Questions to Investment experts: Effect of BREXIT
- Thread starter meridian
- Start date
That is a good question. One thing you can be sure of is that the market will overreact to them leaving.
One thing is for sure. Nobody absolutely knows the answer to that. People will have all kinds of theories and prognostications, but for every person that thinks the markets will go down further from here, there are just as many people who think it will go up. The market is down approx. 500 points today. At this level, that is where that equilibrium is found.
If you are a long term investor, and still have plenty of time on your hands, just stay the course. We have done nothing today other than give back what we made in the last week to week and a half.
Yep, mine is down by 20K! Ouch! But then, as you say, I gained that much in the last week or so. Still ouch!
It's interesting to see that my Smith and Wesson shares went up! Do people think they need to arm themselves or what? I bot them late last year, sold them for handsome profit in the spring at the top, and then bot them back a couple of weeks ago, suspecting that people would be uneasy about this BREXIT thing. Yes, I can boast that I was right. What I don't understand is why? Are they really buying more guns because of BREXIT? Doesn't make sense.
I agree that financial markets are overreacting (I mean, a 10% dip in the pound sterling? C'mon). But I'm also growing more and more wary of equities in general...and that wariness did not begin setting in last night.
I've been moving money out of equities and into real estate, commodities, and cash for the past year or so. I'm still at around 60% equities -- but that's down from almost 90%.
Saw an article today saying that the S&P has been trading at 19 times earnings, with earnings starting to erode - and that was before the Brexit. So the Brexit might be a "catalyst" as the article called it for a return to a more historically average P/E.
I've reduced my stock funds holdings by six figures, in part because of the P/E ratios at the time, the uncertainty about the economic and political outlook in the US and because I started my own practice again and wanted to have cash reserves handy. I haven't reinvested what I took out yet . . . and likely won't until the economic and political outlook becomes more clear.
It's interesting to see that my Smith and Wesson shares went up! Do people think they need to arm themselves or what? I bot them late last year, sold them for handsome profit in the spring at the top, and then bot them back a couple of weeks ago, suspecting that people would be uneasy about this BREXIT thing. Yes, I can boast that I was right. What I don't understand is why? Are they really buying more guns because of BREXIT? Doesn't make sense.
Next time you go ranting about gun violence go look in your stock portfolio. That is absolutely unbelievable.
What is "normal"? The biggest cause of the market drop is the fact that the outcome of the vote was largely unexpected by the markets. Besides, trying to predict short term market movements is a fool's game for 99% of investors.
The bigger question is what will this mean for the overall economic outlook. Per Smith Barney this morning, the affect on U.S. GDP is expected to be nil in 2016, and -0.3% in 2017 (-0.6% under a high stress scenario). For the UK, they predict -0.5%/-0.9% this year, and -1.0&/-1.8% in 2017 (mild stress/high stress).
It seems to me that what many are not factoring in at the moment (perhaps because it's impossible to do so right now) is that no one really knows how the exit will play out. Heck, there's still a possibility that it never happens, as the vote to leave was a non-binding referendum. I have read that there are a number of different ways this could play out, and by no means is it a foregone conclusion that Britain will ultimately leave the EU.
Most people don't count the two numbers to the right of the decimal point.
Niiccce . . . .
. . . BTW, all of those figures were curvy, hour-glass and good lookin' . . . .
The article I read said that a correction back to an average of a 13% P/E ratio would be possible. I have no idea whether that would be considered historically "normal" in the current economic environment.
Someone made an absolute fortune on this. Some hedge fund(s) and/or other powerful investors were artificially raising the remain price on the betting markets in order to short pound/ stocks. At one point when early results coming in were favorable to leave it hit 93/7 on betfair and the pound hit 1.5. Huge manipulation. The # of bets on leave was something like 5-1 or 6-1 compared to the amount on remain, but there was big $ coming in on remain.
That's interesting, because the story I heard on TV news - CNN? CBS? - yesterday was that virtually all of the bookie action had moved in favor of Remain winning. Hmmmmmm . . . .
