UK EU REFERENDUM/ BREXIT: BUY EQUITY RISK AND GOLD DISCOUNTEDThe UK EU Referendum has presented significant discounted buying opportunities, with many blue chip names anywhere from 5-15% down in the last 2wks.
The uncertainty regarding the UK position in the European Union has pushed investors to see Gold, Treasuries and JPY, whilst fleeing risk equities.
- IMO the next week or two will form a trend of oscillating risk-on/ risk-off asset price swings as the markets reflect the volatile investor sentiment - this opens up significant arbitrage opportunities within the equity markets and Gold - by owning both on pullbacks you then TP as the investor sentiment switches into the favour of each - as it is bound to do.
- Essentially this strategy is a volatility play (ATM volatility for Gold almost double since last month), you naturally own both "sides" of the market (risk-on and risk off), thus taking profit when the sentiment swings in the way of each of the assets.
1. My personal Favourite GOOG and FB are currently trading at an average of apprx 10% down - I advise buying GOOG and FB at these levels, in a pyramid (increase lots if further downside occurs).
- Long GOOG and FB can be used as an event scalp as I expect their values to climb 2-5% back within the week, or you can hold longer for the full 10%. GOOG and FB discounted 5-10% are high alpha and low beta trades since IMO fundamentally they operate monopoly's over the Online Marketing Market and have significant Top and bottom line figures.
- Alternatively you could pick up Nasdaq 100 Index at a 5% discount, and own the market which in the long run will pay off - although I do not advise this trade so much (3/10) as I believe equities are due a correction - especially coming into earnings.
2. Long Gold on any 2-5% pullback, which i think we will see by Tuesday is a good trade: 1) as Gold will rally on Wednesday/ Thursday as global Macro risk is hedged for the vote day. 2) In the longer run, Risk assets (spx) are due a correction, thus Gold is due to outperform and have a bull run. 3) By holding Gold on pullbacks you can benefit from the tail risk of the UK actually REALISING BREXIT where IMO Gold would rally 10% as the Global Macro environment flees to safety.
3. By playing both the long Gold and Equity on pull backs you benefit from: 1) the natural hedge of owning long risk and Risk-off assets, thus your portfolio is diversified to perform in the short run for any outcome but also in the long run. 2) you own both assets at a discount so probability is on your portfolios side.
