Friday, June 24, 2016

Brexit and cash holding is 50%

Do what we can control. 

When I read Brexit is very likely at 12 p.m. I did the following:

Consider what size of equity to cash will I be comfortable with. Which are the counters that I am willing to sit through 20-30% loss.

Which are the low-dividends companys with high correlation with STI. 

In 10 min, I took the following actions:
1) Take contra loss of Silverlake axis (recently bought)
2) Sold Singapore Shipping at a profit
3) Reduce ST engineering at break even price
4) Reduce SCI at 30% loss.

With earlier sale of FST and CMPH, I am now about 50% cash. 

Again, luck played a part. I was ready to start buying if market goes down enough before the vote, but surprising market keep going up and I just start a small position on Silverlake which exited too. 

Hey, I panic and sold. I am a bad investor! Hmm, but I did what I plan to, I am feeling excited now instead of depressed or anxious. While I have quite a bit of skin in the game, I have started to hedge against Brexit earlier by selling and holding off my buying. I already have in my mind what I want to keep, and what are the counters that seem to be closely correlated with STI movement -- SCI and ST engineering. I believe they will follow the market down. The rest of my counters hardly fall more than any usual day and some surprising gain. (venture and MIT) I had quite a hard time accepting loss of 30% for SCI, but I let it go partially nonetheless. 

Better to sell now, buy later than ironteeth and capulate later. If I am wrong, and Market do a V - shape recovery a few days later, I am fine too. 

With my short experince in markets, I believe there is plenty of room for market to fall, at least 5-10% in the coming weeks. Why?

1) News scaremongering. I am not sure what is the real impact. But what will make good stories? Let me look at my crystal ball- "Who's next to leave Euro?"
"Impact on Euro and Germany", "Next currency crisis"

2) Most central banks have already QE, negative interest rate. To intervene in currency markets, u either raise interest rate or use your foreign reserves to intervene, or both. Nuclear option is to introduce curbs. Governments will try to stabilize and come out with joint statements, by short sellers is a force that is beyond governments, and the force is bigger now (according to Soros)

I set alerts on my existing counters and those on my radars. I know I cannot stop looking at the news and the counters, so I told myself not to do anything unless those alerts points are triggered. I am a kanchong spider, i always buy too early.


  1. Hi mike, maybe you are right. Haha

    I also wonder will Europe Union dismissed , if so what is the impact to market?!

    1. Europe Union will not disband. IMHO, Guardian news just ask British to go ASAP and renegotiate the exit plan about immigration. The world know that economic mayhem (at least in the short term) is not scaremongering but very real.

      If u are Italian, will u be clamoring now let's leave Euro too and get our currency bash.

      Currency is just the beginning. Property is the next pain for UK.

      People cannot come in it will
      Not come in until there is clarity, people might be going out.

      Low currency improve exports. But Britain is more of a service economy than manufacturing...

      Pain pain pain for Britian. Now Johnson (upcoming PM perhaps) also no balls and say no haste to leave Euro, and wonder what others voters think about him now

    2. well, British pound drop 11% in a day, i feel a bit over-reacted. Uk not in recession yet.

  2. DPM Tharman write this.
    Divided We Leave.
    That’s what the UK referendum result looks like. London and Scotland voted to stay in the EU; Wales and the English provinces outside London voted to leave. The majority of the educated class voting to stay; the less educated to leave. Those doing well in their jobs and incomes voting to stay; those who felt they’ve been losing out voted to leave. Many more of the young voted to stay; old voting to leave.

    It will take some time to draw the full lessons of the vote. The big issues are not about financial markets or economics. The markets will react negatively, and overshoot, but this will not be like 2008 when the house came down. There will be a loss of growth in the UK and Europe because of the uncertainty of the next few years, and the weaknesses there will also hurt the rest of the world including us in Asia.

    But the more profound questions revolve around politics. Many of the people who voted for Britain to leave Europe, like those in England’s industrial cities, may end up being hurt by its economic consequences. Yet their frustration over their jobs and wages, and their fear of uncontrolled immigration if Britain stayed in Europe, has shaped their votes.

    There is a new brew in politics around the world, especially in the most mature democracies like the US, UK and in Europe. The growing appeal of nationalist politics, demagogues, and in some cases outright racism. (There was in fact all of that in the UK referendum debate.) A growing disaffection with the establishment. A weakening of trust and consensus in society, and of the centre in politics. That too has happened in the UK itself, with the two major parties now weakened.

    As politics gets fragmented, the political extremes will gain appeal. We do not know where this will lead to, but it cannot mean anything good. But to tackle it, the politics of the centre must stay connected to the challenges that ordinary people face - and address their need for jobs and security, and a balance in immigration that preserves a sense of identity. Tackling this without turning inward, and weakening jobs and society further, is the central challenge everywhere.

    1. luckily singaporean didn vote like 意气用事。else really die pain pain.

  3. Hi yeh,

    Thanks for the link. I also saw the social side of it too

  4. Btw, of all the experts view on Brexit, I like DBS Boon's most.

    Most comprehensive and wise in my opinion

    1. Brexit should be seen in the backdrop of weak growth and also a further level of uncertainty against the backdrop.

      It should not be seen in isolation.

      Fear of contagion lead to contagion.

  5. Replies
    1. Hi EH, actually not nimble.

      The sell price are not too far off the price of market yesterday. Lol

      Timing does not matter in the case, but the decision

  6. Hi mike
    Weak psychology ? So sell at fear?

    1. Hmm... Yeh,

      I have no regrets selling. While it is not panning out as what I expected And I have no chance buying cheap, at least those I sold are not "recovering"

      If really Brexit is a big yawn, which I think is not. I believe the correction is not here yet, I think there are enough counters in my radar that still offer bargain. There are some which I dun owned but went down by quite a fair bit. I might end up with a different port, but nonetheless one of dividend paying.

      Take out Brexit, assuming it never happened, how high can markets go with "earning weakness"?

    2. I seldom analysis market. I see enough cheap then I buy and hold. Mainly for dividend.

      Oil and gas I have a lot, still holding. I think they will recover. But not soon, luckily I didn buy at peak.

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