Brighton Area

[Tired of Waiting]

nobody knows the whole picture and to what extent the UK's economic situation has already been priced-in to the value of the pound.

That is indeed a very important point, perhaps the most important, regarding sterling. I've though about it yesterday, and I remember why I had the impression that it hasn't (or hadn't last week) priced it in yet: Because the Mckinsey chart is new, and it was news even at Davos, for the davos participants, last month.

Robert Peston, on his blog (1 February 2010) wrote: "That said, at Davos, for example, perhaps the biggest talking point was McKinsey's epic study of the respective debts of major economies, "Debt and Deleveraging". This is not pleasant reading if you're British."

But it is still possible that front line market traders were already aware of the deeper British data before Davos. Or their back offices? Or the big currency players? Soros et al? Possible. After all Davos gathers the elite, not the specialists. Hence we can't be sure. For safety, it is better to diversify.

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/02/tories_withdraw_support_from_t_1.html

http://www.mckinsey.com/mgi/publications/debt_and_deleveraging/index.asp

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Edited March 2, 2010 by Tired of waiting

[tigsrenting]

A bit OT but I put an offer in on a place last week just 100K+ short of what they were asking but exactly the same price that they had paid two months prior.

Think the EA was a bit miffed apparently there had been other offers well over asking, one had already fallen through due to financing and so on and so on.

I love talking to EAs they have answers for everything but sometimes forget what they have told you because I suppose they have to spin so much in the course of a day.

The place was a good size and I could see it's potential but there was no emotion involved. That's the worst when you see a place and go all out to get it.

Now what shall we discuss schools, currency dare I say it Jamie Oliver Peter Andre and where is Equitystasher gone off and left us.

Yellerkat and Cview have been rather quiet too.

[brightone]

t

Edited March 2, 2010 by brightone

[brightone]

That is indeed a very important point, perhaps the most important, regarding sterling. I've though about it yesterday, and I remember why I had the impression that it hasn't (or hadn't last week) priced it in yet: Because the Mckinsey chart is new, and it was news even at Davos, for the davos participants, last month.

Robert Peston, on his blog (1 February 2010) wrote: "That said, at Davos, for example, perhaps the biggest talking point was McKinsey's epic study of the respective debts of major economies, "Debt and Deleveraging". This is not pleasant reading if you're British."

But it is still possible that front line market traders were already aware of the deeper British data before Davos. Or their back offices? Or the big currency players? Soros et al? Possible. After all Davos gathers the elite, not the specialists. Hence we can't be sure. For safety, it is better to diversify.

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2010/02/tories_withdraw_support_from_t_1.html

http://www.mckinsey.com/mgi/publications/debt_and_deleveraging/index.asp

.

For anyone who is thinking of following your advice to join the ranks of the currency speculators, todays Moneyweek is probably worth a read.

http://www.moneyweek.com/investments/forex-safest-way-to-play-the-currency-markets-00905.aspx

Sensible advice for the wealthy and sophisticated investor...imperative for someone saving for their first home.."you should think twice before trading currencies". As it points out "all the worlds currencies are in a mess" and that "betting on currency movements wont end well for retail investors". Finally, before you launch another personal attack on me for my opinion, I would state that my sole intention of continuing this debaate is that I feel very strongly about people such as you who offer opinions as fact and ecourage people to risk their savings on a foolhardy , speculative and high risk approach to "saving". By all means offer your opinion on investments ToW, but please recognise them as opinions, not fact and not accuse those who who not agree with you as " duplicitous, low and disingenuous"

Edited March 2, 2010 by brightone

[Tired of Waiting]

For anyone who is thinking of following your advice to join the ranks of the currency speculators, todays Moneyweek is probably worth a read.

http://www.moneyweek.com/investments/forex-safest-way-to-play-the-currency-markets-00905.aspx

Sensible advice for the wealthy and sophisticated investor...imperative for someone saving for their first home.."you should think twice before trading currencies". As it points out "all the worlds currencies are in a mess" and that "betting on currency movements wont end well for retail investors". Finally, before you launch another personal attack on me for my opinion, I would state that my sole intention of continuing this debaate is that I feel very strongly about people such as you who offer opinions as fact and ecourage people to risk their savings on a foolhardy , speculative and high risk approach to "saving". By all means offer your opinion on investments ToW, but please recognise them as opinions, not fact and not accuse those who who not agree with you as " duplicitous, low and disingenuous"

You still didn't realise that you are advising them to bet 100% on sterling. Sterling is a currency too, and that is not a opinion, sterling is indeed a currency, this is a fact.

