Thanks Skaap...my last reply was specific to the previous post. As I said in my first post - this is not a trading discussion, and I dont want it to "degenerate" into one. My focus is investment in the medium and long term.
I understand the investing long side...but you can sit on the sidelines and watch for a bit. For me, the question is: Do I sell my investment financials, or do I sit and wait it out, and what, if any impact will a junk downgrade have. No one knows the answer to this - but in discussion - I am able to filter our what other people are doing. As mentioned, this is not my job or life...so I value other peoples input. Having said that I know my own plan and generally stick to it.
I was thinking of an analogy last night: If you met Hitler when he was a ten year old, and had been told by a battery of psyches, that Mr 10year Old Hitler had psychopathic tendencies, and there was a strong chance he would turn into a mass murderer...you were then given a gun. What would you do? Many think a junk downgrade is coming, but no one knows exactly how this is all going to pan out.
Hey Blik. I don't think it's all priced in. I wish I had a buck for every time it's priced in and then tanks anyway.
We get downgraded, the rand will tank and financials will be hammered. Everything will be hammered except rand-hedge stocks and a few lucky companies with special situations.
You already have a position on this situation, whether you like it or not. Currently many of us are betting 100% on it being ok, whether we have our investments in cash or equities. We don't believe it'll be ok, but we're certainly betting that it will. It's an interesting starting point for "what should I do?"
Very interesting question Blik and got my nuts in a twist as I am in a similar situation. So I called up Brazils graph and yes it got slapped in December 2015 after the downgrade announcement but by the end of Feb it had recovered its losses and steadily climbed since. So my thinking is, I won't sell but I am going to watch it like a hawk!
I have sold my FSR RMH and RMI positions. I am keeping my REM position for now. I am going to wait for the OML unbundle and see what happens then. My DSY holding...is holding for now.....I need to re-evaluate my strategy a bit with this one. The rest I'm holding as all are decent rand hedge. Sounds like a lot of cross holding - but much was gained through unbundles etc...
Hey Blik. In my opinion I wouldnt have sold my financial stocks like FSR. Quality company. so what if FSR gets smashed as a result of the downgrade. Just keep on buying more. Easier said than done but hey everyone can invest in a bull market but the bear market, crash, correction or pullback will tell you who the experienced investors are.
I see your point. It is a good company, but in terms of my long term plan, it just doesnt fit at the moment. Still with a PE of around 10 and a DY of over 4, the basics look good. But there is no reason why I cannot climb back in at a later stage. Or get some FSR benefit by holding Remgro or an ETF.
Blik you don't seem to have a discernible strategy - or is it solely counter based? Financials are definitely cheaper than industrials - this is a lot of hot air - earnings - increases - nah??? not a lot. But Financials look to be hit harder come the inevitable downgrade. But this stuff about downgrade is all history....or mostly so..... Two things. Long bond yields indicate the junk status is re-priced in. If you wanted to compensate for the down grade you had to trade on 8/12. Not now. Its all in - and though there might be a flutter an analysis of other countries post a downgrade indicates a return to the mean - or close to that.
Comments much appreciated, although this post isnt about my specific or general strategy....it's more about what effect a downgrade will have on the JSE and discussion around that. Having said that, I have responded to a number of questions about what I have done. Look - my general thoughts here, whether a downgrade is priced in, or not, is that if it happens, I suspect that many shares will take a hit. Yes, I might be wrong, but being right or wrong doesn't matter to me. What matters is that I protect my gains at this time. You must agree that we are heading into choppy waters (or are in them already), so I am shifting and have been shifting (pre 08/12) out of certain specific holdings into more general holdings. For the sake of your question - I want more direct offshore and more investment holding. A specific current example - I would rather own REM than FSR. Maybe that is not discernible to you, but its as clear as mud to me.....also it is kinda hard to elaborate on ones complete strategy on this forum...
In short, Blik, nobody knows - just remember a couple of old adages : "Up the escalator, down the lift shaft." "Protect your capital first, chase profit next." Then there are the relative risks to apply these to: (1) If it is largely priced in... well things go on as before pending the next downgrade, pretty much. (2)If it isn't...