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Dont Play The Currency Game

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I've seen a few postings here that indicate you should consider using foreign currency purchases as a means of investning. My advice to you is don't. Those who make money trading in foreign currency markets are either lucky or actually 'making' the market. I live in the USA and followed advice in the press suggesting that it was a good time to bring over a significant part of my UK savings and now have burned fingers. The one thing I have learned over the past two years of reading the Wall Street Journal is that the press and pundits are full of sh1t when they predict future outcomes. If Alan Greenspan can't predict the future then none of us can.

If you are looking to make money and are happy to accept higher risks then Foreign Equities is the way to go.

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Guest

Thanks for the anecdote.

Always good to hear another side of the story!

I guess my curiousity about this was just to have a percentage as a hedge. During the last recession, I thought sterling suddenly lost a lot against the Swiss franc that it didn't regain for years.

Edited by megaflop

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Thanks for the anecdote.

Always good to hear another side of the story!

I guess my curiousity about this was just to have a percentage as a hedge. During the last recession, I thought sterling suddenly lost a lot against the Swiss franc that it didn't regain for years.

UK inflation is creeping up and with the Bank of England being stuffed like a Christmas turkey with Gordon Brown's doves, IMHO sterling looks like a very bad bet, even against an anemic dollar. Of course you have to do your own research and never take the opinion of just one person or group of people s gospel. I have noticed that over the last year or so the American media has been largely bullish on the dollar. This against a large body of evidence otherwise and against all the foreign press which have largely been bearish. I put this down to a form of misguided "patriotism". But your research may yield different results.

Edited by gone west

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Guest Bart of Darkness

It's not a game. It's for real. And those who don't hedge against pound sterling falls will regret it.

This has been my main concern of late.

I'd don't think I'd ever speculate using currencies to try and increase my net worth.

Trying to keep what I've carefully saved is much more of a priority.

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This has been my main concern of late.

I'd don't think I'd ever speculate using currencies to try and increase my net worth.

Trying to keep what I've carefully saved is much more of a priority.

Exactly. I am the last person in the world who would consider playing fancy games like investing in PM or buying CHF. The reason I have started to do both since August is because I have been taking a lot more interest in the big trends out there in the world. If I thought Sterling was going to be the solidest currency then I'd keep my savings in it. But the ailing balance of payments, rising oil prices and increased energy imports all persuade me that Sterling probably is not a good long term store of value.

But I must admit that my excursion into silver is a flutter. Spend £500 and what is the worst that can happen? You might lose £200 of it, although I doubt it. It's far more likely I'll make at least something, and if silver "does the molybdenum BANG!" then I'll be nicely in pocket money and taking a high jump I didn't put all my money into it. Note: in the last three years moly has gone from less than $2/pound to $35/pound.

I don't think anybody should stop considering another currency than Sterling. CaD and CHF are probably good bets.

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It's not a game. It's for real. And those who don't hedge against pound sterling falls will regret it.

Thanks everyone for your replies.

Like Bart says, I wouldn't be expecting to accumulate, just to protect value. A hedge, as cgnao points out.

The thing that struck me about CHF was that it's been a pretty constant match with GBP over the past 5 years, with only mild depreciation of GBP if you look behind the 'noise'. So, not really making much, but not losing anything either. When we went tits-up last time around, it suddenly became a different story.

Other questions:

What percentage though?

What are the tax implications?

malco - What's PM?

Edited by megaflop

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It's not a game. It's for real. And those who don't hedge against pound sterling falls will regret it.

This has been my main concern of late.

We seem to have a consensus emerging from two experienced posters.

If Bubb joined in with this analysis I'd suggest its a goer.

Question - Surely a decline in Sterling will prevent a "HPC" (in the sense that most people think - "falling prices")?

1 - As sterling falls the manufacturing sector (whats left of it) will pick up adding to employment.

2 - A fall in sterling (the currency in which houses are priced) is a de facto fall in house prices. The numbers on the stickers will not fall but the houses will have actually decreased in value.

Over to Bart, Cgnao and Bubb for a reply.....

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If Sterling falls against other currencies, it affects the price of stuff we import in a BAD way: Shell out more Pounds.

Foreigners would find our stuff cheaper, so you're right about manufacturing. In the limit, we'd be the ones making the DVD players.

It doesn't affect UK houses priced in Sterling. Or our salaries, also priced in Sterling. I would still earn £100,000pa and my FTB house would still be £700,000. ;) It's just chinese DVD players would cost more. (Like I give a crap, Gordon).

Crash situation not directly affected, but British employers importing stuff would find costs rising who then can't fulfil their projects, who then abandon them making staff redundant who then can't pay their mortgages, and become forced sellers who have to accept lower prices because of a slow market which makes this the new market level.

Edited by megaflop

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I largely agree: in normal circumstances I wouldn't have even considered transferring savings abroad. But there are times when there are clear trends in the world and you either want to take advantage of them or hedge against them.