.

Edited March 2, 2010 by Tired of waiting

[brightone]

You still didn't realise that you are advising them to bet 100% on sterling. Sterling is a currency too, and that is not a opinion, sterling is indeed a currency, this is a fact.

.

Arghhhhhhhh. You remind me of someone who, when told the earth is round, say "well it would be flat if...."

If you read my previous posts you will see that I said I hold around 40% of my long term investmnets and pension pot in non UK funds, which means that they are held in currencies other than £. I just do not agree with your opinion that people should speculate with their short term savings for something like a deposit on a house.

PS You werent one of the people who sold £ and bought the Zim $ yesterday by any chance were you?

Edited March 2, 2010 by brightone

[Tired of Waiting]

I hold around 40% of my long term investmnets and pension pot in non UK funds, which means that they are held in currencies other than £.

Good.

[Tired of Waiting]

their short term savings for something like a deposit on a house.

Sorry, "short term"? For a deposit on a house? By any chance do you think we are at, or close to the bottom in house prices? And one would need the deposit in the short term?

(Glad to talk house prices again.)

[brightone]

Sorry, "short term"? For a deposit on a house? By any chance do you think we are at, or close to the bottom in house prices? And one would need the deposit in the short term?

(Glad to talk house prices again.)

My IFA uses the generally accepted definition of investment/saving horizons of :-

Short term...up to 3 years

Medium term ...3 to 10

Long term 10 plus

So yes, I would think that most people would want to have access to their "house deposit" funds within a 3 year time frame.

[Tired of Waiting]

My IFA uses the generally accepted definition of investment/saving horizons of :-

Short term...up to 3 years

Medium term ...3 to 10

Long term 10 plus

So yes, I would think that most people would want to have access to their "house deposit" funds within a 3 year time frame.

And regarding house prices, what is your best estimate for the bottom?

Edit to add: No need to reply anymore. I've just found my answer:

I said that I think that they will "flatline or increase very slightly" (probably in line with inflation). I think that the housing market crash (a year ago) and "recovery" has happened. As I said though it is a matter of opinion. I am backing my opinion by looking to upscale to a larger house because I want a bigger one and want to carry on rising up the ladder

God almighty.

I've been wasting a lot of time.

Oh well. Living and learning.

Edited March 2, 2010 by Tired of waiting

[brightone]

And regarding house prices, what is your best estimate for the bottom?

Edit to add: No need to reply anymore. I've just found my answer:

God almighty.

I've been wasting a lot of time.

Oh well. Living and learning.

However....that view was based upon a Tory election win, a sensible plan to reduce the defecit, the UK retaining investor confidence and therefore interest rates remaining low for the next couple of years. Gawd help us if we get a hung parliament, a coalition "government" who can not take decisve action to reduce the deficit and therefore interest rates having to rise. In that event I think that prices will drop again....

Edited March 2, 2010 by brightone

[All Seeing Eye]

Thanks for your responses re currency, I realise that the currency for a house deposit is best held in the currency of the country you are intending buying in. In my case it might have been wise to split it between pounds and euros, then if the pound drops a lot implying the UK is ruined I emigrate to the eurozone. The one advantage of the Euro seems to be 'It's too big to fail'. I guess I could invest in a low risk stocks portfolio as presumably that isn't in ANY particular currency, it is just worth what it's worth in whatever currency when you sell it. That may not be appropriate for just 2-3 years which is how long I might wait to buy another property either here or if no movement abroad.

I am interested though what the effect might be on my savings if a proper housing and UK economy crash did occur ? If house prices were to properly crash (after all it's just a domino effect in loss of confidence, which another Labour government could trigger) then repos and neg equities handing back the keys, might cause the banks to fail, so my money would be lost (well exchanged for a worthless government bond).

