Brexit: Don’t Try To Be A Hero

reminiscences of a stock operator pdf

What just happened?

24th June 2016, marked a historical moment. The United Kingdom voted 52% to 48% to leave the European Union in a referendum that revealed deep divisions within political parties, generations and between the different regions of UK.

With the UK’s historic vote to leave the European Union, it shocked markets around the world. Investors responded with a mix of shock, fear and excitement. We see the GBP and Euro both sinking the most. The Sterling is now trading at its weakest levels since 1985 and the Euro suffered its biggest intraday drop since it was introduced in 1999. Additionally, US Treasury yields posted the biggest decline in seven years and the yen jumped to an almost two year high. Overall, we see gold soaring 8% as investors piled into safe haven assets and global equities being wiped off.

What should we do?

Any investor be it value or not would definitely feel that any dip yesterday would be an ideal opportunity. How often do we witness such volatility and huge dips. My take would be do not be a hero, most of the market is still in denial and shit has only just started. While Britain may have voted to leave the European Union, the whole process of leaving will take roughly 2 years. Furthermore, there are still many questions that are not answered. What will happen to all of the trade deals that are currently in place? Trade agreements drafted between the European Union and Asia, with Britain exiting, how long would these trade agreements take to be done again? What about the bond markets, or the debt that is tied to the European Central Bank? Long term, will other European countries follow Britain’s example? The list of questions goes on and on.

Upcoming risky events in Europe: Brexit to be followed by Grexit. Departugal. Italeave. Fruckoff. Czechout. Oustria. Finish. Slovlong. Latervia. Byegium, until EU reach the state of Germlonely.

– Joke from a fellow friend

The one certainty that everyone should see is that there is no certainty. That said, we are excited in the upcoming weeks to deploy our remaining cash hoard. It is only during such moments of panic where opportunities presents itself for us to take advantage of and achieve large-sized gains. The ramifications will take time to play out. Hence, do not try to be clever these couple of days by buying up different asset classes as self preservation is crucial during such times. Additionally, we will be looking at companies with little exposure to the European Union but have been affected by mass hysteria. With the recent brexit, don’t try to be an hero, but wait patiently before deciding to deploy that cash.

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About the Author

SG Value Investor
I developed my passion for investment management especially equity research at a relatively young age. My investment journey began when I was 20, at a point in time where markets were still recovering from the Global Financial Crisis. My portfolio started from money I saved over the past years and through working during the holidays. I was fortunate to have a good friend with common investing mentality to began my journey towards value investing. To date, we still research and invest in companies together, discussing valuations and potential risks of a company. To date, I manage a fund with a value investing style. Positions are decided upon via a bottom-up approach or smart speculation (a term I came up with when buying a stock for quick profit due to a mismatch in prices in the market due to takeovers/selling of a subsidiary or associate). Apart from managing my own portfolio, I enjoy sharing my research with family and friends, seeking their opinions and views towards the stock. Reading Economics in London, I constantly keep up with the financial news in Singapore & Hong Kong. Despite my busy schedule, it has not stopped me from enjoying other aspects of life. I enjoy a variety of activities in whatever free time I may have – endurance running, marathons, traveling, fine dining, whiskey appreciation, fashion. Lastly, I enjoy meeting new people, discussing ideas and gaining new perspectives towards issues in the world.

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