value and opportunity

Mental preparation

Another week and the war still goes on. My subjective feeling is that currently, a surprising large amount of investors still believe that this war will end relatively soon, one way or the other. However, if the war will last for a few years, we would be still far away from a turning point with a lot of escalation potential (stopping the oil and gas pipelines, “dirty weapons”, tens of millions of refugees etc). In the short term however, especially in European markets we could see some rallies if some good news is surfacing.

Consequences As mentioned already, I desperately hope (and still pray) for a quick end, but mentally, as an investor, I prepare for a much longer conflict. What does that “preparing mentally” mean ?

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When Mike Tyson was asked by a reporter whether he was worried about Evander Holyfield and his fight plan he answered; “Everyone has a plan until they get punched in the mouth.”

This is how the current crisis developed so far for me personally and that is why i decided to do this more frequent “Panic journal” in order to document my actions and to hopefully learn a thing or two.

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Personal experience 2007-2009 

There are a lot of articles currently about the “Great Financial Crisis” which culminated exactly 10 years ago when Lehman Brothers collapsed on September 15th 2008. There is still a lot of discussion around who is to blame for this, however most of this is nonsense as Barry Ritholz nicely summarized here.

My personal story is relatively short but quite lucky: Due to my “day job” back then, I saw many early warning signs in 2007. Although I had no idea how deep the crisis would be, I got mostly out of the stock market by the end of the year 2007.

This was maybe my only successful timing action I ever managed to do with some success. I even made some decent money with shorting that I had just discovered back then and a was on track to positive performance in 2008 when I was caught in the mother of all short squeezes, the famous “Porsche Volkswagen corner” which cost me more than -10% portfolio performance.

Nevertheless especially the years following the crisis taught me some important lessons which I wanted to share:

My 10 lessons (hopefully) learned

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As I mentioned in the comments a few days ago, I sold my complete Metro position at around 12,30 EUR /share. Including a 0,70 EUR dividend, this translates into a -26,6% loss and is a new entry into my “flop 10” list.

So what went wrong ?

Looking back at my initial post, my original idea was to buy the “ugly” part of old Metro which was supposed to be Ceconomy. This was clearly influenced by missing out on Uniper when it spun off from E.On, which was a similar ugly duck but performed very well.

One observation that I made back then was the following:

Looking at the stock chart we can see that Metro didn’t create a lot of shareholder value over the last 20 years.

When the split actually happened, Ceconomy traded far above the level that I thought would be interesting:

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Reading the press and comments of market pundits lately, one might get the impression that the end is near if the British referendum next week will result in a vote for leaving the EU.

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