Alternatively if the pound dropped significantly then UK house prices could seem cheap to the rest of the world and they might start wading in aiding and abetting a new bubble, shutting the Brits out even more! Either way the British people are getting screwed. I am really worried at the thought of Brown getting re-elected as the only predictable thing about his unpredictable economic policies is they will be disastrous. Whatever people think about the Tories you can always trust them to look after the economy, bar the odd blip.

[Tired of Waiting]

Thanks for your responses re currency, I realise that the currency for a house deposit is best held in the currency of the country you are intending buying in. In my case it might have been wise to split it between pounds and euros, then if the pound drops a lot implying the UK is ruined I emigrate to the eurozone. The one advantage of the Euro seems to be 'It's too big to fail'. I guess I could invest in a low risk stocks portfolio as presumably that isn't in ANY particular currency, it is just worth what it's worth in whatever currency when you sell it. That may not be appropriate for just 2-3 years which is how long I might wait to buy another property either here or if no movement abroad.

I am interested though what the effect might be on my savings if a proper housing and UK economy crash did occur ? If house prices were to properly crash (after all it's just a domino effect in loss of confidence, which another Labour government could trigger) then repos and neg equities handing back the keys, might cause the banks to fail, so my money would be lost (well exchanged for a worthless government bond).

Alternatively if the pound dropped significantly then UK house prices could seem cheap to the rest of the world and they might start wading in aiding and abetting a new bubble, shutting the Brits out even more! Either way the British people are getting screwed. I am really worried at the thought of Brown getting re-elected as the only predictable thing about his unpredictable economic policies is they will be disastrous. Whatever people think about the Tories you can always trust them to look after the economy, bar the odd blip.

I agree with you that real house prices will probably fall for the next 2-3 years, at least. (My estimate is for a real fall of 20-30% from current levels.)

And you are absolutely right to be worried with "effect might be on my savings if a proper housing and UK economy crash did occur? If house prices were to properly crash" regarding the consequences of it for the UK economy in general.

That was my main mistake in 2007. I knew then, like most of us here, that we were in a house price bubble. By I didn't know that it was big enough to bring the whole British financial system down, and with it the whole country into a 1930s level recession, and to crash Sterling - including my savings for a deposit. To be frank, I felt, in this sequence: then then :angry:

I also felt stupid. It was obvious that sterling would fall with it. But then I realised that it was obvious only after seeing the data regarding the size of the debts, and how much people were MEWing, etc. I didn't know these macro-economic numbers before. So, it was not really stupidity, but ignorance... (Just a bit better, I know... Oh well.)

Anyway, see what I wrote a few months ago:

By the way, we think that average house prices fell 12% from the peak, right?

Communities and Local Government House Price Index: average at peak 221,800. Now 196,500. Hence, 12% fall.

Not really. We are measuring this fall using sterling - a shrinking measuring tool. The pound was worth 1.48 Euros in mid 2007. Now it is 1.10 Euros. A fall of 25%. So, in Euros (...) house prices actually fell already by:

Average House Prices, in Euros:

At peak: £221000 x 1.48 = 327,100 Euros

Now: 196,500 x 1.10 = 216,200 Euros

216,200 / 327,100 = 0.66%

A fall of 34% already!

What we didn't consider before was that government policies would bring the pound so low down - and with it, our salaries too, of course...

In 2008-9 I saw my deposit going down with house prices! Very annoying, indeed.

So, the lesson learnt: A fall in real house prices will probably come together with a "double dip" - UK into recession again - or inflation. And both of these will probably bring sterling down as well.

Therefore, in a bubble situation it is not correct to say that "the currency for a house deposit is best held in the currency of the country you are intending buying in." Particularly if you have to wait 2-3 years for the correction to come. Because this correction, if it comes, it will affect the currency as well.

But since nowadays one cannot be 100% sure of which particular currency will do better or worse, the safest strategy is not to put all the eggs in one basket, and not even too many eggs in just a few baskets. The best is to diversify as much as practically possible. I would go for UK savings accounts (FSA deposit guarantee protected) in at least 5, ideally 10 different currencies - like 10% in each currency for instance. (It's even safer if in different banks, we have some in HSBC, NatWest and CitiBank.) And leave them there for the 2-3 years you are planning to wait. That is the most stable, less risky, less speculative situation.

