View the article online at http://citywire.co.uk/money/article/a582285
Diary of a Dumb Investor: fail, Sarko, fail!
My leveraged synthetic exchange traded fund (ETF), designed to short France, may have some more – nay, a lot more – love to share.
Well, my purchase of BP (BP.L) shares has turned out to be a massive flop, and my Lloyds (LLOY.L) holding is doing what it does best – shedding value. But my audacious bet against the French stock market is beginning to look quite clever.
My CAC 40 2X Short Fund Shares exchange traded fund (ETF), which attempts to give me the inverse of twice the value of the French index’s daily change, has returned 7.7% since I bought it at the beginning of the month.
It jumped as high as 9% on Friday, when markets were really tanking on all this new Spanish debt stuff. But today the CAC is annoyingly staging a bit of a rebound, so I’ve lost some of my gains.
Which begs the question: should I sell out now, having had a pretty good run with what is surely one of the most esoteric investments available to a lowly retail investor like myself?
My answer? Hell no!
Yes, I’m aware that ETFs of this ‘synthetic’ sort carry all sorts of risks owing to amount of financial engineering that goes into making them. It’s also clear to me that France is not guaranteed to continue falling: the Fed or the ECB could shock us all again with another splurge of money-printing or cheap loans.
But with the French election coming up this weekend, it seems somewhat craven to pull out now, when I could potentially win big if Herr Sarkozy is ousted from the Elysée.
The thing is, I’ve read that investors know where they stand with Sarko, the incumbent. He’s close with Angela Merkel, paymaster general of the eurozone, and is unlikely to rock the fiscal boat with any mad-cap ideas such as taxing rich people more.
His opponent, François Hollande, makes me think of Hollandaise sauce. Yet he also stands for renegotiating a number of European deals and reversing some of Sarkozy’s market-friendly legislation. A France under his rule could look a lot more like doddery Spain and Italy than fortress Germany.
And I haven’t even mentioned the Communist to the left of Hollande who is racing up the polls.
What’s more, readers mostly backed my bet on France’s failure. ‘Dumber Investor, I think you made a good investment,’ said Sameh Youssef in response to last week’s entry.
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