Shorting Brexit with ETFs

gingertechie

gingertechie

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There are ETFs that provide an inverse of the FTSE100 (your investment goes up when the FTSE100 goes down)

I’m searching for an equivalent of the FTSE for Ireland, but I can’t find anything equivalent.

I’m not looking for advice regarding shorting, nor advice as to whether shorting Ireland Inc is ethical. I’m looking to position a small part of my portfolio to benefit from a negative impact of brexit.

First post, so apologies for any mistakes.
 
I’m not convinced that shorting the FTSE or shorting the ISEQ (for example) will give you the result that you’re looking for.

Take some of the major components of the FTSE; they’re multinational companies. As I recall, and merely as an example, only circa 8% of Diageo’s business is in the UK. Similarly, how much of Ryanair’s business or CRH’s business is Irish?

Perhaps you could short something like the ISEQ ETF via CFD, but then again it may not be liquid enough, plus there’s the above issue of the actual Irish exposure.

I wouldn’t do it personally, but if I absolutely had to take a position along the lines that you’re indicating, I think I’d short an Irish bank, probably BOI because it’s (obviously) an Irish business and a decent proxy for the Irish economy with the added kicker of some meaningful UK exposure.
 
galway_blow_in said:
The iseq is already down a lot since 2016, financials are at six year lows in the case of at least one particular bank.
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A very fair observation.

Markets obviously price in bad news on a forward looking basis. So if the grand plan is to short Ireland Inc when a hard Brexit starts to look likely, that’s probably too late.
 
I suppose that general question that strikes me is that if you felt that Brexit was going to be an absolute economic disaster for Ireland and a regular disaster for the UK and the EU, what would the smart financial plays be?

For example Gordon, you have previously stated that you hold a high equity allocation and are pretty relaxed about the cyclical movements of the markets. (Sorry, I'm not sure what the geographical make-up of your portfolio is). In any event, are there particular prudent adjustments that could be made at this stage??
 
I just keep the high equity allocation and don’t chop and change because I buy into the ideas that equites deliver the best returns and that more money is lost trying to time one’s entry and exit in relation to the market.

I accept that people are different, but I will never deviate from my 100% allocation to equities and property plus six months’ expenditure in the credit union.
 
If you are looking for exposure to weakness in GBP and domestic markets, the broader UK FTSE index (FTSE300?) is a much better bet. The FTSE100 has been ticking up with the weakness in GBP due to the reasons mentioned above - so much income in non-GBP and therefore a benefit
 
gingertechie said:
I’m not looking for advice regarding shorting, nor advice as to whether shorting Ireland Inc is ethical. I’m looking to position a small part of my portfolio to benefit from a negative impact of brexit.
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Its well known that the FTSE100 is largely uncorrelated with UK economic performance (if that's the brexit play you're going for). [broken link removed] started doing some analysis on this in 2016. They produced two indices a UK50 and non-UK50. It might give you another angle.
 
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gingertechie said:
There are ETFs that provide an inverse of the FTSE100 (your investment goes up when the FTSE100 goes down)
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not a great strategy, the big hit from brexit has more or less already happened and sterling has taken the hit, it could fall a bit more . The ftse 100 has actually risen a bit recently probably because of the fall in sterling making uk exports a bit cheaper. But in general the ftse 100 has been range bound for years and is more or less at the same level it was in the year 2000. The ftse is actually very cheap now , you wont get much more air out of that tyre as most of the air has already been let out. You could get hit the other way, if there is a brexit deal and a big relief rally .
 
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Gordon Gekko said:
A very fair observation.

Markets obviously price in bad news on a forward looking basis. So if the grand plan is to short Ireland Inc when a hard Brexit starts to look likely, that’s probably too late.
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The massive sell off in one particular food company this past week, must have dragged the index down substantially on it's own.
 
gingertechie said:
I’m looking to position a small part of my portfolio to benefit from a negative impact of Brexit.
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The negative impact of Brexit?