The only risk you would have is if Sterling goes up in the next few years in relation to the average of all these currencies. If you think this is likely, you can leave a larger share in Sterling. If you are also considering a property in the Eurozone, you may want to increase the share in Euros too. Like 30% in each of the two, and 40% in other currencies? or 20% in each, and 60% in others? (I would go for this.) It is up to you.

Re Stocks, they are also much more volatile than a varied basket of currencies. And I wouldn't advise it for non specialists. Even a "safe" stock, like utilities for instance, or "cash cows", may be too exposed to one particular country, and therefore to that country's currency. Conversely, an export company on the other hand can benefit from a falling currency and reduced costs on its home country, and from the relative increased purchasing power of the importing country.

[Tired of Waiting]

So when does a currency hedge become currency speculation? I'd say that putting a chunk of savings into another currency and leaving it there is not speculating.

You were absolutely right by mentioning time-frame. I though at first that you were introducing another aspect to the discussion. But it became clear now that timing was an unspoken premise in my disagreement with the "Bright One". I think real prices will fall for at least 2 to 3 years, probably for longer. And the "Brigh One" thinks that the bottom is around now, or even happened last year. Hence, his time frame was much shorter than mine.

Thanks for the insight.

[i wanna house]

prices seem to be going up though

and the pound seems to going down ....

where does this leave us ?

[Tired of Waiting]

prices seem to be going up though

and the pound seems to going down ....

where does this leave us ?

House prices, are stable at the moment, in Sterling. But in Euros, UK House prices fell by around 5% in the last couple of weeks. In Dollars too, some 5%. And in most currencies as well, by about 5%.

Oh wait... maybe it is not a coincidence, that all these currencies went up by about 5% in the last couple of weeks... Maybe it was Sterling that fell.

[brightone]

You were absolutely right by mentioning time-frame. I though at first that you were introducing another aspect to the discussion. But it became clear now that timing was an unspoken premise in my disagreement with the "Bright One". I think real prices will fall for at least 2 to 3 years, probably for longer. And the "Brigh One" thinks that the bottom is around now, or even happened last year. Hence, his time frame was much shorter than mine.

Thanks for the insight.

Just for the record, my screen name is short for brighton tony and I am not a "the" but dont let that stop you from being insulting, as usual, about someone who has dared to disagree with one of your many opinions (sorry "facts") and pointed out flaws in your arguments and dangers in following your advice

Edited March 3, 2010 by brightone

[i wanna house]

Just for the record, my screen name is short for brighton tony and I am not a "the" but dont let that stop you from being insulting, as usual, about someone with who has dared to disagree with one of your many opinions (sorry "facts") and pointed out flaws in your arguments and dangers in following your advice

tony...

i assumed you were a woman . not sure why . just goes to show ....

not sure what it goes to show but it must be something

And i would say asking prices are definately on the rise round elm grove and hanover. In pounds

[i wanna house]

duplicate mistake

Edited March 3, 2010 by i wanna house

[i wanna house]

tony...

i assumed you were a woman . not sure why . just goes to show ....

not sure what it goes to show but it must be something

And i would say asking prices are definately on the rise round elm grove and hanover. In pounds

then agian Tony can be a ladies name too... all these gender assumtioms i keep making.. not sure what I am anymore

[brightone]

tony...

i assumed you were a woman . not sure why . just goes to show ....

not sure what it goes to show but it must be something

And i would say asking prices are definately on the rise round elm grove and hanover. In pounds

Maybe being in touch with my feminine side comes through in my style of writing , but no I'm a man and not planning on gender reassignment just at the moment . One of the things I love about Brighton though is that , as a straight mate of mine (who lives up North) says "bleedin hell, even the straight blokes in Brighton seem a bit Gay" . I hasten to add that, as a Gay man, I mean that as a compliment and that we were out drinking in Kemptown, not West Street

Out of interest, what are asking prices like in Hanover in Zim $ ? On a serious note, I really like that area of town, but do think prices there are a bit crazy at the moment.

Edited March 3, 2010 by brightone

[LiveAndLetBuy]

You were absolutely right by mentioning time-frame. I though at first that you were introducing another aspect to the discussion. But it became clear now that timing was an unspoken premise in my disagreement with the "Bright One". I think real prices will fall for at least 2 to 3 years, probably for longer. And the "Brigh One" thinks that the bottom is around now, or even happened last year. Hence, his time frame was much shorter than mine.

