The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: smedleyb on June 02, 2012, 10:28:10 PM
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As Europe teeters on the brink, I can't help but think of ways to take advantage of whatever dislocations/opportunities which may result as Europe gazes into its financial abyss and sees nothing but insolvency.
Now don't get me wrong, I'm intimately connected to events over there, and see first hand the devastating effects the economic crisis is having on ordinary folk. I take no pleasure in their misery.
However -- and it may be a bit unmustachian to discuss this -- I can't shake the feeling we've entered a new phase in the global leverage adjustment game which may bring about amazing long-term investment opportunities. Greece might be small, but it's bigger than Lehman Brothers, and the stakes of it's survival impinge on the much larger EU. In our interconnected world economy, problems across the pond can't be isolated and ignored. We are not immune to their plight.
The massive sell-off in our markets on Friday -- and their failure to muster any sort of bounce into the close while trading below the important technical level of 1284 (200 day moving average) -- suggests to this seasoned market watcher that the potential exists for an epic sell off which will cut deeper and sink faster than anyone can imagine. Yeah, yeah, it's impossible to time the market, etc. I get it. But let's not ignore what's before our eyes: this market is deteriorating quickly, and unless Europe produces its own fiscal bazooka soon, the worst may be still yet to come. And I mean bad worst.
I say ready your cash and prepare to strike.
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this market is deteriorating quickly, and unless Europe produces its own fiscal bazooka soon, the worst may be still yet to come. And I mean bad worst.
When the US has to borrow more money again post election is when I'll be looking to throw additional cash into the US stock market (reduced US dollar currency value benefits me here).
I'm personally with our CEO on the economy, with the belief of the next five years will be a roller coaster of ups and downs but ultimately little growth in the stock market.
With that said I'm not throwing all my eggs into timing the market. Regular investment will be made, just bonus savings will be put into market timed investments.
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Currently, the value of the euro is a function of the strength of the economies within its zone. If it should break up, we will presumably see "euro" deposits become guilders, deutchsmarks, punts, lira, and so on - at which point, 1 "new deutschmark" will presumably rise against world currencies, while the new punt or the new escudo slides.
So, an arbitrage opportunity. A mustachian with cash in a "weak euro" country might consider joining the huge northward flow now exiting banks in Greece, Spain, and who knows where else. Moving into a non-euro country creates a foreign exchange risk, but in this scenario, 1 weak euro buys 1 strong euro. No breakup, you've still got your euro. On the other hand, a breakup could increase your buying power by 70% relative to a "stay home" scenario.
The question is, where to? It needs to be:
* A very well-capitalised bank with little exposure to, for example, empty and unsaleable Spanish apartments.
* A strong euro-zone economy.
* A bank happy to accept deposits from non-residents.
I'm interested in BCEE (Luxembourg), but there must be others... right?
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Rabobank
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The question is, where to? It needs to be:
* A very well-capitalised bank with little exposure to, for example, empty and unsaleable Spanish apartments.
* A strong euro-zone economy.
* A bank happy to accept deposits from non-residents.
I'm interested in BCEE (Luxembourg), but there must be others... right?
(1) I'm definitely interested in owning the best European banks/Euro bank fund when the crisis ends, but it's impossible to know who owns what at this point. And it's not just the paper on Spanish apartments which stinks up the Euro banks' balance sheets; toxic debt comes in many forms -- most critically it may come in the form of owning Spanish and Italian sovereign debt itself.
(2) There is no strong Eurozone economy among the weak -- there is no decoupling (given the structure of the economic crisis) between, say, Germany and Greece. If one goes down, I'm afraid they all go down. Goliath is no match for David.
(3) The ultimate beneficiaries of the panic may be state-side and Canadian banks who have scant exposure to the EU economies.
I think we are witnessing the beginning of the end of the EU (but that journey may take years to unfold). This is Europe, after all, and it's evident to me that in the end Europeans will look out, not for Europe, but for Germany, for France, for Portugal, etc. The markets are desperately looking to western leaders for a concerted and forceful response to the crisis. The less they get the more the market drips lower (and remember how slow our government was to respond to our financial crisis, yet back then we all spoke the same language and shared the same national interests).
Ultimately, this is a thread about opportunity -- ideas on how to invest in the context of a crumbling Europe. There's many mustachians sitting on new found riches since they dispensed with the frivolities of consumerism in the quest to get rich. I don't know about you but I like cheap markets. I like to buy things on sale.
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Subscribed. Finally good MMM EU investing topics!
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I wouldn't touch European financials. There are a lot of tangled inter-bank arrangements there, on top of the direct sovereign exposure. IMHO, if things get really bad, inter-bank credit will dry up as banks try to figure out who's solvent and who's not. And that won't be good for anyone, even the ones with enough capital. I would expect U.S. financials to get dinged too, and they've been working pretty hard to dump or hedge away their European exposure.
Of course, the wild card here is the ECB and how much they can/will do. Plus sovereign political action/inaction. Plus probably another 6 things we can't even foresee. I'm still buying foreign index funds because I don't want to miss out on a sale, but to place a directional bet in a situation that in flux.... eeeks!
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Why try a pick banks that will be winning market share in the aftermath? We know what the research shows - stock picking will under-perform the dollar-cost-averaged purchase of index-tracking funds. My problem is that I do need to keep some cash as cash, and since I live in one of the more stretched Eurozone countries, that cash needs to take the form of euros - I could have a dollar account, but that would mean taking on extra exchange-rate risk. Too exciting!
Given I need to maintain a euro deposit somewhere, I have to live with the risk of future capital controls and the risk of a currency breakup, and the risk of a sudden change in a the solvency of the bank holding the deposits. My thinking is that this means I need one - or, better, several - very well-capitalised banks located in states with very low debt-to-gdp (hence BCEE in the Luxembourg). Presumably there are other euro-zone Mustachians trying to solve this problem?
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Why try a pick banks that will be winning market share in the aftermath? We know what the research shows - stock picking will under-perform the dollar-cost-averaged purchase of index-tracking funds.
Not during bear markets, which we've been in since 2000. Buy and hold is the worst strategy to employ. I'm not saying that to be inflammatory, I say it because it's true. Stock/sector bets will always outperform buy/hold strategies when the overall market is sideways to down.
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So what you're saying is that there are categorically no individual stocks or sectors that underperform the market in any period that the market isn't rising?
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So what you're saying is that there are categorically no individual stocks or sectors that underperform the market in any period that the market isn't rising?
Now why would I say that?
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Stock/sector bets will always outperform buy/hold strategies when the overall market is sideways to down.
How else would you read that?
