Brexit

I’ve only been managing our investments for the past year and a half, but I have to admit that I’m enjoying it a lot.  There is an element of self control that I’m enjoying learning.  There is a lot of overlaps with budgeting and forecasting at my work.  Here are a few of them.

  • Too much information can be as bad as too little.
  • Ego is the enemy.
  • Stay humble and alert.  Continue to learn and adjust.
  • Emotions are the enemy.  Fear, greed, uncertainty.
  • Play the odds, don’t try for perfection.

Morgan Housel [link] writes a lot about the importance of investor behavior.

This whole Brexit thing is a good exercise in it all.  Today is Monday 6/27/16 and it happened last week on Friday 6/24/16.  The broader markets were down ~3% on Friday and ~1.5% today.

Here are some of my initial thoughts.

1.) It’s hard to find tangible impacts that will come from it.  So, is this a non-event and the market’s simply getting spooked over nothing?

  • Does this mean that America will have more leverage when it comes to negotiating trade agreements with that continent.
  • If people are scared will they flee to the dollar and strengthen it to the point that the stronger dollar hurts American sales abroad.
  • I’ve read that it will take 2+ years to figure out the exit.  A lot can happen in that amount of time.
  • Does that also mean that nothing much will happen for two years?  If so, people will definitely forget about it.
  • … Unless more countries leave the EU.  If that happens it would weaken that continent too much.  Would Russia try to reassert itself if that happens and/or will Europe turn to America for more helps as a result?  Or will the past come back and they side with Russia?
  • What do I not see about this?  What does the media not know

2.) Does this create buying opportunities or will this lead to a larger market shift that will put even more up for sale?  If I were to buy, what has the biggest drop and will create the most value when things come back?  Right now I’m looking at BOFI because it is in the financial sector which got hit the hardest, but BOFI has really good financials and is at 8.8 PE. Below is how it performed today versus the broader market.  I think it got hit harder than most of the financial sector simply because it’s smaller.

BOFI

Rothschild said that the best time to buy is when there is blood in the streets.  Is there blood in the streets yet?  … I think the answer is no.  The market’s aren’t bleeding, but … they might have a little rash.

The Schiller PE ratio is still really high at 24.89.  It’s coming down, but is still way above it’s long term average of 16.

 

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One thought on “Brexit

  1. As a follow up to this article, I’m definitely glad I didn’t jump on that BOFI purchase. I did more research and didn’t like some of things I saw about them. Especially about their auditors leaving

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