For example, I transferred my dollars to pounds a few years ago at around 1.4, which has effectively made me about ten thousand pounds after the dollar fell (as it obviously was going to do before long). Equally, I'm hedging against a big fall in Sterling right now by transferring savings into Canadian dollars because I've no idea which way it's going to go... I'd rather transfer most of my savings at a decent rate and lose out if Sterling goes up than keep it sitting in a Sterling account watching it go down and down and down thanks to Brown's mismanagement.

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Depends how much money you play with I guess. Personally I ignore most of what I read in the press and on forums. Forums can be good to develop new ideas, but the best thing to do is to develop your own style of trading/investing that suits your needs.

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Guest Bart of Darkness

My main concern is not so much a fall in Sterling in the "normal" way (the sort of ups and downs we've all seen over the years).

As part of the "the bigger the boom, the bigger the bust" kind of thinking I'm concerned that recession may become the kind of outright depression witnessed after the pre-1929 excesses.

I hope I'm wrong and it is certainly a "worst case scenario". But imagine if this site existed in 1929. No doubt we would have been called cranks or doom-mongers to suggest that stock market prices were unsustainable.

In the late 1920s, it seemed as if everybody was in the stock market. Estimates vary from 1,000,000 to 25,000,000. Why not? Stock prices just kept going up and up, making your original investment more and more valuable. And here was the best part -- you didn't need a lot of money to get into the market. You could buy on margin. First you borrow the money to buy the stock (interest rates were a phenomenally low 3 1/2%). Then you put up the stock as collateral for your loan. Simple, easy money -- if stock prices go up, you collect your dividends. If the price dips, you raise a little cash to cover your loss and wait for the market to rise again. In 1929, so many people were buying on margin that they had run up a debt of six billion dollars.

I originally came to this site because of concerns about the housing market, now I'm much more concerned about the state of the economy (specifically the UK and US). I truly hope that we get through this current mess in one piece, but I think it's a good idea to try and plan (even in a small way) for the worst.

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Surely a decline in Sterling will prevent a "HPC" (in the sense that most people think - "falling prices")?

1 - As sterling falls the manufacturing sector (whats left of it) will pick up adding to employment.

You seem to forget that 80% of our GDP and jobs are not in manufacturing.

2 - A fall in sterling (the currency in which houses are priced) is a de facto fall in house prices.

Only for foreign buyers. UK buyers (people earning pounds sterling) will see absoutely no increase in affordability whatsoever.

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UK buyers (people earning pounds sterling) will see absoutely no increase in affordability whatsoever.

Actually they'll see a decrease in affordability, as a falling pound will import inflation on things they have to buy, and therefore reduce the amount of money they can afford to waste on mortgage interest.

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Only for foreign buyers. UK buyers (people earning pounds sterling) will see absoutely no increase in affordability whatsoever.

Thats exactly my point.

House prices will fall but will not become more affordable.

Thus, people waiting for a crash (a majority on this board?) will not benefit in any way.

People laugh at the suggestion that "its different this time".

Implicit in this suggestion is the idea that, things being the same as last time, they can ride in and pick up a bargain. This scenario also catches out the bears and the STRs.

From the governments point of view everybody loses, buyers and sellers, but everyone loses equally so the status quo remains.

The crazy idea that people can just sit back, wait for prices to fall and snap up a bargain is just half-arsed and lazy thinking.

Edited by needle

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Guest Bart of Darkness
House prices will fall but will not become more affordable.

So who exactly will be buying these unafforable houses? Foreign speculators?

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So who exactly will be buying these unafforable houses? Foreign speculators?

Aliens from planet Zarg. They're big on intergalactic BTL out there.

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So who exactly will be buying these unafforable houses? Foreign speculators?

Ehhhh...nobody....thats the whole point of my arguement. Nobody benefits.

Read the threads about people moving to Dollars or Yen or Dinari or whatever.

They were trying to preserve the value of their money.

(Remember we're assuming a big drop in sterling here.)

Affordability will remain at or near current levels.

Further, companies listed on the UK FTSE, who make most of their income abroad will see a "rise" in their share price. Denominated in sterling, they will "hold" value as sterling drops - therefore will "rise" in value.

Thus, It is entirely possible that the stock market will rise, house prices stay the same and manufacturing employment increase - and all the while the **** is falling out of sterling.

Indeed this could happen because sterling is falling.

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Needle - did you see this by MarkG:

Actually [buyers will] see a decrease in affordability, as a falling pound will import inflation on things they have to buy, and therefore reduce the amount of money they can afford to waste on mortgage interest.

Putting pressure on all sellers to reduce asking prices. They can't ask for what's been taken from all buyers.

... Which would make moving something into foreign currency an even better plan?

Edited by megaflop

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It's not a game. It's for real. And those who don't hedge against pound sterling falls will regret it.

for sure!!!...that's why I'm long on yen and have a bit of gold stashed away.

sterling and dollar are quite easy to trade,most of the time they are in a range,so that's why I bought in on gold earlier this year at $420oz/ at $1.91

currency play is good too.It isn't just luck.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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