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Stock/sector bets will always outperform buy/hold strategies when the overall market is sideways to down.
How else would you read that?
I'm saying that to make headway with your money in a bear market, you need to be a more discriminating investor. Read up on the trends, ; locate the cyclical bull markets within the general bear market e.g., commodities from 2004-2008, banks in 2009, etc.
The truth is the S&P is today exactly where it was 13 years ago. A whole lot of sound and fury signifying nothing -- save the growing chorus of frustrated buy and holders who have seen their returns stagnate.
I've witnessed two massive market crashes in my day -- 2000-2003, and 2007-2009. I managed to escape the first with my account intact. I avoided the second by being 100% cash at the time because the guys I read like Mish Shedlock and Bill Fleckenstein and many others were all over the commodity rally and financial collapse years before they unfolded. Yeah, I was a market prepper! I make the effort to learn and understand what the brightest minds in the investing world are thinking and, more importantly, why they are thinking it. I let my opinion grow in the space of that conversation/analysis. The knowledge I have acquired makes it impossible for me to give the all clear sign to investors to plow their money into this market. When trillions in stimulus are needed to maintain these anemic GDP growth rates, when real unemployment hovers near 20%, when Europe just sucks, and when the debt bubble was met head on with even more debt, I cringe at the thought of how this ultimately plays out.
I say let's have a conversation. Hold nothing sacred. "The more I learn, the less I know." Nowhere is this Socratic nugget more relevant -- and more true -- than in the capital markets at the turn of the 21st century.
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I'm saying that to make headway with your money in a bear market, you need to be a more discriminating investor. Read up on the trends, ; locate the cyclical bull markets within the general bear market e.g., commodities from 2004-2008, banks in 2009, etc.
The truth is the S&P is today exactly where it was 13 years ago. A whole lot of sound and fury signifying nothing -- save the growing chorus of frustrated buy and holders who have seen their returns stagnate.
Or you could have dollar-cost averaged into this same market using index funds and you would be up nicely.
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I'm saying that to make headway with your money in a bear market, you need to be a more discriminating investor. Read up on the trends, ; locate the cyclical bull markets within the general bear market e.g., commodities from 2004-2008, banks in 2009, etc.
You are saying that you know that you can beat the market based on publicly available knowledge by knowing which stocks are going to outperform the market, right? The impossibility of that is a nugget I hold pretty sacred.
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I'm saying that to make headway with your money in a bear market, you need to be a more discriminating investor. Read up on the trends, ; locate the cyclical bull markets within the general bear market e.g., commodities from 2004-2008, banks in 2009, etc.
You are saying that you know that you can beat the market based on publicly available knowledge by knowing which stocks are going to outperform the market, right? The impossibility of that is a nugget I hold pretty sacred.
Where -- in a post where I cast explicit doubt of the very possibility of "knowing" anything at all -- do I act like I know this, therefore I know that, etc.
You do understand that investing is a game of probabilities? Only a fool invests with blind certainty.
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I feel like that's what you were saying in the part that I quoted. That's why I quoted it.
It looks like you're saying that you knew ahead of time that commodities would do well in 2004-2008 and banks would do well in 2009, and that further you knew that they would do so much better than the market expected them to that they were underpriced and so you managed to beat overall market returns by investing in them, which is saying that you knew about and exploited a significant market inefficiency that was based on publicly known information.
More generally, you're saying that by being a discriminating investor you can beat market returns. The fact that one's discrimination even comes into the discussion of investing returns suggests that you think investing is skill based, which means you think that there are significant market inefficiencies that are exploitable by an intelligent and skilled investory based on publicly known information. Again, that's violating a sacred truth for me.
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I feel like that's what you were saying in the part that I quoted. That's why I quoted it.
It looks like you're saying that you knew ahead of time that commodities would do well in 2004-2008 and banks would do well in 2009, and that further you knew that they would do so much better than the market expected them to that they were underpriced and so you managed to beat overall market returns by investing in them, which is saying that you knew about and exploited a significant market inefficiency that was based on publicly known information.
More generally, you're saying that by being a discriminating investor you can beat market returns. The fact that one's discrimination even comes into the discussion of investing returns suggests that you think investing is skill based, which means you think that there are significant market inefficiencies that are exploitable by an intelligent and skilled investory based on publicly known information. Again, that's violating a sacred truth for me.
By all means you must invest in a way that's right for you. My style involves much research, analysis (both fundamental and technical), as a well as a decent grasp of general marcoeconomic themes underlying the economy. My style since 2000 has been to maintain high levels of cash and focus on specific stocks/sectors to invest in rather than some general market fund I put money in month after month without ever selling a bit of it. I've been humbled by this market plenty to know that there are no certainties, no "sacred truths" as you put it, for me to hang my hat on. But I've also been rewarded enough to see that you can gain an edge through hard work and research.
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This seems very appropriate.
Be prepared for a challenging read.
http://www.businessinsider.com/full-text-of-george-soros-speech-2012-6#comment-4fcd3e636bb3f76e6300000a
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This seems very appropriate.
Be prepared for a challenging read.
http://www.businessinsider.com/full-text-of-george-soros-speech-2012-6#comment-4fcd3e636bb3f76e6300000a
I agree with Soros and his "three month window" argument. Markets feel sold out, negativity is rampant, and much of what can go wrong in Europe is already priced in. I think a calm is about the enter the markets which should provide a price floor as the leaders of Europe work to produce a Paulsoneque financial bazooka of their own to combat the crisis. Look out below if they cant.
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Wow, the comments of that article really hate on Soros. Honestly I didn't know the name till now...
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The truth is the S&P is today exactly where it was 13 years ago. A whole lot of sound and fury signifying nothing -- save the growing chorus of frustrated buy and holders who have seen their returns stagnate.
Or you could have dollar-cost averaged into this same market using index funds and you would be up nicely.
Yup. Sure, the S&P price is exactly where it was 13 years ago, but that's an irrelevant bit of information, unless you're just trying to deceptively cast your alternate investment strategy in a better light. The price ignores two important things: dollar-cost averaging, and dividends.
To see the effect of dividend reinvestment, see this chart (http://ycharts.com/indices/%5ESPXTR#series=type:index,id:^SPXTR,calc:,,id:^INX,type:index,calc:&zoom=5&startDate=&endDate=&format=indexed&recessions=false), which compares the Total Return (SPXTR) value vs. the Price-Only (INX) over 5 years. The Price-Only value is down 11.78%, while the Total Return value is down only 1.61%.
