Risk Happens Fast

Risk can happen fast in the investment business.  Today's example is the Vanguard FTSE Europe ETF {Symbol VGK}.  Above is a chart of VGK from TradingView.com.  You can click on it to make it larger.  Investors in VGK were experiencing an nice ride off of last winter's lows until the world woke up about a week ago to polls out of Great Britain suggesting that those favoring exiting the European Union, the so called "Brexit" vote, had moved into a statistical tie with those who favor remaining.  Recent polling which is all over the map suggests the "Leave" vote has now pulled ahead.  In a few polls that lead is as much as 10%.  A week ago VGK was flirting with 2016 price highs.  Now it's lost nearly 10% on this news.  "Brexit" has become the "Next Big Bad Thing" or NBBT, the current media focused and often binary event that investors and pundits can obsess over until the results are in.  We introduced NBBT over a decade ago and there is always an NBBT.  Prior to Brexit investors worried about whether the Federal Reserve would raise interest rates in June or July. After that we'll likely worry about what comes out of the Democratic and Republican conventions this summer and then the elections in the fall.

We do not give individual investment advice or recommend securities on this blog.  We do, however, on occasion point out events in the market that we think might interest our readers.  In that vein, if you're hunting for yield then at some point you might want to review what you know about VGK.  Once the donnybrook over the vote is over the world will have to get on with life.  The sun is going to rise in the east in the morning after the event regardless of the vote and businesses all over the continent are going to have to figure out on how to continue working with each other.  Life will go on.  It may be harder to do business and profits may be impacted but at some point that will be priced into European shares.    In the interest of disclosure I want you to know that I  already own VGK for certain clients and in some personal accounts and I am likely to do some additional research on the name if this weakness persists.  Assuming no dividend cuts the current estimated yield on this security is north of 3%.  VGK is also becoming more oversold in the short-term by our work with each day that it trades like this.  One thing to note is that the volatility in this name has a higher probability of continuing in the days leading up to the Brexit vote so be aware of this possibility and take it into consideration when you do your research.  Also be aware that picking an ultimate bottom when events like this occur is hard.   You should be prepared for losses if your research  in VGK ultimately finds this name attractive and price in your risk accordingly.

Please note that I am simply pointing out the decline in this name, a security that currently carries an interesting yield and also what can happen when investors are caught on the wrong side of a market moving event.  This should not be considered a recommendation to buy or sell VGK.  You should do your own research on this security or talk to your financial advisor before taking any action with regards to VGK.  Better yet you can hire us!

*Long VGK in client and personal accounts.  Please note the possibility that we may become active in this security in the near future depending what our review indicates.  That review could lead us to buy, sell or hold VGK in both client and/or personal accounts.  We will not disclose on this blog the results of that review and whatever positions we own in VGK, for clients and for personal accounts, can change at any time without notice.