Sure the total $... not the # of individual bets. For example I read someone dropped 80k on remain in one bet at a bookie. Huge $ bets were coming in on remain. The highest probability I saw from any prognosticator was remain winning with 76% likelihood. As of last night on the exchanges there was a 40% chance of remain winning by more than 10%! They were giving a 20% margin a 10% chance.
Me too and the wariness did not begin last night either. I am beginning to wonder if you can make money in the market any more. I wish there was a place that tracks pro market verses negative market stories. Seems like the media talks the market down (not talking about last night). When you see one story after another about how the market is gonna fall then it's gonna fall. JMO
13 P/E is slightly on the low side of average.
But I pay more attention to the Shiller's PE/10 (or CAPE ratio) for examining valuations. It examines price to the average of the previous 10 years of earnings (adjusted for inflation). The S&P 500's PE/10 is presently at 25. The historical mean is a tick below 17.
That's a pretty beefy valuation for a global economic situation that is still saturated with so much uncertainty.
I should slowly move out of stock markets, and I have been saying that for some time. Real Estate? If you are talking about rental units, I do not have good experience with renters and such. Perhaps, I should enroll in Trump University.
Commodities? Too risky for me. Sitting on cash for 1% APY is a losing venture. Mutual funds? How have they been doing?Stocks are due for a significant correction, IMO. I'm not one much for trying to time markets (that's a fool's errand). But I do know that they always, eventually, revert somewhere close to the mean.
Oh God, I'd never enter into a situation where I, personally, had to deal with renters, maintenance, and all that headache. I'd almost certainly end up killing one or more of them. As a general rule, I don't do anything where I have to regularly interact with the general public. People, by and large, suck.
No, I have stakes in some commercial and industrial developments by way of a couple of property management firms. It's something I've been doing since about 2010, when you could still buy RE on the cheap. They've been solid returners and I've increased the allocation in the past year or two.
There are a whole host of ways to limit downside risk while taking advantage of the volatility. You won't ever hit any homeruns, but you're pretty likely to keep hitting singles and the occasional double.
But it's definitely the sort of thing you should learn a whole lot about before ever taking any actual positions with actual money. If you don't know what you're doing, it's really no different than gambling.
Not if other asset classes are shedding 15%.
I don't know. It's been a while since I've paid much attention to them.
The scary thing about the stock market moving forward are the projections that the average yield just won't be there. It's yielded about 7-8% on average per year for the last 50-75 years. Many experts have predicted that it will be lucky to yield 3-4% per year going forward. Having ridiculously low interest rates isn't always good either.
I'm liking my gold and silver positions today....too bad it's not a big enough hedge to offset my equity losses. I'm slowly headed toward the rental or real estate market as we speak.
I think the market will recover quicker than many think from today's debacle.
I'm liking my gold and silver positions today....too bad it's not a big enough hedge to offset my equity losses. I'm slowly headed toward the rental or real estate market as we speak.
I think the market will recover quicker than many think from today's debacle.
A Brexit means more political power for Nigel Farage and his gang, which some might hope would lead to at least a slight loosening on gun regulations in the UK, opening them up as a bigger potential market for American manufacturers.It's interesting to see that my Smith and Wesson shares went up! Do people think they need to arm themselves or what? I bot them late last year, sold them for handsome profit in the spring at the top, and then bot them back a couple of weeks ago, suspecting that people would be uneasy about this BREXIT thing. Yes, I can boast that I was right. What I don't understand is why? Are they really buying more guns because of BREXIT? Doesn't make sense.
That's not necessarily manipulation. Bigger bettors were more likely to be Remain voters. With more money to play with than the average Leave voter, the end result is they push the markets artificially in one direction.
Maybe, but the financial markets were reacting to the betting markets. For a relatively small amount of $ a hedge fund could move the betting markets substantially. It wouldn't be the first time this has happened. Moving one market to influence another. This isn't something that would ever be brought out publicly, but imo it's the best explanation for the huge mispricing.
I can't imagine that the Brexit vote will have the slightest impact on British gun policies.