Then, add in dollar-cost averaging. I've been making regular investments in S&P 500 index funds from 5/12/2000 until today. The S&P Price-Only value is actually down 7.3% between then and now. Despite that, the combined effects of dollar-cost averaging and dividend reinvestment mean that my annualized return over that period has been 4.29%. Still not matching historical returns, but definitely not "signifying nothing". Yee-haw!
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Over the weekend, Spain was offered 125 billion dollar bailout for it's insolvent banking system.
Today, the Spanish stock marked was down, and the yields on Spanish sovereign debt were up.
In other words, this was hardly the financial bazooka the markets have been looking for. The chance remains that today was a fakeout move and Europe could ignite to the upside over the next week -- but today's reaction does not support that possibility, and the onus falls again on the bulls to prove that the Spanish bailout is the beginning of something significant and not a belated act of desperation by the EU.
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I agree with Soros and his "three month window" argument. Markets feel sold out, negativity is rampant, and much of what can go wrong in Europe is already priced in. I think a calm is about the enter the markets which should provide a price floor as the leaders of Europe work to produce a Paulsoneque financial bazooka of their own to combat the crisis. Look out below if they cant.
It appears Europe did indeed enter a period of calm following the early June dip as most Euro indices are up anywhere from 5-10% over that time. Piecemeal measures have been rolled out by European governments and by the ECB to stem the negative financial tide which has lead to temporary stabilization as leaders attempt this week to replace their temporary band-aids with something more substantive.
Either European leaders act in concert and forcefully this week to deal with the manifold issues surrounding their fragile financial constructs, or else we may very well enter the final and most lethal stage of the sell-off since the crisis began many months ago. It's put up or shut up time for Europe as the health and stability of global stock and debt markets hang in the balance.
Hold on to your hats because this week promises to be a bumpy ride.
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I agree with Soros and his "three month window" argument. Markets feel sold out, negativity is rampant, and much of what can go wrong in Europe is already priced in. I think a calm is about the enter the markets which should provide a price floor as the leaders of Europe work to produce a Paulsoneque financial bazooka of their own to combat the crisis. Look out below if they cant.
It appears Europe did indeed enter a period of calm following the early June dip as most Euro indices are up anywhere from 5-10% over that time. Piecemeal measures have been rolled out by European governments and by the ECB to stem the negative financial tide which has lead to temporary stabilization as leaders attempt this week to replace their temporary band-aids with something more substantive.
Either European leaders act in concert and forcefully this week to deal with the manifold issues surrounding their fragile financial constructs, or else we may very well enter the final and most lethal stage of the sell-off since the crisis began many months ago. It's put up or shut up time for Europe as the health and stability of global stock and debt markets hang in the balance.
Hold on to your hats because this week promises to be a bumpy ride.
Are you making any moves at this point? Or still in wait and see mode?
If you're not making any moves - what would be your play if you thought they would figure out a more substantive response? If you thought they wouldn't?
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Definitely wait and see mode, John.
Lots of news this week: Fed tomorrow, Europe after that, ISM, employment data, etc.
My plan is to short any spike up to 1400 over the next couple days (via Oct Spy puts), but I'm attempting to keep my head (and trading account) clear in order to pounce on any "false" euphoria that may emerge the next couple of days.
Then again, a powerful and concerted move by the ECB and state central banks could be a game changer going forward. I assign a low probability to that outcome (30%), but it's significant enough to keep me honest and in a temporary holding pattern.
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Again, I wish to emphasize that the point of this thread is to not "game" the day to day fluctuations spawned by erratic and unpredictable European news flow, but rather to focus on potential dislocations that may emerge in their markets (I think we're already in the middle of a major dislocation) and the possible ways to invest for the long-term. I'm not a fan of buying individual stocks (since I don't analyze Euro companies) but think there is definitely some great values emerging that one could play through mutual/index funds or ETF's like EWP (the Spanish ETF which, I think, will handily outperform the SPY over the next 5 years).
Also, monitoring Europe should provide clues as to the next major market move here in the United States. If Europe sinks, it's reasonable to think the S&P gets hit too given that almost half its profits are derived overseas. Alternatively, if Draghi unleashes his own fiscal bazooka, the markets could just as easily melt up.
But either way, European -- and, by extension, global -- markets are at the most critical juncture of the year, IMO.
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Why try a pick banks that will be winning market share in the aftermath? We know what the research shows - stock picking will under-perform the dollar-cost-averaged purchase of index-tracking funds.
Not during bear markets, which we've been in since 2000. Buy and hold is the worst strategy to employ. I'm not saying that to be inflammatory, I say it because it's true. Stock/sector bets will always outperform buy/hold strategies when the overall market is sideways to down.
To new investors,this is interesting.While the sp500 index was flat, this ignores dividends.
10k in an auto-balanced stock-bond fund like VWELX returned an annualised 7% from June 2002, becoming 20k. YTD it's up over 5%.
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And it's only flat if you compare to the absolute peak of the dot-com bubble, which I've pointed out before (https://forum.mrmoneymustache.com/investor-alley/help-with-an-old-investment/msg15735/#msg15735), only to be answered by gratuitous ad hominem.
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And it's only flat if you compare to the absolute peak of the dot-com bubble, which I've pointed out before (https://forum.mrmoneymustache.com/investor-alley/help-with-an-old-investment/msg15735/#msg15735), only to be answered by gratuitous ad hominem.
Did somebody say bubble?:
JOHN CASSIDY: Many people would argue that, in this case, the inefficiency was primarily in the credit markets, not the stock market — that there was a credit bubble that inflated and ultimately burst.
EUGENE FAMA: I don't even know what that means. People who get credit have to get it from somewhere. Does a credit bubble mean that people save too much during that period? I don't know what a credit bubble means. I don't even know what a bubble means. These words have become popular. I don't think they have any meaning.
CASSIDY: I guess most people would define a bubble as an extended period during which asset prices depart quite significantly from economic fundamentals.
FAMA: That's what I would think it is, but that means that somebody must have made a lot of money betting on that, if you could identify it. It's easy to say prices went down, it must have been a bubble, after the fact. I think most bubbles are twenty-twenty hindsight. Now after the fact you always find people who said before the fact that prices are too high. People are always saying that prices are too high. When they turn out to be right, we anoint them. When they turn out to be wrong, we ignore them. They are typically right and wrong about half the time.
CASSIDY: Are you saying that bubbles can't exist?
FAMA: They have to be predictable phenomena. I don't think any of this was particularly predictable.…
Well, (it's easy) to say after the fact that things were wrong. But at the time those buying them [subprime-mortgage-backed securities] didn't think they were wrong. It isn't as if they were naïve investors, or anything.
http://mises.org/daily/4056
For those not familiar with this debate, Fama is the father of the "Efficient Market Hypothesis" which Grant subscribes too, and which he uses to critique all my market/stock forecasts as being nothing more than pure guesses since, of course, the market is nothing more than a random walk.
