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Diary of a Dumb Investor: Lloyds in the eurozone scrapyard

I know I'm 'crystallising my losses', but Lloyds is a loss-making, economy-destroying eurozone bet too far for this investor.

 
Diary of a Dumb Investor: Lloyds in the eurozone scrapyard

People who have been watching stock markets far longer than me weren’t fooled. Like the outmoded Smithfield meat market traders featured on a recent BBC doc – who pelted a newcomer with cows’ entrails, lamented the arrival of mod-cons such as electricity and assumed the poorly designed market must have been hashed together by a ‘woman’ – they’ve seen it all before.

For me though there was a moment this morning – yes, I tend to align my investment decisions with the Monday deadline for this article – when I wondered whether this was it: was I missing the start of the rally?

But then I realised, like the old-timers who have been watching eurozone ‘bailouts’ for years, that not even Spain has been saved: just its dodgy banks.

No sooner had we heard the staid Spanish president Rajoy pronounce a victory for his people than we were told that Spain itself, as in the whole country, funky lisp, rolled letters and all, could need rescuing. And maybe Italy too. And then of course Greece could do one entirely and go its own way.

So this is not the big one, the grand rally I’m supposed to catch somehow.

Waiting for the tide to turn

But will I know it when I see it?

My next problem is how to raise the money to buy a ticket when my ride finally arrives. I’ve actually become a bit richer over the past couple of weeks (by that I mean the portfolio has increased in value), and more of my individual investments are in the ‘blue’.

Where I stood on Monday: Click to enlarge

But with cash of just £663 I don’t have much room to manoeuvre. So I face a dilemma which I imagine is common among investors: do I sell a loss-making dud and seek my fortune elsewhere? Or do I sit it out on holdings like Lloyds (LLOY.L), which is such a pitiful part of my portfolio that it shames me to see it in there? After all, if I sell Lloyds I’m ‘crystallising my losses’.

Exposed to a crippled eurozone

Well, I learnt something in the past week that makes that decision a tad easier. I had thought that my current investments were not direct bets on anything eurozone-esque – assuring such distance had been my first aim – but it turns out that Lloyds has a STACK of eurozone exposure.

As a matter of fact, Lloyds – as well as RBS (RBS.L) and Barclays (BARC.L) – are ‘UNINVESTABLE’ for that very reason according to one article I read last week (citing City analysts). ‘Uninvestable’!

I might be crystallising my losses, but I think it’s time to ditch Lloyds. The shares are up today, so at least the timing looks half-sensible. I will have pressed the big ejector button by next week.

27 comments so far. Why not have your say?

Dennis .

Jun 11, 2012 at 14:57

You shouldn't think about your loss. Always ask the question "if this shareholding is worth £x today would I invest £x in it if I was buying today". Think about the opportunity cost of not putting the £x into something else.

People are generally more averse of making a loss rather than looking for an opportunity to gain.

It's the same as people saying they can't afford to sell their house at current prices and assuming that they will one day house prices will get back to "normal" they might not, especially after inflation.

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snoekie

Jun 11, 2012 at 16:39

I know you have said that you are the brother, but the writing style is very much the old DI.

I have but one comment, remember Afren? Please sell Lloyds, and Lloyds will rocket, such has been your history.

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Ian Lees

Jun 11, 2012 at 17:09

If you are not prepared to invest in the company for ten years - you should not invest for ten minutes ! Banks are no longer banks as we know them. These are high street money lenders ( that do not lend money ? ) often the sale of mortgages and PPI and scottish Widows products by Lloyds ( LLOY.L ) - is the result of this reckless money lender - whohas failed their cusotmers and profiteered throgh the misselling of pensions, endowments and other commission laden products. This dysfunctional loan shark is as dysfunctional as their logo for the Olympics.

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gggggg hjhjkl;'

Jun 11, 2012 at 17:29

If you have a better idea then sell Lloyds, if you do not, then do not!!!

