Category Archives: Market Timing

Deja Vu with Brexit – Standard Life Fund Freeze – Pre Bear Stearns Moment – the Lehman Moment can still come

If you like working through the worst case scenario it would probably be sensible to consider the Brexit Vote the beginning of problems to come.   (Telegraph Group Business Editor James Quinn is doing a great job of reporting effects of Brexit!)

Trading in a £2.9bn commercial property portfolio managed by Standard Life Investments has been halted after a flood of withdrawals exhausted the fund’s cash reserves.

Standard Life said the move followed “an increase in redemption requests as a result of uncertainty following the EU referendum result”.

Details were not provided on the current liquidity position or on whether any buildings would now be sold.

The latest figures for the portfolio, from May 31, show the fund held 13pc in cash. Much of this may have been paid out to departing investors.

In the ten days since Brexit two other commercial property funds – run by rival managers Aberdeen and Henderson – have cut almost £300m from the value of their holdings. Freezing withdrawals is the “next step”, commentators say.

Time line – Bear Stearns Hedge Funds Collapse (we could be at the moment in time: June 2007 – meaning we won’t see the worst to come untill 2017 or early 2018. These things don’t unravel in a few days.)

July 5th update: “Three property trusts, including Standard Life, M&G Investments and Aviva Investors, have suspended trading. The suspensions now account for more than a quarter of the £35bn-sized sector.” “Andrew Bailey, the new head of the Financial Conduct Authority, also attempted to ease concerns around the property sector, saying the actions taken by the property funds was not a “panic measure.” Mr Bailey, until last week the head of the Bank’s Prudential Regulation Authority, said the purpose of suspending redemptions is to allow a funds’ underlying assets to be revalued.” <– not a panic measure. No, just an indication that a haircut of unknown proportion is likely to follow. That is not something that is a calming thought to the owners of properties or property fund holders. — The big question: Will a self-fullfilling prophecy ensue. Worried people, pessimistic people selling because they are told they can’t sell. If a large proportion of your net wealth is in property, wouldn’t it be prudent to now take money of the table with property prices still high? I think so. — Mostly, if a ball gets rolling, it’s velocity doesn’t slow down. — Except the CHF vs EUR, that ball is being held by the SNB. The problem is: That ball is getting larger. — It reminds me of my attemps as a child to dam a little stream in the Swiss Alps. Just a question of time before pressure builds up and flushes away the dam. — But maybe the dam is so strong the SNB is building, that the safety seeking liquidity will go to Gold and other markets…


Marketwatch has it summed up nicely:

“What’s happening?”

“Standard Life Investments on Monday was the first to halt trading in its open-ended property fund. Aviva moved to suspend trading in its fund Tuesday, followed minutes later by M&G. Observers expect other U.K. real-estate funds to follow suit.”  (My view: aka Domino-effect, trickle-down-effect, contagion, you name it, it’s happening. It’s also going to be enough that buyers pause, to leave the sellers quickly swelling in number…)

“Redemptions can put a strain on such open-ended real-estate funds. Unlike stock funds, they can’t move to quickly liquidate holdings to meet redemptions. Most carry significant cash cushions, but those appear to have been sharply eroded. Complicating matters, unlike stocks, properties can be hard to value and liquidate during times of stress.”


SMI Future am 24. Juni 2016


Interessante Tatsachen:

  • Noch vor Börseneröffnung waren die besten Kaufkurse.
  • Innerhalb von 15 Minuten nach Future Handelseröffnung um 8.00 Uhr war bereits 1% korrigiert.
  • Innernhalb von 60 Minuten und  bei Akiten Handelseröffnung um 09.00 Uhr waren bereits 2% korrigiert.
  • Innerhalb von 90 Minuten waren 4% der Korrektur bereits wieder ausgepreist.
  • Innerhalb von 180 Minuten hat der SMI Future um fast 6% zugelegt, im Vergleich zur Eröffnung.


  • Um 8.10 Uhr versuchte ich telefonisch eine der Depotbanken zu erreichen; ich wurde nicht durchgestellt, bzw. der Anruf (von Handy und von Festnetz) wurde durch das Bank-Telefonsystem nicht durchgestellt, da überlastet.
  • Erst um ca. 8.12-8.14 Uhr via Email konnte ich einen Auftrag platzieren
  • Um ca. 8.17 erhielt ich die Email Bestätigung für das Buy Open.
  • Um die gleiche Zeit konnte ich die Bank telefonisch erreichen.
  • Um 10.05-10.10 habe ich die Future wieder geschlossen (Sell Close).


  • Eine Bank mit Möglichkeit zu elektronischer und telefonischer Futures-Auftragsaufgabe  wäre wünschbar.
  • Ich habe einen Teil des Futureskaufes limitiert, was rückblickend schade war (7350 Limite) und eine von einem Hedge Fond Manager namens Guy Spier gehörte Regel, versuchen den Kurs bei Auftragsaufgabe NICHT zu berücksichtigen (wobei er ein Value Investor ist, der immer viel langfristiger orientiert ist).
  • Da ich nicht aggressiv genug gekauft (die volle Size) habe, habe ich den Gewinn stark eingeschränkt (mein Risiko natürlich auch).

