Brexit, EU and crises du jour
It seems like the last fifty times the markets tanked off any EU-related over the last five years has been a great opportunity to buy stocks. I found this article I wrote back in 2011 about the “EU Crisis” and it’s funny how much of it still applied just perfectly into Brexit. The article was called Get Smart! about the EU Crisis and I wrote it back in 2011(!).
With every major index back to where they were last Thursday before the Brexit Panic, the latest one has been no different. The next one might be though, just as always. And that’s why I don’t go all-in or all-out in even in set-ups like this Brexit action over the last week, which played out perfectly according to my analysis and worked out very well for our portfolios as we were set up and took advantage according to our playbook. If you’d like to learn more about my Marketwatch Revolution Investing product, be sure to get your free trial going here.
Of course, I wish I’d bought some puts before the Brexit vote hit. I did expect the markets to get hit, but we can’t nail every move, can we? Recall that here’s what I’d written about Brexit 3 weeks ago:
“Then again, it’s been a while since the US stock markets got hit hard over a European crisis du jour. Which brings us to ‘Brexit’ and the idea that Great Britain might exit the European Union. Here’s a good run through of the latest headlines and some background about ‘BREXIT’: GAUGING THE IMPACT.
I’m not in the business of trying to game the next 5-10% move in the stock market, but I wouldn’t be surprised if we did see the DJIA sell off towards 17,000 into the Brexit vote and the next Fed rate hike, both of which will most likely be non-events after all.
And then perhaps, if earnings in the next two or three quarters are as strong as I expect they might be for the companies I invest in, we might see some higher prices from there.
I plan on sticking with my playbook, which means investing in companies with strong balance sheets that are Revolutionizing the world and doing so early and/or when their stocks are at compelling valuations. Being disciplined with an eye toward maximizing my returns and minimizing my losses over the next, oh 10,000 days.”
A few days later, I wrote:
“I think we’re likely to get some panicky near-term action as Brexit worries and Fed worries escalate in coming weeks, and I’m ready to do some more nibbling and maybe sneak in and buy some call options like we’ve done the last few times the markets have gotten panicky.”
Late last Thursday night, moments after it became clear that the British voters had embraced Brexit and the stock market futures tanked, I sent out the following report called, “Brexit brings buying opportunity” in which I wrote:
“So to be clear, an actual Brexit is a good thing in my humble opinion. But whether Brexit actually happens in coming months or not, it will likely be a great opportunity to buy stocks if they’re down 5% or more in the next couple days. You know I’ve been keeping powder dry for just this set up.”
Subsequently, during the trading day last Friday, Trading With Cody subscribers got two Trade Alerts. The first one was called “Trade Alert: Today’s game plan” and in it I outlined a couple stocks and a partial short-cover that I was scaling into as the panic escalated:
“As you guys know I’ve raised a lot of cash over the last year or so and have been recently looking for a 5% pullback in the markets to do some more buying and getting a little bit longer overall. Here’s my plan for this morning. I’m going to nibble more longs now.”
Later that day as the market closed I sent out “Trade Alert: Options nibble” which noted:
“Nothing shocking, no drastic moves for me today. I am going to bid on some QQQ call options into the close.”
On Monday as the markets tanked yet again, I sent out another report called “Trade Alert: Two small tranches” I wrote:
“I came down with the flu or something last night and am aching and miserable today. I’m going to do another small tranche of buying today, but am not rushing into anything. Then I’m headed to the doctor.”
And on Tuesday as markets started to rebound, I wrote “Brexit, Brexit, Brexit: Let’s get a grip” in which I explained:
“While I recognize the increased near-term risks of Black Swans in the financial system, I still think the risk/reward lies most favorably with our current playbook and set-up. I remain net long overall, and have increased some of that long exposure in the last couple days.”
So what does Brexit mean for the market now? Pretty much nothing, I guess, just like I’d been saying. And what are we doing now? Yesterday I trimmed some of the long exposure including a few QQQ call options I’d bought into the teeth of the Brexit panic.
And as I’m wont to do, I’m going to be patient looking for the next sweet pitch. Which might or might not include buying the next panicky sell-off from the EU-crisis du jour. Surely the EU-crisis du jour will eventually actually matter to the economy, the stock market and your portfolio, right Marsha?