As for Farage, I'm not at all convinced that the result is going to boost his (or the UKIP's) political fortunes. They've now achieved virtually the sole reason for the UKIP's existence. It's all over now but the messy details of untangling everything. And, besides, it was just last year that the UKIP won one measly seat in Parliament (and it wasn't Farage, who is ironically an MEP). Granted, they got the 3rd most votes of any party nationally. But all but one of their candidates still lost despite that.
Oh, don't get me wrong. I have no problem believing that someone with the money and forethought to do it might try to pull something like that off. But I think this is one of those areas where the betting markets fail us. When the outcome is very personal and emotional, people are more likely to bet on their own side, rather than based on objectivity, and when the voters are split by class, this means extra money going to one side over the other. That's why the markets as well as the bookkeepers in Britain were predicting* a bigger win for Remain than the polls were.
* To be fair to the bookies, they weren't predicting anything. Their goal was to set the odds so that amounts wagered on one side matched payouts on the other, so they could minimize risk and turn a profit.
I'm just suggesting how the result might be tied to an increase in gun stocks. I'm not predicting anything.
Well, betting markets were just reacting to the polls and the "expert" predictions. And the polls (and, thus, the predictions) were about as wrong for Brexit as they were for the 2015 general election.
This could be a matter of preference and bias. People in politics -- which includes those in the media wing -- always try to steer the narrative. But, given that both Boris Johnson and Nigel Farage expected defeat early in the night, I don't think that's what was going on here.
In fact, looking at the results, I think a big explanation is that the passion (and, thus, turnout) was clearly on the side of the "Leave" campaign. It seemed to me that most of the districts that voted Leave had higher turnout than most of the districts that voted Remain. That's something that an opinion poll can't reliably measure, IMO.
While there is interplay between them, you are wrong to say they were "about as wrong" as each other. The betting markets showed a solid Remain victory even as polls were saying it had become too close to call.
The poll movement in the last few days -- at least what I read -- was in the direction of "Remain". And that would've followed a similar pattern of the Scottish Independence Referendum....which, as I recall, had long showed "Leave", but broke towards "Remain" in the waning days as undecideds (not surprisingly) decided not to take the leap.
I didn't mean to suggest that polls and betting markets were joined at the hip. I meant to suggest that betting markets were reacting to the (slight) poll movement in that direction and the high number of remaining undecided voters.
There may have been a tiny hint at movement toward Remain in the last day or two, but that's not what we're talking about here. For the last three weeks, Leave gradually closed the gap and even took the lead, and yet the markets and regular gamblers were still putting more money on Remain.
Never before have we seen so much money/media/influencers putting out so much propaganda to try and discourage people from voting to leave. The BBC/Cameron and all the big money tried to stack the deck as best they could to influence that vote and it backfired so the gamblers got it wrong.
Your thoughts on how a Fed rate hike will impact real estate and commodities?
Talk about hypocrisy. He'd fit in perfectly in the Chicago Political Machine.
I agree, except that if you view equities in the totality of financial assets, they really aren't that expensive, relative to fixed income products.
OK. And I agree that you have to look at any asset relative to other options. And I really don't like fixed income right now. That said, I've always tended to favor the Ben Graham school on equities (short term: voting machine...long term: weighing machine), and I think the voting and weighing have gotten pretty out of sorts with the loose money policies that can't go on forever.
I don't want to be holding too many equities when the central banks start strapping down. Given that disparity and how much their policies have been propping up valuations, I think that could get really ugly really fast.
Honestly, I'm not that worried in either case. The way I (mostly) deal in commodity futures relies more on volatility (either way) than seeking appreciation. And, anyway, most commodity prices are still pretty cheap, historically. I don't think there's too much downside risk -- barring a major recession.
Obviously, real estate prices will probably hit some turbulence when rates climb (they almost always have). But I don't think cash flows will be too adversely impacted. The expectations there, from the people I listen to, are pretty good. And as long as cash flows stay relatively steady during tightening, I'll be comfortable riding out the asset value volatility.