And yes, using the March 2000 tech top as the starting point in demarcating what I consider to be our current bear market, I am making a subjective determination. Guilty as charged.
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To new investors,this is interesting.While the sp500 index was flat, this ignores dividends.
10k in an auto-balanced stock-bond fund like VWELX returned an annualised 7% from June 2002, becoming 20k. YTD it's up over 5%.
In all fairness, we were talking stocks. Bonds have been in a bull since the early 80's, and have performed fabulously since the tech bubble implosion. It's easy to see why a balanced fund (stock and bond mix) would perform well. Unfortunately, there was a ton of people who sat on their hands after the tech bubble burst, only to watch their "growth" and "aggressive growth" funds become a fraction of their original investment. Hence the mantra "buy and homework," not "buy and hold."
It's also worth mentioning that 2002 marks the low of the initial phase of the bear market, so it's reasonable to expect that its performance to date would be solid; much less so if one begins in 2000.
Finally, dividend and value funds are the best stock vehicles to own during a primary, secular bear market. On the flip side, growth is a much better bet in a rising market (and by "rising" I mean breaking out into new highs).
It goes without saying Mr. Mark, but I'm glad you're funds are up over this time and I wish you continued success.
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critique all my market/stock forecasts as being nothing more than pure guesses since, of course, the market is nothing more than a random walk.
That's the same mischaracterization you've been committing since we started this conversation a month and a half ago. I've made it very clear that that is a misrepresentation of my position.
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critique all my market/stock forecasts as being nothing more than pure guesses since, of course, the market is nothing more than a random walk.
That's the same mischaracterization you've been committing since we started this conversation a month and a half ago. I've made it very clear that that is a misrepresentation of my position.
Okay, the inefficiencies of the market cannot be exploited in a systematic manner to produce greater than average market returns after fees on a risk-adjusted basis. Or something like that. I really do get it, even if my own investment experience has proven otherwise.
But do you get that the progenitor of the core theory you subscribe to does not believe in bubbles, bears, bulls, technical analysis, or the impact of emotion (greed/fear) on the movement of stock prices? Basically, he dismisses as bunk everything I hold to be of primary value?
There's just no basis for a market conversation between you and I, which is not meant as a slight against you, just a statement of fact.
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There's just no basis for a market conversation between you and I, which is not meant as a slight against you, just a statement of fact.
I think there is. I've been following the technical analysis conversation with interest, I've put your suggestions on my reading list, and talking with you has really made me think. I've learned about behavioral economics and fundamental analysis. I still don't think that they can consistently be exploited, but it doesn't mean I'm not curious or that they're not interesting.
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There's just no basis for a market conversation between you and I, which is not meant as a slight against you, just a statement of fact.
I think there is. I've been following the technical analysis conversation with interest, I've put your suggestions on my reading list, and talking with you has really made me think. I've learned about behavioral economics and fundamental analysis. I still don't think that they can consistently be exploited, but it doesn't mean I'm not curious or that they're not interesting.
I think I can get 100% behind this statement. I do realize that I'm probably wired a little differently than the vast majority of investors, which is why I've always supported your (and Mr. Mark's, and Arebelspy's, and the Boss') contention that mutual/index funds are the best vehicles for the vast majority of Mustachians to invest in the market. I will never waver from that opinion.
It's been a hell of a conversation, and one I do look forward to continuing to have with you and the others for as long as possible.
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mutual/index funds are the best vehicles for the vast majority of Mustachians to invest in the market.
Absolutely.
I'm wired different in that I love real estate. I realize it's not for everyone. (Although I think many times more people have gotten rich using real estate than day trading, even percentage-wise.)
Most people should dollar cost average into index funds and never look at what the market is doing, and they'll grow rich over time, even with "lost decades".
The vast, vast majority of people.
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I really do get it, even if my own investment experience has proven otherwise.
That's like saying a really hot day proves global warming or a really cold one disproves it. Your anecdotal experience cannot prove or disprove anything, but it definitely makes sense how it would strongly impact your opinion and choices.
I do think the conversation on the issue here has matured over time as the various positions have become more clear and better fleshed out. Like Grant I'm interested in your theory and actual moves that you make, while continuing to be suspect of your confidence in the ability to profit from your analysis.
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I really do get it, even if my own investment experience has proven otherwise.
That's like saying a really hot day proves global warming or a really cold one disproves it. Your anecdotal experience cannot prove or disprove anything, but it definitely makes sense how it would strongly impact your opinion and choices.
I do think the conversation on the issue here has matured over time as the various positions have become more clear and better fleshed out. Like Grant I'm interested in your theory and actual moves that you make, while continuing to be suspect of your confidence in the ability to profit from your analysis.
James, here's a little secret: today on Wall Street, billions of dollars of merchandise will be bought and sold by traders/fund managers who:
(a) employ technical analysis in order time their trades;
(b) employ behavioral psychology in order to time their trades;
(c) engage in fundamental analysis in order to time their trades;
They will do all these things, regardless of your or my perception of the utility/effectiveness of such endeavors.
k?
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And every day there is a winner and loser on each side of those trades.
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And every day there is a winner and loser on each side of those trades.
Some would argue that the guy or gal with the chart, sentiment indicator, and the company income statement in hand stands a better chance of being on the winning end the trade than the guy who comes to the table blind.
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(a) employ technical analysis in order time their trades;
(b) employ behavioral psychology in order to time their trades;
(c) engage in fundamental analysis in order to time their trades;
They will do all these things, regardless of your or my perception of the utility/effectiveness of such endeavors.
Sure they will do these things regardless of our collecitive perception of utility/effectiveness but that doesn't mean they are effective for them. Most of wall street trades are employ a complex string of derivatives and take big positions to eke out a small gain with protected downside and even more than that they exploit microsecond inefficiencies in the trading platforms (the majority of trades are computerized and of the high velocity type).
I do think technical analysis can work for long term trades when things get way off normal in either direction but these in-and-out type of trades like you are suggesting not so much. And really the behavioral analysis is nothing more than the technical analysis.
Fundamental analysis is the only real way to beat the market but again it is very hard, complex and the vast majority don't have the skills or time to do it.
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Some would argue that the guy or gal with the chart, sentiment indicator, and the company income statement in hand stands a better chance of being on the winning end the trade than the guy who comes to the table blind.
Others would point out that that statement is demonstrably false.
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Some would argue that the guy or gal with the chart, sentiment indicator, and the company income statement in hand stands a better chance of being on the winning end the trade than the guy who comes to the table blind.
