Geopolitical situation

I know one should not time the market, but I think it is also stupid to ignore global geopolitical circumstances. With the current situation in the near east and the upcoming conflict potential between USA, Iran, Israel, Irak, Saudi Arabia, Turkey and Greece and all the gas pipeline projects and oil stuff there I tend do rebalance a bit stronger from ETFs (VTI, VSS,VWO, VEA, SMMCHA) to bonds (TLT, IEF, one swiss bond?)

TLT, IEF had quite a plus last Friday after Trump sent that Iranian General to heaven at the same time everything else dropped. I think the conflict potential is very high at the moment and it’s just a matter of time when a bigger incident will occur again.
What are your thoughts on this? Do you think the market will correct a bit and will especially react strong to some global incident or do you think this strong correlation last Friday was just because it was anyways holidays time and the liquidity on the market was low, hence the market will continue in 2020 where it has stopped in 2019?

Nobody knows nothing. Focus on the things you can control. Discipline and a high savings rate.

Target an AA which you will stick to no matter what. Ignore news, it’s all just noise.

7 Likes

I’m doing the exact opposite :-).

Upping my stakes in GCC countries through the XGLF (IE-Listed) as we speak.
Energy producers alternative to the GCC, such as Russia, Brazil, Nigeria, Malaysia, Colombia are likely to see some bump due to risk diversification, but I already hold those via single country ETFs, so no changes here.

At the same time I’ll trim my allocation in XES (Oil&Gas Services) as it’s likely to overshoot on the news.

5 Likes

I am not saying it’s wrong to ignore news and just stick to the ETFs and keep accumulating, long-term with +10-20 years everything will vanish in noise that is true. But I am convinced one can do better while still keeping the risks low, of course it is betting - if I was captain on the titanic and saw the iceberg approaching I would have bet that the ship will hit the iceberg and that’s what I a thinking right now for the neareast.

Thank you for your insight, I will have a closer look on this.

Do you believe in market timing?

Of course. All my best investments are the ones I timed right, and the bad ones I timed wrong.

Fun aside, I see nothing wrong in buying certain asset classes when they are trading at a significant discount due to a random political event. I’m in this for the long term and I believe the dust will eventually settle.

7 Likes

I think market timing is possible, especially when I see what people have posted here Stock picking vs ETF. But I don’t have the energy, resources and most of all motivation and interest to do it diligently on a small scale. However, in 2018 there was a lot of stress because of the usa and china tradeware and I had a bad timing. Of course, now 2019 corrected everything but I would be in a much better position if I had thought a bit more about this tradewar. What also always happened in history is that stocks would surge after president election independent of the party that takes seat in the white house. So, I believe less in market timing but a lot in statistics and I follow geopolitical changes out of interest. Now, if I had enough time I would run some statistics for at least back to second world war and would find similar events as to the drone strike on the oil plants in saudi arabia or the missile strike in iran and check how much the market was affected by such events and for how long. But I am a bit lazy or better said busy with more important things and I would never bet a substantial amount on such a thing at high risks.
What I know is that Trump eradicated any news and voices on impeachment with a single missile strike and that the US industry needs some war from time to time, so I would be very surprised if things would calm down instead of heat up in 2020.

1 Like

Yes it takes time to follow the news and markets, and most importantly, be quick to pull the trigger.
You see, not even a full day has passed since the “start of war war 3”, and the market is back in green.

2 Likes

well, let’s not mix up weather with climate. The australian prime minister is also still doubting climate change. But thank you again for your insight, I will look a bit closer at it and decide then if I am able to do something smarter than just investing in ETFs.

According to the efficient market theory we must assume that events like the one you are talking about are priced in before you and me even hear about the event.
As you hear the news about WW3, it is already too late to bet on WW3. There are enough studles showing that the ones who earn the least money on a stock market are those reading the news. Second best are the ones ignoring the news and best are the ones woth insider informations.

4 Likes

Well I’m not sure it’s that fast. Take Russia or Turkey. We hear about their troubles, and their stock markets were falling for a longer period. Probably a lot of dumb money or conservative money backing out of a risky territory, and not enough smart money to offset it. After some time we see that these news were overblown.

I agree with you on the efficient market theory but I always thought it applies on single stocks or a field of stocks (e.g. oil and gas industry etc.). And I don‘t know why you guys suddenly start using the term WW3. I don‘t believe in such a thing, the world has become too complex and entangled for two large parties to start a direct confrontation with tanks etc. I think conflicts will be more subtle and less obvious to understand. Anyways, I rebalanced my portfolio to weigh a bit more on clean energy (PBW, a bit expensive) and a bond (TLT). Also, I am doing a small bet on increasing oil prices with VDE. The rest stays with large and broad ETFs.

1 Like

Like dumb money from ETFs? Cause in a declining market, they have to back out as well (and in larger amounts), in order to replicate the market.

Who has to back out in ETFs?

In a declining country/regional market, ETFs will open up fewer positions due to the sentiment of other market participants.

What’s the market performance of those who tend to over-generalize?

Nobody can properly price in an event with an uncertain outcome. There are certain, not so rare moments when markets sell off in panic, perhaps even correctly pricing in the worst case scenarios.
Also perhaps, the reality is statistically not as grim as feared.

3 Likes

… speaking of which, China screams BUY

1 Like

Would you still do it via EIMI/VWO or any China only ETF, the latter having TER of 0.75+?

I have allocation in several single stocks making up the KWEB etf. I do not buy individual shares of Tencent and Alibaba as I already have enough of them through an emerging market ETF.

You could also go with EIMI. China pulled most emerging countries down with them and it is ~40% of EIMI.

2 Likes
By reading and partipating to this forum, you confirm you have read and agree with the disclaimer presented on http://www.mustachianpost.com/
En lisant et participant à ce forum, vous confirmez avoir lu et être d'accord avec l'avis de dégagement de responsabilité présenté sur http://www.mustachianpost.com/fr/