Tags
Alternative Asset Opportunities, Argo Group, benchmarking, Brexit, Donegal Investment Group, Fortress Investment Group, JPMorgan Russian Securities, KWG Kommunale Wohnen, Newmark Security, portfolio performance, Rasmala, Saga Furs, Tetragon Financial Group, value investing, VinaCapital Vietnam Opportunity Fund, Zamano
Benchmark Performance:
Yeah, it’s that time of year again…and hopefully a chance to step back from some of this recent Brexit insanity. Let’s jump right in – here’s the H1-2016 performance of my usual benchmark indices:
Of course, what jumps out immediately is the UK. Brexit schmexit…the FTSE’s performance is actually bang in line with long-term averages! Which reflects its predominantly international exposure, but the much-cited FTSE 250 certainly wasn’t much of a disaster at (6.6)%, while the AIM All-Share managed to limit its decline to (4.2)%. [Sterling took the real walloping, trading down 10-12% vs. the dollar & euro]. Unfortunately, this is a sad reminder the real risk of home bias for investors may not be portfolio return. It’s the fact they wake up to a shrinking portfolio…and suddenly realise their currency’s dumped, their housing market’s locked up (& their house value’s probably dumped too), not to mention their employment & economic prospects may also have dimmed substantially. [At least Brexiteers won’t notice the currency impact, since they seem to think only in terms of Mighty Blighty & The Pahhhnd In Your Pocket]. Only a fool would question (or ignore) the benefits of greater/global diversification in the face of such potentially existential risks – particularly as there’s no obvious long-term cost(s) to such a strategy.
At first glance, Europe has borne more of the Brexit brunt, with the Bloomberg Euro 500 significantly trailing the UK indices – down over 10% (which must delight the Brexiteers!). However, it’s worth noting escalating NPL/capital issues in the Italian banking system (& a mounting EU-Italy war of words) have been overlooked by the media recently (hat tip to The Economist though)…I suspect this is responsible for a significant portion of the index decline. Despite efforts to date, this crisis will require an expensive & long-drawn out resolution, and will probably continue to exert a significant drag on sentiment. Fortunately, it shouldn’t pose any kind of existential threat to the European banking system ultimately, at least for stronger banks & countries…Draghi & the ECB will presumably continue to do ‘whatever it takes’. But the ongoing compression in European banking valuations is puzzling – who the hell wants to bet & sweat over sub-0.5 P/B banks, when the cream of the crop remains on sale at 1.0 times book (or less)?! [And the US banking situation isn’t much different].
Perhaps the real Brexit victim here is Ireland, with the ISEQ suffering a 17% decline. Then again, with the market clocking an impressive multi-year string of gains (& a late-2015 double top), a correction was overdue…regardless of Brexit. [Hmph, so why didn’t I dump my Irish shares?!] Of course, now we have to figure out the medium/long-term consequences for the Irish economy & market – a challenge which I think nobody, no matter how authoritative, is qualified to tackle at this point. But anyway, let me throw my (initial) ten cents into the ring:
Wexboy 