Saturday, June 25, 2016

WHERE BRITAIN SHOE PINTCHES THE GLOBAL MARKET


The exit of Britain has happened and now another round of financial time bombs are triggered and awaited to get blasted. Everyone is busy figuring out the consequences of the same and its effects on the global liquidity. Well we are doing the meeting for that point which has less significance and we are skipping the important aspects of the financial tremors which will be faced worldwide. The biggest mother of all these problems will be valuations due to change of currencies and policies.
Lets come to the point .Inter linked bonds, trades investments, hedge fund investments, private equity investments all are now at stake. Bonds are the biggest risk since you have bonds for at least 3 years 5 years and 10 years which will get affected. This will create panic selling across the globe since various QE have been executed through bonds and mostly are foreign countries holding the same. Hedge Funds and Private equity investments will need to work out on valuations since currencies will be changed and this will create another round panic and also buying opportunity for China. They have reserves and they will try to penetrate and by out the same treaties.  Bonds which are set for expiry in 2018 and 2019 will be under pressure. Further the recent bonds expiry will create panic as buyers will be reluctant and most of bonds might be renewed but with different terms and conditions. No alternative for the holder of the bond, but to accept for less in case the changes are not in same lines like the before Britain exited
Mutual fund redemptions will also happen followed with another biggest threat coming from alternative investments asset products which will break the backbone of the Britain related investments.  Pension funds and other retirement safe heaven products come under threat as volatility and change of policies and valuations will play their game.
Hybrid bonds are the biggest problem and also banks and Ultra HNI clients holds the same. My concern is for the seller of the bond in these times that will look for opportunity to liquidate.   It might take 2 years to exit Euro-zone but fears of lossess have already entered into the minds and also high currency volatility creates favorable opportunity for exiting foreign portfolios particularly in those countries where returns from stocks have been flatten or not much impressive. Municipality and state bonds and infrastructure bonds all comes under problem due to change of currency and change of valuations norms.
Let’s come to the global stock market segment.  If I suffer loss in one country I will sell other countries investments. Wait I will not only sell but make double profits since huge outflow of dollar will lead to currency depreciation of the local country which results to more profit and also I will short sell the market of that country and will make another round of profit. Hence I make 3 times return from the same investments in that country and makeover my losses. Friends it’s a globalised market and you can’t intervene to stop outflow of capital unless a country like china impose redemption of stocks in 2015.  If I am global investor I will play my cards in this fashion only. Well most of the globalised fund managers will save their clients from this strategy only so as to keep the clients portfolio intact.
Now Gold price will rise further as it’s a safe asset for investments in these times and also many central banks will buy gold to save from the financial tremors as they also don’t know which part of their investments will come out as bubble.
2nd referendum is being planned. This will make great fun for the world market and also of the British Lions poor democracy system ruling in the country. Further it make quite difficult for the European countries now to keep intact as many countries will go for extreme level of negotiation in the future. Greece has been a lesson for the Euro-zone and now Britain exit leads to building of confidence within the other struggling euro-zone countries.

That’s why I said central banks meeting for injecting liquidity are of no use. Middle class and investors will face huge losses as the trigger of exit is already in place.  My concern is of financial tremors and also another phase of growth of income inequality due to loss of investments.   Its useless to discuss which country is favorable destination for investments since all I need as an investor to save my portfolio and maximize my return from these uncertain times. 

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