal investments wouldn't be exposed to sterling. The difficulty has been choosing wisely within the fixed interest sector, or elsewhere. I'd normally have a decent bond holding, but am glad not to have stuck with that in recent years. Gold has done ok in general, but not as well as some might have believed; crypto can be once and for all discarded as an inflation hedge; TIPS have been the star of bond markets; REITs have had mixed results, but property valuations are set to come under pressure. I personally loaded up on wealth preservation funds and these have not disappointed so far, but anything could happen in the coming weeks and months. I'll need to do some rebalancing soon, but not yet.

It has to be gold. I know it hasn't performed as well as would be expected, but it's the one thing almost everyone agrees on.

Gold has performed slightly better than Capital Gearing Trust today.

I think it will crash along with everything else, though, so perhaps some SGLN (or preferably physical sovereigns/Britannias) would be a good opportunity at that stage. Along with SSLN and silver Britannias (although the VAT on physical silver puts me off).

I'm never one to put all my eggs in one basket, so I hold a couple of other funds besides CGT, and a separate slug of gold. It would be unfair to judge CGT based on one day's performance, as it employs some longer term strategies to boost performance which are realised in the short to medium term. Of course in part I am paying for a fund manager with an appropriate record and outlook to navigate the minefield of lower risk assets for me.

I would be surprised to see gold fall while equities are on the ropes. It has traditionally fallen during bear market rallies, although that's after it soared during the crash, which hasn't really happened this time. If you are right about a 1970s style situation playing out, I'd have thought gold would be a bargain at today's price and unlikely to fall from these levels.

Lyn Alden, a macro economist who's active on YouTube and Twitter, makes the case that the 2020s are more like the 1940s than the 1970s. It's worth hearing her case on that. 

Has not gold gone down in value when there's been liquidity crunches and crashes in the past?

I'm certainly not knocking CGT. That, along with healthcare and some other defensive stocks may do well over the coming months/years. 

masonic

Type_45 said:

Has not gold gone down in value when there's been liquidity crunches and crashes in the past?

There have certainly been dips within recessions and crashes, but examples where it has gone below the price at the start of such crises are few and far between. The early 1980s would be the main example, but it started that decline from a higher point than we're at today in inflation adjusted terms. There was a prominent dip towards the tail end of the global financial crisis, but this coincided with a brief reprieve of stock markets and only took the price back to where it was just over a year earlier. Gold is volatile at any time, so further buying opportunities will present themselves in the future, but I can't see the wisdom of holding back cash for these in the scenario where equities fall much further than they have so far.

Type_45 said:

Lyn Alden, a macro economist who's active on YouTube and Twitter, makes the case that the 2020s are more like the 1940s than the 1970s. It's worth hearing her case on that.

The 1940s all the way out to 1970 market a torrid period for the gold price, but that period was one of very different economic circumstances, so I'd be hesitant to even draw comparison to today.

Type_45

SPY closed 3.83% down.

Type_45

masonic said:

The 1940s all the way out to 1970 market a torrid period for the gold price, but that period was one of very different economic circumstances, so I'd be hesitant to even draw comparison to today.

Lyn Alden is referring not to gold in the 1940s comparison with the 2020s, but to the macro economy.

She says, among other things, that we have wartime-like spending (Covid).  Just did a quick search on YouTube and found this 8 minute clip of her talking about it:  https://www.youtube.com/watch?v=BFa6etRCIog

Type_45

Bitcoin in a slow freefall. Now £18,328.

If it goes below £5,000 I will buy one. 

masonic

Type_45 said:

masonic said:

The 1940s all the way out to 1970 market a torrid period for the gold price, but that period was one of very different economic circumstances, so I'd be hesitant to even draw comparison to today.

Lyn Alden is referring not to gold in the 1940s comparison with the 2020s, but to the macro economy.

She says, among other things, that we have wartime-like spending (Covid).  Just did a quick search on YouTube and found this 8 minute slip of her talking about it:  https://www.youtube.com/watch?v=BFa6etRCIog

Seems like she is advocating the way out being to hold down rates, put up with inflation, and grow the economy / inflate the debt down. Quite different to the approach currently being taken, and one that overall was good for equities.