The Lemon Fool

Walkeia wrote:On this thread in mid March I referenced the CNN Greed indicator which had touched 1 intra-day. At the bottom of the page (linked below) you can see the past three years history. Currently 78.

https://money.cnn.com/data/fear-and-greed/

Equities valuations feel more exposed to a pull back; and I gradient my weekly equity index purchases lower as this indicator rises. Keeping the excess money as dry powder for a. equity weakness b. reduction of leverage or c. picking up an investment property to take advantage of the stamp duty relief.

Undecided at the moment - leaning towards an investment property as houses prices, in my view, seem poised to do very well in a low mortgage rate + high money supply world - resulting in real-asset price inflation.

johnhemming wrote:I think the first sign of this is likely to be in exchange rates. That being the case perhaps the Swedish Krona would be a good starting position. If the monetary expansion is limited to inflating capital asset values then it should not all fall apart. The fact that most western countries are in a similar mess makes the situation a bit easier.

However, there clearly is potentially an inflationary risk with MMT.

Redde Northgate plc (LSE:REDD), the integrated mobility solutions and automotive services provider, today announces the acquisition, by a wholly owned subsidiary, of certain businesses and certain assets of Nationwide Accident Repair Services (“Nationwide”) by way of a purchase from administrators, for an initial cash consideration of up to £11m, plus a deferred consideration of up to £5m conditional on retention of certain trade business on satisfactory terms.

johnhemming wrote:I went in to Sylvania SLP earlier this year and then out when I thought platinum prices would go down, but back in now as I think the platinum price is probably reasonably stable and they seem quite good on forecast PE.

dspp wrote:it is quite highly exposed to any downturn in either oil & gas use and/or dino-juice (ICE) vehicles.

Walkeia wrote:Hi,

I bought Thursday afternoon and decided to add again Friday morning. The specifics of any company’s ability to weather the virus impact is beyond me so I bought VEUR and VWRL. The reasons I decided to are:

1. I don’t know anyone who doesn’t think that it will get worse before it gets better. I agree the virus infection numbers and sadly deaths etc will go higher but the sell off has been dramatic so I feel some of this further negative news is in the price.

2. I believe the peak to trough declines in ‘08 and dotcom crash were approx 50% in the equity indices. We were getting to the mid 20% declines which triggered me to react.

3. I’m in my early 30s; so can take a very long term view on these purchases and continue to look to add. A V-shaped recovery is actually not in my long term interests as I am still in the asset acquisition stage of my life.

4. Unlike recent market corrections - there isn’t a direct business sector to blame such as the bankers for ‘08 and the tech companies for the 2000 (I would blame bankers for dotcom too). As such I don’t foresee huge changes to the business environment or anti-wealth / business policies. If anything I think the opposite - the public will have sympathy for help for some firms in trouble if required due to the virus.

5. I watch the CNN greed index as I find it a fun tool. Since late 19 it has been flashing extreme greed even posting 98 (the measure goes from 0-100). On Thursday afternoon it was showing 1 for an hour which made me smile and think I had to add some stocks.

https://money.cnn.com/data/fear-and-greed/

6. Lastly, and I feel most importantly, is the policies taken by central banks and Western Governments. Listening to the ECB Thursday - they are the last major CB to react and it’s the same across the board. Interest rates are going negative or close to zero in the EU, US and U.K. and QE is increased in the EU and arguably started yesterday in the US (1.5 trillion of operations to help the functioning of the market). The CB policies are creating the groundwork for governments to spend and finally we’re seeing some reaction. Netherlands said yesterday has capacity to spend up to 90bn, Italy 25bn, US, UK, Germany, France, Spain etc all coming. This is near term - but monetary policy impacts over an 9-18 month period so if the virus passes by Autumn - will see the U.K. and US reversing their interest rate cuts? I think not as hikes have been much harder and slower since the GFC.

So my view is I don’t know the winners or losers from this and I don’t know how long it’s going to last. When the virus passes, and it will, what I feel I can say with more confidence is assets with positive real returns such as equities, housing and REITs with inflation linked contracts can do very well due to the policies taken in the past month. The alternative is to suffer a real loss holding cash in the bank with no prospect of better interest rates for years.

