Re: UK - in or out of the EU?
..........Just pee'ed my super fund had to suffer for it. And at my age I have a snowball's chance in hell of being able to recover.
A common sentiment I'm sure, Pushka, so some may find this info informative:
Futures contracts are used as an insurance instrument against falls in the stock market i.e. they can be used to “short” the market to reap profits to cover losses from falling share prices. For those unfamiliar, the ASX200 is a composite figure representing the “value” of the top 200 stocks on the ASX. Futures are expected to be higher than the underlying market because we generally expect that prices next month etc. will be higher than today.
So what have futures been doing lately? ASX200 futures for the June Quarterly Contract were trading at 4 points above the XJO (the “cash” price of the ASX200) when it expired last Thursday week. On the same day the new September Contract traded at 50 points below XJO.
So what does that mean in real terms? It means that fund managers and Corporates were heavily insuring with the September contract against potential losses from Brexit. Which was not surprising given that, unlike a lot of things that can cause the markets to crash (such as the Japan tsunami a few years ago), everyone knew that the Brexit vote would be on 23[SUP]rd[/SUP] June and had plenty of time to develop strategies for whatever eventuality that ensued. All that shorting of futures markets means that we can expect they would be in line to reap nice profits from yesterday’s falls.
Now consider the fact that fund managers use investors’ money (i.e. YOUR money) to finance those futures contracts. Good, you might think, the fall in my portfolio will be covered by those profits, right? WRONG! Because there is no obligation on the “fundies” to return those profits to the investors, and in practice they certainly don’t! In fact they don’t even have to report them.
Accordingly, when you get your EOFY statement there may be a note saying how your balance was “unfortunately negatively impacted by the Brexit crash……… but don’t worry because the investments are “solid” and their values will bounce back in time”. Meanwhile they’re sitting at their desks working out how to divvy up the profits as bonuses to themselves. In a lot of cases the “system” allows them to get it tax free as well!
Most people have no inkling that during the GFC shorting created enough profits (literally $Billions) to cover a large proportion of the stock market losses. Not that investors got to see any of it.
A second scenario to ponder for those who use brokers for recommendations on which stocks to hold in their SMSF or personal portfolios:
Most people don’t realise that their brokers are forbidden to hold shares in companies they recommend to their customers. So, do you think your broker is recommending the very best investments to you? Or do you think he might invest in them himself and suggest you buy something else, i.e. stocks he WOULDN’T buy for himself?
You have to laugh when financial advisors etc. pontificate as if they are the all-knowing bastions of financial market investment knowledge and the implications of things like Brexit on financial markets. Maybe their real agenda is different to the hype. The truth is a lot of them are only experts in emptying money from your pockets into theirs – and whether your investments rise or fall in value under their advice they still take their fees irrespective. A
very wise and wealthy mentor of mine once told me never to forget that those who control financial investment markets primarily use it to transfer money from those who have little to those who have a lot.
Now I'll put my helmet on and wait for the responses.