Others would point out that that statement is demonstrably false.
Is that the point billionaires like Buffet, Soros, and Tudor Jones vanish into thin air, having succumbed to the inexorable logic of a stuffy academic?
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Some would argue that the guy or gal with the chart, sentiment indicator, and the company income statement in hand stands a better chance of being on the winning end the trade than the guy who comes to the table blind.
The guys and gals at JP Morgan probably would have argued that before they lost billions.
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James, here's a little secret: today on Wall Street, billions of dollars of merchandise will be bought and sold by traders/fund managers who:
(a) employ technical analysis in order time their trades;
(b) employ behavioral psychology in order to time their trades;
(c) engage in fundamental analysis in order to time their trades;
They will do all these things, regardless of your or my perception of the utility/effectiveness of such endeavors.
k?
That's not a secret. It's completely true, they will do that.
What's also not a secret is that it has been shown over and over that it doesn't give them an edge over the market over their fees, and that investing with those traders will cost an investor money.
Is that the point billionaires like Buffet, Soros, and Tudor Jones vanish into thin air, having succumbed to the inexorable logic of a stuffy academic?
He didn't say theoretically false. He said actually false, demonstrated in the real world.
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This is a really interesting thread.
A core assumption here and at MMM in general is that for most people index funds will beat managed funds because the fund management does not give them an edge over the market over their fees.
Can we extrapolate that excluding fees, they do have a significant edge? Significant meaning statistically, not implying size.
It appears that smedleyb is his own fund manager and, by much research and effort, has historically outperformed the market with his investments and will, with a high probability but not certainty, continue to do so.
The 'fees' charged to his account therefore are an investment of his personal time.
So for those of us with an analytical mind (everyone on this thread), how much money would we need to have invested for the time investment in managing investments more complex than index funds to outperform in dollar terms our earnings at our jobs?
I know that's a how long is a piece of string question! But maybe an interesting one to discuss?
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So for those of us with an analytical mind (everyone on this thread), how much money would we need to have invested for the time investment in managing investments more complex than index funds to outperform in dollar terms our earnings at our jobs?
A lot...
I think you're missing the point of my question. And I don't mean this as an attack, just genuinely curious why you think this isn't the case.
You say this:
Again, bullish over 1330, as SPX works its way to 1390 (maybe a touch higher). Minor resistance at 1350 (downtrend line) and again at 1365. These are the zones I'm focusing on.
If these are important zones, why can you pick up on that with only a few hours/week research, when those spending 20x that can't? Or can they? If so, why doesn't an efficient market quickly remove the opportunity?
Okay -- it's more than a few hours a week. I was up til 2 AM last night studying my charts; I was up a 7 (before work) scanning headlines, preparing my game plan, attempting to locate opportunities; it's really a second job, truth be told.
And yes, the greatest traders in the world know these zones/trends/patterns. How quickly the opportunity is removed varies, but I've found the most glorious trade set ups allow you plenty of time to get on board.
This brings back up the question... is it worth it? Which, of course, is primarily dependent upon three variables (as I see it).
Total amount you're trading with (using these methods): P
Expected increase in yeild over more passive approaches: r
Increase in time spent analyzing/trading over more passive approaches: t
Your reward / time function then becomes P*r/t
Using that and assuming 1,000 additional hours per year (part time job equivalent) for time here are the hourly rates recieved for every 1% increase in performance for different levels of P.
$100,000 = $1/hour/1%
$250,000 = $2.5/hour/1%
$500,000 = $5/hour/1%
$1,000,000 = $10/hour/1%
Obviously if you spend less time these numbers change but even at 500 hours per year a 2% gain and a $500K portfolio, I'd be at $20/hr.
The opportunity cost will be different for everyone, but even that ( in my opinion top end) situation would probably not be worth it to me personally. Especially given that the % gain is not guaranteed. I can pick up part time consulting gigs for much better hourly rates than what I would gain spending a ton of time trying to gain a % or two on my current portfolio (for sure) and probably my FI portfolio as well.
I guess if you enjoy the analysis - maybe that should be factored in as a non monetary benefit too that would make it worth it. I happen to very much not enjoy that side of things - even though (or maybe because?) I do statistics/modeling/forecasting for a living.
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I know that's a how long is a piece of string question! But maybe an interesting one to discuss?
Sure.
To give it baseline figures, if a fund manager can't beat index funds after fees of 1-2%, that means he can't, with all his time, beat it by more than 1-2% without the fees included.
Given that, the numbers JohnGalt posted seem reasonable, and it's not worth doing except as a hobby. You'll be getting less than minimum wage, typically.
...and that's with a GIVEN that you beat it. You might not. Almost none do.
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Ah. Those figures sound about right.
I think I will stick to my job, it's better paying and I'm already trained for it!
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James, here's a little secret: today on Wall Street, billions of dollars of merchandise will be bought and sold by traders/fund managers who:
(a) employ technical analysis in order time their trades;
(b) employ behavioral psychology in order to time their trades;
(c) engage in fundamental analysis in order to time their trades;
They will do all these things, regardless of your or my perception of the utility/effectiveness of such endeavors.
k?
That's not a secret. It's completely true, they will do that.
What's also not a secret is that it has been shown over and over that it doesn't give them an edge over the market over their fees, and that investing with those traders will cost an investor money.
Is that the point billionaires like Buffet, Soros, and Tudor Jones vanish into thin air, having succumbed to the inexorable logic of a stuffy academic?
He didn't say theoretically false. He said actually false, demonstrated in the real world.
From what I was able to determine, the studies I looked at determined that on average active fund managers underperformed (excluding fees) the indexes by less than a fraction of a percent over time.
The number I found was .4%.
In my reality that's called a push.
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Again, a thread devoted to discussing specific market activity (European markets) has miraculously transformed into a thread on meta-market techniques.
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Again, a thread devoted to discussing specific market activity (European markets) has miraculously transformed into a thread on meta-market techniques.
So for all of us that look back at 2008 and wonder how we passed such a great buying opportunity, how can we (stock and index wise) take advantage of this European Crisis?
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I really do get it, even if my own investment experience has proven otherwise.
That's like saying a really hot day proves global warming or a really cold one disproves it. Your anecdotal experience cannot prove or disprove anything, but it definitely makes sense how it would strongly impact your opinion and choices.
I do think the conversation on the issue here has matured over time as the various positions have become more clear and better fleshed out. Like Grant I'm interested in your theory and actual moves that you make, while continuing to be suspect of your confidence in the ability to profit from your analysis.