Re-opening of Tweedy, Browne Global Value Fund II – A Good Sign

I follow this value investment company as they are one of the oldest and most venerable ones out there.

From there recent press release:


Re-opening of Tweedy, Browne Global Value Fund II

The Tweedy, Browne Global Value Fund II – Currency Unhedged will reopen to new investors on February 1, 2016. As you will recall, the Fund was closed to new investors back in August of 2014, as it had become difficult to invest new subscriptions in the face of rising equity valuations. More recently, flows have become more manageable, and we now believe that the addition of new assets can be managed effectively, without risk of diluting returns to existing shareholders. This is especially true given the enhanced volatility in global equity markets of late which has begun to stimulate new idea flow. We will continue to impose for the time being a maximum purchase amount of $4,000,000 per investor on any single trade day to prevent large trades that could be disruptive to effective portfolio management.


Gives you a good idea, as a long term investor, that it is worth being ready with any sidelined money, to invest. In my humble opinion.

Here there top holdings (easy and cheap to replicate!). Not much value added by management , except the fact they don’t trade…

tweedy-brown-top-holdings_2 tweedy-brown-top-holdings_1

Importance of FX – Trading Gains when in Cash with Foreign Exchange Transactions


I was pleasantly surprised looking at a private account I have, which is extremely small in net assets. It’s an account that is pretty much dormant, except when in January there were major moves on the CHF Swiss Franc, I decided to buy EUR, USD and GBP. The chart above shows what just that move did.

Interestingly that account did better than one I manage equities actively in. Nearly double as good to be honest.

I think I can use this insight to make a mental note that

  1. gains or losses can come from unexpected places
  2. just two three transactions a year can make all the difference  i.e
  3. you can be watching the markets out of the corner of your eye on a daily basis (end of day, not intraday) and still reap very large profits with very little “work”.
  4. work is mostly NOT entering into trades, but only reacting to major sentiment shifts

Why Value Investing is a Good Choice for Your Nerves


The chart above illustrates very well, why value investing is a superior way of investing long term. For example the Global Value Fund (Tweedy, Browne) has been able to outperform in down and normal markets (left, center) and only underperformed in strong markets (right). When M&A gets heated you’ll be feeling pain, potentially, with a value investing portfolio or fund. But when the rainy days do come, you’ll have the best umbrella!


Practical step:

Looking at Tweedy, Browne Swiss Equity portion portfolio:

Name Investment %
ABB Ltd 40’043’593 3.39%
CIE Financiere Richemont AG 30’059’973 2.55%
Coltene Holding AG(d) 12’659’866 1.07%
Daetwyler Holding AG, Bearer 18’116’447 1.54%
Loeb Holding AG 428’308 0.04%
Nestle SA, Registered 208’491’495 17.68%
Neue Zuercher Zeitung(a)(f) 415’515 0.04%
Novartis AG, Registered 279’700’952 23.71%
Phoenix Mecano AG(d) 31’805’097 2.70%
Roche Holding AG 285’117’184 24.17%
Siegfried Holding AG(d) 44’311’142 3.76%
Tamedia AG 70’841’142 6.01%
Zurich Insurance Group AG 157’581’660 13.36%
Total 1’179’572’374 100.00%

(Partially) Hedging a Portfolio with Futures or Options to reduce Volatility and to a lesser extent Return

After having gone short futures for a client portfolio recently, I needed to explain what effect such a tactical decision has on the portfolio in question to the clients beneficiaries.

Below is a graphical representation of what happens when you hedge part of a portfolio (in a very specific example, this would need to be calculated for each portfolio that was being considered for a hedge).

Firstly the expected volatility is reduced (in my example hedging 15% of portfolio with SMI put options would move the volatily down by around 1%).

Secondly the expected return is reduced (in my example from 4.9% to 4.8%).

While the exact numbers give a false send of certainty and detail, it does go a long way to quickly and graphically showing what happens when you hedge a portfolio.

Hedging can be very interesting to complement a long term buy and hold portfolio, in my opinion. using-options-or-futures-to-reduce-volatility-while-keeping-expected-return-nearly-unchanged

money into equities in the building phase and then live on the result

A very wise comment and a view which my experience has shown to apply to a majority of non-insider traders:

I divide the word of investors into two camps: ‘traders’ and ‘investors’. The latter put their money into equities in the building phase and then live on the result. The latter leaves their money in play on multi-decade time scales. A trader is anyone else.
The investor bases their hope for success on the observation that in the past the equity market, on decade time scales, has out performed all other investments. For an investor, fire and forget is the best option. They really only need to know two things: expenses will kill you and buy risk (e.g. small caps) until you are within ten years of retirement. At that point if they aren’t comfortable sit down with a counselor who isn’t a broker, and stratify the nest egg into appropriate risk layers. Too little risk is as bad as too much – especially given that the post retirement life expectancy of around three decades.
Unfortunately this isn’t what is being sold either in the press or by the brokers. Company 401k programs often suffer from being loaded with dogs which the contracting provider wants to herd people into.

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