Petri Redelinghuys of Herenya Capital Advisors on how we have managed to stay cool in this market as volatility rises and people sell after seeing tempers flare in the Middle East.
How Are We Managing?
We are seeing something that we have seen before in times of uncertainty and high volatility. Tuesday was a perfect example. When the panic hits, people tend to sell to get out of the markets and have their funds in cash because it’s tangible and feels safe. Oil is up since refineries are being struck in the Middle East because of the latest conflict between the United States of America and Iran. The next question is, how are we positioning ourselves?
U.S. Natural Gas (UNG) & ProShares VIX Short-Term Index (VIXY)
It’s no secret that we here at Herenya are bullish on energy, so this is playing into our portfolio. We have made some moves recently to hopefully give us an advantage. We looked offshore and bought into UNG, which is the United States Natural Gas ETF. People need energy, and if oil is unavailable, then we think people are going to look to natural gas, which will help drive prices. Some analysts believe that natural gas prices may rise to as high as they were when the Russian-Ukrainian war kicked off. Next, we looked into VIXY, which is the ProShares VIX Short-Term Futures ETF. This holds near-term VIX volatility futures, so this is some protection and not something we are looking to hold onto for too long. We did this because VIXY could double, as in the past, we have seen volatility jump from 20 to 50 during difficult times. We did this because, as this conflict continues, unfortunately, we seem to be in for a wild week and are just trying to cover ourselves from some of the losses that we are going to take.
Core Natural Resources (CNR)
One key thing we believe is to not panic and sell your positions, but rather find ways to hedge yourself, or use cash to buy into something reliable. Another instrument we bought into is CNR, Core Natural Resources, which does coal both for steel smelting as well as energy production. Seeing as coal is still one of the most used means of producing power, we feel safe in buying into it at this time, and we bought some KWEB too, which is an ETF that focuses on Chinese tech, so all in all, we have been shopping.
Before We Go
Most of these are only planned to be held till the year-end, but let’s say UNG manages to triple in a week, we are going to sell it, but if we have a slower movement up, then we will probably hang onto it for some time. We do expect that in the short-term to see slower movement. This was a reactive move to buy into these as a measure to protect ourselves, which is an opportunity to take when you are presented with it.
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