Thanks for the insight.

I guess the difference between speculating and hedging is ultimately a matter of state of mind and attitude: are your intentions to make money or safeguard it? And I suspect it's difficult to do one without the other, e.g. if you decide to put some money into another currency just to protect yourself from a currency collapse, then the tendency is to search for the currency that you think will do best. At which point you have started to speculate as well. It's almost impossible not to speculate when you make that initial decision. But after you have made that initial decision then yes I think the longer you lock your money into another currency (or any investment) without touching it, then the less speculative it is.

Personally I think diversification (hedging) is excellent advice, but with everything so volatile right now, it is not such an easy thing to do. However, all things being equal, I'd say for example that holding 40% sterling, 20% dollars, 20% euros, and locking 20% into an index linked ISA for a few years should be safer than holding 100% sterling. Dollars, euros and sterling tend to be a zero sum game, i.e. they are largely measured in terms of each other which makes it difficult for them to all decrease in value at the same time.

[christhpc]

Just for the record, my screen name is short for brighton tony and I am not a "the" but dont let that stop you from being insulting, as usual, about someone who has dared to disagree with one of your many opinions (sorry "facts") and pointed out flaws in your arguments and dangers in following your advice

Ahh, I thought you were bright one too. Nice to know. For the record my name's Chris not Christ, although some people do and have called me that.

Well Sterling's up a bit today, woohoo.

As for Brighton... [checks Rightmove / Property bee 1/4 mile local area] nope still ripoff central.

[christhpc]

Personally I think diversification (hedging) is excellent advice, but with everything so volatile right now, it is not such an easy thing to do. However, all things being equal, I'd say for example that holding 40% sterling, 20% dollars, 20% euros, and locking 20% into an index linked ISA for a few years should be safer than holding 100% sterling. Dollars, euros and sterling tend to be a zero sum game, i.e. they are largely measured in terms of each other which makes it difficult for them to all decrease in value at the same time.

Good post.

Right now I have 70% of my cash in sterling based cash ISAs and index linked certs so a bit tricky to get to those percentages. Got 10% in foreign now... And the other 10% is sterling cash easy access, emergency fund, whatever. I'd probably be comfortable up to say 20% in foreign - hey as most on this forum I'm pretty risk averse.

I'd just say be careful ToW... Don't risk an amount of money you couldn't afford to 'lose'. The UK may seem to be up the creek, but we've all been fooled by the irrationality of the housing market over the last decade and of late despite the economic carnage.

[Tired of Waiting]

I guess the difference between speculating and hedging is ultimately a matter of state of mind and attitude: are your intentions to make money or safeguard it? And I suspect it's difficult to do one without the other, e.g. if you decide to put some money into another currency just to protect yourself from a currency collapse, then the tendency is to search for the currency that you think will do best. At which point you have started to speculate as well. It's almost impossible not to speculate when you make that initial decision. But after you have made that initial decision then yes I think the longer you lock your money into another currency (or any investment) without touching it, then the less speculative it is.

Personally I think diversification (hedging) is excellent advice, but with everything so volatile right now, it is not such an easy thing to do. However, all things being equal, I'd say for example that holding 40% sterling, 20% dollars, 20% euros, and locking 20% into an index linked ISA for a few years should be safer than holding 100% sterling. Dollars, euros and sterling tend to be a zero sum game, i.e. they are largely measured in terms of each other which makes it difficult for them to all decrease in value at the same time.

Exactly, a "zero sum game" is the main goal here. This is the main point. Currencies is the only market in the world that you can guarantee a zero sum game, as they are all measured against each other. And if you buy currencies from the, say, 10 biggest economies in the world, you cover about 90% of the world GDP. (And to be technically correct: the amount bought in each should be proportional to that economy's share of world GDP). The only thing you will have to compensate for is inflation, but if you buy government bonds from those economies you will be mostly protected. All other investiments can go up or down. This one cannot go up (unless you had global deflation - very unlikely). And it can go down by very little - if inflation is a bit higher than the gov. bonds. It is not an speculative investiment, for profit, it is a stable, safe harbour, for stormy times.

.

Edited March 4, 2010 by Tired of waiting