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Jonathan

Jun 11, 2012 at 17:30

Dennis, You also have to take into account the cost of selling shares. If you decide to change your holdings too often you will lose a lot in transaction fees.

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Blind Jack

Jun 11, 2012 at 17:31

It's true what you say about banks and their reckless pursuit of short-term profit but I am 60% certain that they have learned their lesson and are building up their balance-sheets to be able to act in the future just like other grown-ups. When they do they'll be sustainably profitable so I say hang in if you can because the good times tend to come so quickly there's no time to re-invest.

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Ian Lees

Jun 11, 2012 at 17:49

A bank balance sheet appears to indicate some stability ? Unfortunatley, there appears to be some £ 40 bn of undisclosed debts, according to the FT - which it appears the FSA has not been informed of - nor do they appear in these money lenders accounts. What a great way to run a business or as a private individual - I m going to write of my credit card debt . . .and I will be in profit ! or will I ? Or in the case of Pensions - apparently the Gov't change the figures for RPI - and the combined deficits of Pension funds result in their deficits falling by some £ 20 Bn. This is as a result of actuaries changing the figures to suit themselves - we all know the scam. We all know the reality is nothing has changed - only the actuarial accounting standards have been reduce to ridiculous levels by those in power who really ought to know better.

No change a deficit is a deficit - and requires talen and statemans ship and authority ( or any regulator ) to ridule these con tricks by Government and their chums.

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an elder one

Jun 11, 2012 at 17:54

What's that saying about leopards and spots?

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Blind Jack

Jun 11, 2012 at 18:01

a tiger will never change its spots.

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snoekie

Jun 11, 2012 at 18:06

Blind Jack, "a tiger will never change its spots.", your handle explains your comment, tigers have stripes, well sort of.

Funny isn't it, 'this' DI has the same phobias and style of the previous one. They would have us believe they are out of the same stable, I say one and the same.

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Dennis .

Jun 11, 2012 at 18:27

Tigers and Zebras never change and they have built in bar codes.

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masud butt

Jun 11, 2012 at 22:06

I bought Lloyds, over ten years ago, no hope kept it hoping something will happen,nothing, selling soon, Mac.

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dd

Jun 11, 2012 at 23:18

I sold my very few LLoyds shares at 333 a very very long time ago. It was an easy number to remember.

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Keith Snell

Jun 11, 2012 at 23:52

I sold any bank shares I had more than 2 years ago and have never even thought of buying again, I prefer well run companies who know what they are doing even if they are loss making in terms of decline in share value, markets tend to reflect the macro news of the day irrespective of the intrinsic value of the company, investing for future income is far easier than for immediate capital growth.

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Blind Jack

Jun 12, 2012 at 09:25

Snoekie-- Blind Jack and the Elder are not from the same stable nor have any connection.

General: I have Loyds prefs bought several years ago when very cheap but not paying any dividends. They have started paying dividends this month (over 10%) so this is progress and a sign that the company is improving in this respect at least.

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Jn

Jun 12, 2012 at 11:07

Too late to sell. Hang on.

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Matthew Charles Flinders

Jun 12, 2012 at 11:18

To early to sell you mean ;)

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Jn

Jun 12, 2012 at 11:33

I mean one should have sold sometime ago, it is too late now at this depressed price.

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Jonathan

Jun 12, 2012 at 11:48

The current value of Lloyds shares includes the markets estimations of growth. Who knows better than that?

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Maverick

Jun 12, 2012 at 12:24

Day traders can make money out of bank shares. My impression is that everyone else will lose money on bank shares.

The old reason why people bought bank shares, that they were safe as houses and a bit boring, disappeared in 2008. Why do punters hold on to bank shares when there is now so much risk, and politics, involved?

Sell Lloyds, Dumb Investor, and stay well away from banks and other financial shares in future.

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Michael Peters Fenwicks

Jun 12, 2012 at 12:46

DI,

I have been advising you to get rid of that dog of a stock - Lloyds for months however I think you should just hold it for the long term.