James, here's a little secret: today on Wall Street, billions of dollars of merchandise will be bought and sold by traders/fund managers who:
(a) employ technical analysis in order time their trades;
(b) employ behavioral psychology in order to time their trades;
(c) engage in fundamental analysis in order to time their trades;
They will do all these things, regardless of your or my perception of the utility/effectiveness of such endeavors.
k?
Here's a little secret, your whole reply is called a non sequitur, it has nothing to do with my position that your "Your anecdotal experience cannot prove or disprove anything". I will not comment on the tangent you took since you did not address my actual point.
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From what I was able to determine, the studies I looked at determined that on average active fund managers underperformed (excluding fees) the indexes by less than a fraction of a percent over time.
The number I found was .4%.
In my reality that's called a push.
1) Assuming the study had a significant sample size, no, that's not a push, but an actual difference.
2) Even if it was, they still couldn't beat the market. Despite that being their full time job and likely passion.
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Again, a thread devoted to discussing specific market activity (European markets) has miraculously transformed into a thread on meta-market techniques.
If I say I can fly, with no proof, and others dispute that with mountains of evidence, studies, and show that no one else can, and I ignore them.
Then I start a new thread on the next time I'm gonna fly... Of course they're gonna start talking again about how it can't be done.
(Now yes, we have admitted it can, due to the law of large numbers.. Almost 1000 people in a million will flip heads 10 times in a row. But it can't be done reliably, such that one could profit on it. And millions of traders out there are the proof!)
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Again, a thread devoted to discussing specific market activity (European markets) has miraculously transformed into a thread on meta-market techniques.
So for all of us that look back at 2008 and wonder how we passed such a great buying opportunity, how can we (stock and index wise) take advantage of this European Crisis?
Good question. Tangible "I'm buying X at $Y" is much more solid than "Crisis! ...I feel like it will go lower but I'm waiting" whereby when it goes lower you say "See!" and when it doesn't you go "That's why I was waiting.. Not time yet"
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Again, a thread devoted to discussing specific market activity (European markets) has miraculously transformed into a thread on meta-market techniques.
So for all of us that look back at 2008 and wonder how we passed such a great buying opportunity, how can we (stock and index wise) take advantage of this European Crisis?
Good question. Tangible "I'm buying X at $Y" is much more solid than "Crisis! ...I feel like it will go lower but I'm waiting" whereby when it goes lower you say "See!" and when it doesn't you go "That's why I was waiting.. Not time yet"
Well, that opportunity does not exist in a European Index Fund, like VEURX....it hasn't does much of anything since the 2000s.
At that point, do you have to bet on an index fund for Spain?
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Here's a little secret, your whole reply is called a non sequitur, it has nothing to do with my position that your "Your anecdotal experience cannot prove or disprove anything". I will not comment on the tangent you took since you did not address my actual point.
"Investment experience" includes observing and witnessing other traders do their magic for the past 15 years; it includes my own real time use of technical, fundamental, and psychological analysis in order to time trades, and witnessing others employ the same tactics to time their own.
What you did is latch onto a little sentence, misread it, and attempt to reduce everything I've been saying for weeks into being something like my own little private investment fantasy.
Have you read any books on technical analysis?
Have you read any books on behavioral psychology as applied to speculation?
Have you read any books on the role of fundamental analysis in exploiting market inefficiencies?
My guess is "definitely no" to the first two, and maybe a book or two dealing with the last. But by all means, don't let a lack of knowledge of a subject deter you from throwing your opinion out there; hasn't stopped the resident efficient market hypothesizers from doing the same.
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Ooh, an ad hominem! We're really in unprecedented new territory here.
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Ooh, an ad hominem! We're really in unprecedented new territory here.
Now it's a party.
Grant in the house!
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Really though smedley, it would be nice if you addressed some of the arguments others are making.
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Really though smedley, it would be nice if you addressed some of the arguments others are making.
Which arguments? I've yet to see one.
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James was arguing that a single anecdote is not sufficient proof of an economic theory. Start with that one.
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James was arguing that a single anecdote is not sufficient proof of an economic theory. Start with that one.
I just responded a couple posts above.
"Investment experience" encompasses way more than my own profit and loss statements.
Next.
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James was arguing that a single anecdote is not sufficient proof of an economic theory. Start with that one.
I'll add to that to clarify, based on smedley's previous response to that question:
"Investment experience" includes observing and witnessing other traders do their magic for the past 15 years; it includes my own real time use of technical, fundamental, and psychological analysis in order to time trades, and witnessing others employ the same tactics to time their own.
All of that quote is still your single anecdotal evidence. So how about some other support (facts and hard numbers)?
I have read TA books, and still, no, the trend is not my friend.
EDIT: looks like smedley posted right before me. My point remains.. that is all your own anecdote. Hard statistics would be nice, real numbers, rather than "I've seen wizards do it!"
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James was arguing that a single anecdote is not sufficient proof of an economic theory. Start with that one.
I'll add to that to clarify, based on smedley's previous response to that question:
"Investment experience" includes observing and witnessing other traders do their magic for the past 15 years; it includes my own real time use of technical, fundamental, and psychological analysis in order to time trades, and witnessing others employ the same tactics to time their own.
All of that quote is still your single anecdotal evidence. So how about some other support (facts and hard numbers)?
I have read TA books, and still, no, the trend is not my friend.
EDIT: looks like smedley posted right before me. My point remains.. that is all your own anecdote. Hard statistics would be nice, real numbers, rather than "I've seen wizards do it!"
There is an entire world out there that trades stocks the way I do. There are thousands of books which attempt to explain and figure out the market using the methods and techniques I do.
Enough with the ridiculous notion that these are "my theories."
Anecdotes? I got a thread which attempts to use TA in real time to locate buy and sell points. I'm not shunning anyone's challenge, but rather attempting to rise up and meet your doubts head on with my day to day analysis of levels, news, psychology, etc. I resent the idea that I'm constantly running away from arguments, or Grant's incessant fixation on my "ad homenin" tactics. I make a couple remarks here and there (out of hundreds) and all of a sudden I'm this real mean poster. Coming from Grant, I find that criticism laughable in a "tu quoque" kind of way...
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SmedleyB
Have you considered other forums where your efforts would be more contextually appreciated? Market timing and tech analysis is exactly antithetical to MMM.
'We' agree its
- possible to exploit market volatility
- hard to do
- very hard to justify even upside results on a per hour wage basis
- proven that even professionals fail to beat balanced asset allocation >80% of the time over 10 yr + time spans
- increases fees
- means you have to do a lot of work and fretting about the market
- should not involve more than a small % of your stash
- likely to loose most people money compared to alternative strategies
If you want to talk long term strategic asset allocation implications, great.