Greed will come back; it always does.... according to CNN it already has by 4 points

All the best,

hiriskpaul wrote:With the FTSE 100 down today I took the opportunity to sell some February puts at 5600. All other world regions are showing a positive return for the year, but the FTSE is still down 10%. Brexit uncertainity has been a drag on recovery compared to other markets and I am betting on a trade deal being agreed, which should hopefully lift the market. It may not though if we see a significant rise in the pound as well, but implied volatility should drop so hopefully the puts should still do well even if the FTSE does not rise or drops a little.

Walkeia wrote:

hiriskpaul wrote:With the FTSE 100 down today I took the opportunity to sell some February puts at 5600. All other world regions are showing a positive return for the year, but the FTSE is still down 10%. Brexit uncertainity has been a drag on recovery compared to other markets and I am betting on a trade deal being agreed, which should hopefully lift the market. It may not though if we see a significant rise in the pound as well, but implied volatility should drop so hopefully the puts should still do well even if the FTSE does not rise or drops a little.

Hi HiRiskPaul,

The is a trading strategy or you are happy to buy @ 5600 should we get there? if we don't you obviously pocket the premium. I have read about using option overlays for personal investment portfolios but never taken the leap.

hiriskpaul wrote:With the FTSE 100 down today I took the opportunity to sell some February puts at 5600. All other world regions are showing a positive return for the year, but the FTSE is still down 10%. Brexit uncertainity has been a drag on recovery compared to other markets and I am betting on a trade deal being agreed, which should hopefully lift the market. It may not though if we see a significant rise in the pound as well, but implied volatility should drop so hopefully the puts should still do well even if the FTSE does not rise or drops a little.

spasmodicus wrote:

hiriskpaul wrote:With the FTSE 100 down today I took the opportunity to sell some February puts at 5600. All other world regions are showing a positive return for the year, but the FTSE is still down 10%. Brexit uncertainity has been a drag on recovery compared to other markets and I am betting on a trade deal being agreed, which should hopefully lift the market. It may not though if we see a significant rise in the pound as well, but implied volatility should drop so hopefully the puts should still do well even if the FTSE does not rise or drops a little.

It depends on what you regard as a worthwhile "world region" to include in a portfolio. As one of the larger global economies, the FTSE has done relatively badly because of Brexit and a lack of global tech companies, when compared with, say, the USA. VWRL, often used a a global benchmark is cap. weighted with more than 50% USA based companies, including Apple Facebook Microsoft Amazon etc. Some emerging markets have fared as badly or worse than the FTSE, including Latin America, Africa and Eastern Europe. Although like VWRL they are not ideal in their weightings, I use ETF proxies LTAM, XMAF and IEER for those regions.



% crashed column is the percentage drop from the average price in February 2020 to the mid March covid crisis low.
% upside represents the percentage price increase remaining, to get back to the mid March 2020 pre crash value

Thus, VWRL is now approximately 7% above its pre crash value, whereas the FTSE100 represented by ISF is still about 16% down. Eastern Europe IEER still has 24% to go to reach its pre crash level. This is probably explained by its heavy loading with Russian oilies and miners. Emerging market regional ETFs such as LTAM and IEER tend to be a lot more volatile than developed markets and represent a "reversion to the mean" opportunity in situations like the one we find ourselves in at the moment. I hold all of the above, except for VWRL, having bought in March/April, to give gains of 20% or more. The question now arises as to how to rebalance my global ETF portfolio. It also begs the question as to whether the boom in USA and China tech companies, which are in large part responsible for VWRL's comparitively good performance, is sustainable in the longer term.

regards
S

FTSE 100          -29%      -12%
FTSE 250          -29%      -11%
Canada            -26%        2%
Europe ex UK      -23%        7%
Japan             -20%       11%
Global EM         -19%       12%
Asia pacific      -18%        2%
US                -17%       15%

All world         -15%       11%
World small caps  -23%        9%