The UK Brexit referendum was on 23 June 2016, when the FTSE 250 index (^FMTC) was trading at 17,333.51 (https://uk.investing.com/indices/uk-250-historical-data). It closed last Fri at 19,253.17, i.e. an increase of 12%. The FTSE 100 was trading at 6,338.10 on 23 Jun 2016 and closed last Fri at 7,407.06, i.e. an increase of 17%. Where's the negative impact? No evidence for a hit from Brexit here.
One negative effect appears to be the currency markets, e.g. GBP/EUR of 1.21 in June 2016 to 1.09 last week. According to StarCapital Research https://www.starcapital.de/en/research/stock-market-valuation/ the UK is has a reasonable CAPE of 16.3 (whereas IE's is 52.7). That's a (once in a lifetime ?) opportunity to pick up UK assets on the cheap.
 
galway_blow_in said:
The massive sell off in one particular food company this past week, must have dragged the index down substantially on it's own.
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Yea and the banks as well, who says buying shares is an easy way to make money, certainly not in Ireland, profits and capital gains are taxed heavily, losses are your own tough luck. I doubt any articles in the national press about the hard pressed bank shareholders since before the financial crisis, I'm not one of them by the way. As for that food company, very dumb and expensive moves into the body beautiful industry, I'm sure the hard pressed farmers will not be impressed while also suffering the big brexit hit.
 
Unless you are good at timing the market and manage to sell after run ups and then buy back after sell offs, you're return from a " buy and hold" strategy won't be that much higher than in savings, that's still OK but the vast majority of people won't get rich as they won't start out with huge sums.

Most average people will make more from the likes of property.
 
galway_blow_in said:
Unless you are good at timing the market and manage to sell after run ups and then buy back after sell offs, you're return from a " buy and hold" strategy won't be that much higher than in savings, that's still OK but the vast majority of people won't get rich as they won't start out with huge sums.

Most average people will make more from the likes of property.
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The average annual return from a buy and hold strategy in say US equities since 1926 has been around 10%pa.

That period includes the 1929 crash, world war 2 1987, the tech wreck of 2000, 2008 Etc so buy and hold clearly does work.

The Dow is now just 63,175% off the July 1932 lows.

The average annual return from T bills over this period was around 1% over inflation so, not great.

My analysis of Irish residential property since 1970 puts the return at no more than equities with similar downside risk.

So that last post was almost entirely incorrect
 
Marc said:
The average annual return from a buy and hold strategy in say US equities since 1926 has been around 10%pa.

That period includes the 1929 crash, world war 2 1987, the tech wreck of 2000, 2008 Etc so buy and hold clearly does work.

The Dow is now just 63,175% off the July 1932 lows.

The average annual return from T bills over this period was around 1% over inflation so, not great.

My analysis of Irish residential property since 1970 puts the return at no more than equities with similar downside risk.

So that last post was almost entirely incorrect
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Can people living in Ireland still buy the DOW?

Thought they changed that?
 
I agree that a buy and hold US has been a great strategy.

But....Some other thoughts

The actual returns experienced by most investors have been much lower. As very few manage to buy and hold the whole market for long term.

There are mgmt charges, trading costs and in Ireland tax costs which reduce the return.

Most of the studies just look at the growth of the usd value of the market and do not consider the change in value of your source currency to usd over that time.

Property generally comes with 'easy' and encouraged leverage which amplifies investors returns (or losses).

So all in I'm not sure that the average irish investor experienced a better return on their cash if invested in USA index vs Irish property.

Marc said:
My analysis of Irish residential property since 1970 puts the return at no more than equities with similar downside risk.
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Is this the best source for more info on that work? https://askaboutmoney.com/threads/what-return-should-i-expect-for-property.206315/#post-1543333

That thread died but it appeared that you didn't include rental value (or maintenance costs).
 
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Its a good point.

Here is the MSCI World Index (gross dividends) from 1987 in local currency (Irish Punt and Euro) to the end of last year over rolling 1, 3, 5 10 15 and 20 year periods.

3996

So an average IRISH investor in global equities should have earned between 6% and 10%pa gross of tax and charges since the Joshua Tree came out
 
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