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So in other words Mr. Mark, just shut the fuck up and get lost? lol!
Yeah, I've though about it. No, ain't gonna happen. ;)
My goal is to help others preserve capital (as a precursor to getting rich); not to chase overvalued and liquidity juiced markets. I don't see how this is incompatible with mustachianism.
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James was arguing that a single anecdote is not sufficient proof of an economic theory. Start with that one.
I'll add to that to clarify, based on smedley's previous response to that question:
"Investment experience" includes observing and witnessing other traders do their magic for the past 15 years; it includes my own real time use of technical, fundamental, and psychological analysis in order to time trades, and witnessing others employ the same tactics to time their own.
All of that quote is still your single anecdotal evidence. So how about some other support (facts and hard numbers)?
There is an entire world out there that trades stocks the way I do. There are thousands of books which attempt to explain and figure out the market using the methods and techniques I do.
Enough with the ridiculous notion that these are "my theories."
I think what is being pointed out is that yes, you may be able to beat the market and, yes, so may Buffet, Soros, and the like - you can probably point to tens, hundreds, maybe even thousands of people who have consistently beat the market over time using TA. The question is what percentage does that make up of all the people using TA (or maybe even subset to just those using TA "correctly")? Are 75% able to beat the market? 25%? 1%? Basically - it doesn't matter how many people you can point to that have been successful if you don't also have an idea of how many have been unsuccessful.
Though - having followed most of the posts on both sides - I think you've clearly stated that you're not trying to convert anyone and that TA is not for the vast majority of investors and, personally, I would like to see the theoretical arguments dropped by both sides so we can discuss what you are actually seeing/doing.
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SmedleyB
Have you considered other forums where your efforts would be more contextually appreciated? Market timing and tech analysis is exactly antithetical to MMM.
I strongly disagree with this... Smedley brings an interesting perspective to this forum. MMM may not himself practice Market timing or TA, but does that make it anti-MMM? If that's the case - do we all need to follow his investment strategy of real estate + broad market investing? Where do other business ventures fit into the mix? are they anti-MMM as well?
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I think what is being pointed out is that yes, you may be able to beat the market and, yes, so may Buffet, Soros, and the like - you can probably point to tens, hundreds, maybe even thousands of people who have consistently beat the market over time using TA. The question is what percentage does that make up of all the people using TA (or maybe even subset to just those using TA "correctly")? Are 75% able to beat the market? 25%? 1%? Basically - it doesn't matter how many people you can point to that have been successful if you don't also have an idea of how many have been unsuccessful.
Though - having followed most of the posts on both sides - I think you've clearly stated that you're not trying to convert anyone and that TA is not for the vast majority of investors and, personally, I would like to see the theoretical arguments dropped by both sides so we can discuss what you are actually seeing/doing.
Good, balanced post as always John.
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Though - having followed most of the posts on both sides - I think you've clearly stated that you're not trying to convert anyone and that TA is not for the vast majority of investors and, personally, I would like to see the theoretical arguments dropped by both sides so we can discuss what you are actually seeing/doing.
I like the theoretical discussions as well but they are becoming repetitive as there doesn't appear to be flexibility in the individual positions.
A new thread would be good that SOLELY for you making your claims so that there is a clear and real time history of the good and the bad. I realize you are doing that in the other thread that got off topic but also got bogged down with the back and forth. If you do this, please do your best to limit it to the technical part of the trade and not the theories and hopefully the forum will return in kind.
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Here's a little secret, your whole reply is called a non sequitur, it has nothing to do with my position that your "Your anecdotal experience cannot prove or disprove anything". I will not comment on the tangent you took since you did not address my actual point.
"Investment experience" includes observing and witnessing other traders do their magic for the past 15 years; it includes my own real time use of technical, fundamental, and psychological analysis in order to time trades, and witnessing others employ the same tactics to time their own.
What you did is latch onto a little sentence, misread it, and attempt to reduce everything I've been saying for weeks into being something like my own little private investment fantasy.
Notice the words in bold? That is additional evidence you are so far using anecdotal experience and not empirical or research data to justify your claims. That was my only point, and it was not criticizing your use of that experience to guide your choices, only correcting what I consider a small but critical error in your use of the idea of "proof". I myself use much of my own anecdotal experiences to guide my actions, though I recognize the inherent danger in that and attempt to balance that with research and empirical data.
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Can any investment approach ever be proven? I suspect it's too large and complex a system and it will never be possible to predict anything for certain. Thus all we have is experience and anecdote to guide us. Statistically speaking, the plural of anecdote is data. (let's not argue about the validity or applicability of that data. That's a whole other thread).
Personally I'm trying to explain what I know about real estate investing to my husband and failing dismally. I base my opinions on a whole lot of perfectly good data, but because I am not writing a PhD thesis I remember my overall opinion - my learning - and forget the individual data points on which I have formed my theories. Therefore I find it hard to explain the basis of my theories. Are they useless because I cannot prove them?
So, personally, I'm interested in smedleyb's anecdotes and food for thought such as the question that started this thread. While often the process of debating is fascinating (not sarcastic, I mean that) I think it's obscuring actually learning stuff here. So can we please keep it to a few threads, allowing other threads to contain unsubstantiated ideas. For which of course caveat emptor - it's the internet!
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I agree with JG that smedely shouldn't go, and that he brings a different perspective. But I do agree with Mark that maybe it could be contained to a thread or two.
And maybe just a trading thread where he gives actual trades, instead of speculation which can't be falsified as one could claim victory either way when not making the trade (I.e. it did what they say, so they claim to be right, or it didn't, so they claim that's why they didn't buy yet, and claim to be correct either way).
Can any investment approach ever be proven? I suspect it's too large and complex a system and it will never be possible to predict anything for certain. Thus all we have is experience and anecdote to guide us. Statistically speaking, the plural of anecdote is data. (let's not argue about the validity or applicability of that data. That's a whole other thread).
But an anecdote or two is not valid data.
We can't predict the future, so at best we can look at what has worked historically, and what hasn't.
Buy and hold index funds has made the average person utilizing it much more money than the average market timer.
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I agree with JG that smedely shouldn't go, and that he brings a different perspective. But I do agree with Mark that maybe it could be contained to a thread or two.
Oh goody, I can stay?!
Yeah, I don't think Mr. Mark was saying that "it should be contained to a thread or two," because, if you stop to think about it, it is already contained to a thread or two. I'm not sure who made him the authority on what is true and what is antithetical to the essence of mustachianism, nor do I really care.
The Boss refers to this site as an "advanced personal finance" site. We're beyond cutting up cards, or finding really thrifty ways to save on our car loans, or boost our savings from 5% to 10%. We're beyond that shit, right?