Timeline best advised is towards September depending the banking crisis talks in the eu.

Otherwise hold until first QTR 2013 for further evaluation as a lot will happen between now and then to know where value Vs Price stands.

By the way I don't own it anymore but it last appeared on my portfolio in 2006 but if it goes down to 15 - 20P I shall buy them like pen stocks.

Perhaps DI citywire's Gavin Lumsden might help provide a little food for thought analysis - he not exactly a carol smillie but then again citywire are cheap.

Here is the link old boy;

http://citywire.co.uk/money/are-lloyds-shares-really-up-the-junction/a543666

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Gristybeasty

Jun 16, 2012 at 11:15

"I might be crystallising my losses, but I think it’s time to ditch Lloyd's."

Oh ye of little faith "Dumb investor". Yes you are dumb. Whoever you are Dummy, stop being so impatient! Equity markets are long term n'est pas?

All will come good, be patient and those who have hung on to their LLOY shares will be laughing all the way to the bank!

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masud butt

Jun 16, 2012 at 11:34

I am trying to laugh for last 10 years- what is long term.

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Maverick

Jun 16, 2012 at 12:46

Long-term is all those people who held on to their dot-com shares from 2000 in the belief the shares would be bound to be worth something one day . . . .

I see Psion has just been psold for pseanuts.

My personal belief, which has no evidential backing whatever, is that there will be just as many losers as winners holding shares long-term. It;'s just that the winners shout about it, and the losers keep quiet.

So if it doesn't matter how long you keep the shares, I'd rather make my losses short-term, thanks, and go on to (hopefully) better choices.

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snoekie

Jun 16, 2012 at 14:18

BJ, I was not suggesting that you and the Elder were from the same stable, merely this DI and the previous DI, not just from the same stable, but one and the same.

BTW, the comment about £40 billion undisclosed liabilities, whilst Lloyds may, I repeat may, have some, I think they have made a sincere effort to clear out the debt stable in their effort to restore their profitability.

Doubtless there are/were some perhaps iffey loans, who were nevertheless paying up on the loans, i.e. not defaulted, and that may have changed in the interim. If there are still some bad loans, if will be at the very lower end of the scale.

I for one am sticking with them. Forlorn hope perhaps some will say, but I reckon they will come good. Currently my 'losses' (if I were fool enough to realise them now) on Lloyds exceed the entire DI portfolio, even as originally constituted.

I am with Maverick, I am in for the long term, and I have made some other investments which are also for the long term, that may well take a year or two before they are hull up, currently mast head up, on the horizon.

The fact that Lloyds are now paying up on their preferential shares is a good sign.

As I said earlier, sell, my view is when that happens they will rise the sooner. Also, do heed what MPF said, if you feel must sell. At least you manitain your 'good' (??) track record.

A note of caution, we are heading into the the worst part of the storm, Greece probably out and Spain already falling and Italy in the cross hairs and soon France will be in the thick of it. (Yeah, yeah, I know too many 'and's, but done for emphasis.) Maybe an opportunity for some decent stuff at bargain basement, possibly even fire sale, prices.

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snoekie

Jun 16, 2012 at 14:20

BTW do look at http://uk.reuters.com/business/quotes/analyst?symbol=LLOY.L

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ClothKap2

Jun 17, 2012 at 10:44

I have been monitoring quite a few hot tips recently, and the best startegy by far woudl be to short any buy recommendations, and buy any sell ones (about a week after the tip). - Or if you already have the shares when the tip comes out, sell immedtiely on any rise: You'll be able to buy back in at much less before long.

And the instant a company announces a consolidaton , get out fast, al that does is give money to brokers and open up a much bigger hole for the price to fall into. -- This has beent very reliable for small aps, and was genuinely surprised to see it hels tru for RBS as well. (at least until it was given a golden opportunity to pay even bigger bonuses this year by being given even more taxpayers money at next to nothing.

So I think I'll be holding on to my in-profit Lloyds holding for a while yet.

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