It stands to reason then that an advanced, personal finance site should allow posters some leeway to discuss specific stocks and/or stock market situations. So let's have some leeway, shall we?
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I'm not saying go away or foxtrot Oscar. But it's a bit repetitive. And generally bad investing.
And yes, I think tech analysis driven trading in stocks is anti-mustashian.
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To take this discussion a different path...
Something like SAN (Banco Santander) who makes their money elsewhere, but have been beaten down from the general pecuniar malaise in Spain. It's a bank. They don't make anything that will be out of fashion, they offer loans, they hold money. They basically don't *do* much and earn money on a spread of sorts.
Just my favorite sort of investment.
What other similar opportunities may there be in some of the affected Euro countries?
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They basically don't *do* much and earn money on a spread of sorts.
Just my favorite sort of investment.
Just curious... why do you favor companies that "don't do much" over companies that actually produce something?
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I agree with JG that smedely shouldn't go, and that he brings a different perspective.
Oh goody, I can stay?!
See it's this attitude and general * (see: attacks towards other users) that makes you seem like an ass. I was defending you.
Chill out.
They basically don't *do* much and earn money on a spread of sorts.
Just my favorite sort of investment.
Just curious... why do you favor companies that "don't do much" over companies that actually produce something?
I'm guessing he perceives less risk? Quite possibly true, innovating is risky.
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See it's this attitude and general * (see: attacks towards other users) that makes you seem like an ass. I was defending you.
Chill out.
I'm chill.
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To take this discussion a different path...
Something like SAN (Banco Santander) who makes their money elsewhere, but have been beaten down from the general pecuniar malaise in Spain. It's a bank. They don't make anything that will be out of fashion, they offer loans, they hold money. They basically don't *do* much and earn money on a spread of sorts.
Just my favorite sort of investment.
What other similar opportunities may there be in some of the affected Euro countries?
I've always been partial to the Spanish market ETF EWP as a means of playing the rebound in Spain. The IBEX 35 is down 60% from its peak, and unless you think Spain is closing up shop, it makes sense to start sniffing around for opportunities. I used to track Banco's stock price as a proxy for Spanish banks in general, and I actually have traded it in the past. Recently I lost track of it after they changed the ticker symbol, which is understandable since who wants to buy an STD? (new ticker is SAN).
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Ah, finally, back to the original topic! I was about to call in the UN here...
IMHO there are certainly some opportunities to be had, especially in the South of Europe. I was looking into Repsol as a possible investment now that in the near future I will have to put my Logica money elsewhere, since they're about to be taken over. Isn't the financial sector affected too much by the recent financial turmoil? You can't really exclude that they still have some skeletons in the closet...
Smedley, what do you think of Zu(e)rich Financial Services as a dividend investment? (Don't know the exact symbol, I track my investments on another computer)
L.
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Ah, finally, back to the original topic! I was about to call in the UN here...
IMHO there are certainly some opportunities to be had, especially in the South of Europe. I was looking into Repsol as a possible investment now that in the near future I will have to put my Logica money elsewhere, since they're about to be taken over. Isn't the financial sector affected too much by the recent financial turmoil? You can't really exclude that they still have some skeletons in the closet...
Smedley, what do you think of Zu(e)rich Financial Services as a dividend investment? (Don't know the exact symbol, I track my investments on another computer)
L.
I agree Lex, investing in European financials is a dangerous game; an although it seems that the ECB has effectively turned the tide (see the following chart on Spanish 2 years treasuries: http://www.businessinsider.com/spanish-2-year-rally-august-2-2012-8), it's still way to soon to know for certain if last week's market bounce and bond rally is sustainable. If not, expect much more pain in the near future. Deutsche Bank is my primary Euro bank proxy (DB) and I'll be watching it closely for clues as to the fate of Europe's financial future.
As far as ZURN is concerned, I have no opinion either way. I confess that I'm not well versed in individual European securities.
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To take this discussion a different path...
Something like SAN (Banco Santander) who makes their money elsewhere, but have been beaten down from the general pecuniar malaise in Spain. It's a bank. They don't make anything that will be out of fashion, they offer loans, they hold money. They basically don't *do* much and earn money on a spread of sorts.
Just my favorite sort of investment.
What other similar opportunities may there be in some of the affected Euro countries?
I've always been partial to the Spanish market ETF EWP as a means of playing the rebound in Spain. The IBEX 35 is down 60% from its peak, and unless you think Spain is closing up shop, it makes sense to start sniffing around for opportunities. I used to track Banco's stock price as a proxy for Spanish banks in general, and I actually have traded it in the past. Recently I lost track of it after they changed the ticker symbol, which is understandable since who wants to buy an STD? (new ticker is SAN).
Just looked at EWP out of curiousity and it appears SAN and TEF account for 40% of the index, so it really depends on your view and potential outcome of these two.
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To take this discussion a different path...
Something like SAN (Banco Santander) who makes their money elsewhere, but have been beaten down from the general pecuniar malaise in Spain. It's a bank. They don't make anything that will be out of fashion, they offer loans, they hold money. They basically don't *do* much and earn money on a spread of sorts.
Just my favorite sort of investment.
What other similar opportunities may there be in some of the affected Euro countries?
I've always been partial to the Spanish market ETF EWP as a means of playing the rebound in Spain. The IBEX 35 is down 60% from its peak, and unless you think Spain is closing up shop, it makes sense to start sniffing around for opportunities. I used to track Banco's stock price as a proxy for Spanish banks in general, and I actually have traded it in the past. Recently I lost track of it after they changed the ticker symbol, which is understandable since who wants to buy an STD? (new ticker is SAN).
To be clear, TEF and SAN comprise 40% of the IBEX 35; the EWP tracks the index, nothing more.
Just looked at EWP out of curiousity and it appears SAN and TEF account for 40% of the index, so it really depends on your view and potential outcome of these two.
Just to be clear, the EWP tracks the IBEX 35, Spain's primary index. It's an index ETF, like SPY or QQQ.
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To be clear, TEF and SAN comprise 40% of the IBEX 35; the EWP tracks the index, nothing more.
Just looked at EWP out of curiousity and it appears SAN and TEF account for 40% of the index, so it really depends on your view and potential outcome of these two.
Or nothing less....but you said you liked the index and SAN at some point, and I was pointing out that this index is concentrated in two stocks - doesn't make it good or bad but much more akin to investing in just these stocks on an individual basis and the 60% decline is likely driven by these two stocks. The point is if you hate these two stocks then you shouldn't touch EWP and the opposite is also the case.