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Hsbc Warns Of Hot Money Exodus From Britain

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http://www.telegraph.co.uk/money/main.jhtm...5/cnhsbc105.xml

HSBC warns of hot money exodus from Britain under 'siege'

By Ambrose Evans-Pritchard

Last Updated: 1:30am BST 05/10/2007

HSBC, Britain's biggest bank, has warned that Britain faces a stark "de-rating" by investors in coming months as growth slows and funds begin to lose confidence in the country's economic management, triggering a mass exodus of "hot money" from the City.
Events such as the Northern Rock debacle have eroded confidence in Britain's economic management
"Sterling's outlook is increasingly taking a turn for the worse. A deeper downward move against a broad range of currencies is on the horizon," said the bank in a new report, "Kingdom Under Siege".
It expects the pound to fall from around $2.04 to $1.76 against the dollar over the next eighteen months, even though the dollar itself is in danger of losing its status as the world's "anchor currency".
David Bloom, HSBC's head of currency research, said signs that the Bank of England's monetary framework was "starting to fray at the edges" had begun to unsettle investors, tarnishing the City's reputation. Both the Northern Rock debacle and the decision by the Monetary Policy Committee to overrule the Governor in setting interest rates have inflicted damage.
"If further problems beset either the Bank of England or policymakers in the UK, the situation could turn from mildly negative to a lot more serious," he said.
The pound as been held aloft by inflows of "short-term" money chasing yield. British interest rates of 5.75pc are much higher than levels in Europe.

Sterling is as solid as the miracle economy that ramped it up to the dizzy heights it now occupies. IMO our banking system is insolvent. THe miracle is in its dying days and sterling must be the worst possible currency to be holding these days.

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Guest DissipatedYouthIsValuable
http://www.telegraph.co.uk/money/main.jhtm...5/cnhsbc105.xml

HSBC warns of hot money exodus from Britain under 'siege'

By Ambrose Evans-Pritchard

Last Updated: 1:30am BST 05/10/2007

HSBC, Britain's biggest bank, has warned that Britain faces a stark "de-rating" by investors in coming months as growth slows and funds begin to lose confidence in the country's economic management, triggering a mass exodus of "hot money" from the City.
Events such as the Northern Rock debacle have eroded confidence in Britain's economic management
"Sterling's outlook is increasingly taking a turn for the worse. A deeper downward move against a broad range of currencies is on the horizon," said the bank in a new report, "Kingdom Under Siege".
It expects the pound to fall from around $2.04 to $1.76 against the dollar over the next eighteen months, even though the dollar itself is in danger of losing its status as the world's "anchor currency".
David Bloom, HSBC's head of currency research, said signs that the Bank of England's monetary framework was "starting to fray at the edges" had begun to unsettle investors, tarnishing the City's reputation. Both the Northern Rock debacle and the decision by the Monetary Policy Committee to overrule the Governor in setting interest rates have inflicted damage.
"If further problems beset either the Bank of England or policymakers in the UK, the situation could turn from mildly negative to a lot more serious," he said.
The pound as been held aloft by inflows of "short-term" money chasing yield. British interest rates of 5.75pc are much higher than levels in Europe.

Sterling is as solid as the miracle economy that ramped it up to the dizzy heights it now occupies. IMO our banking system is insolvent. THe miracle is in its dying days and sterling must be the worst possible currency to be holding these days.

I predict an exodus of hot money to productive economies where this hot money can be given interest.

They'll have to rely on the workers in those economies buying what they produce though, because most of the Western world will be deep in recession.

Edited by DissipatedYouthIsValuable

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So should people with savings move them to a foreign bank account in euros or swiss franks ? Anybody recommend a swiss bank where you can open an account and transfer money over the internet ?

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So should people with savings move them to a foreign bank account in euros or swiss franks ? Anybody recommend a swiss bank where you can open an account and transfer money over the internet ?

Even if they're right, why bother? Will you be spending in those currencies?

As a way to make money you will need to be lucky and time it right. Brokerage, and short term volitility in those CCYs will encroach on your margins too.

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So should people with savings move them to a foreign bank account in euros or swiss franks ? Anybody recommend a swiss bank where you can open an account and transfer money over the internet ?

I have looked at foreign bank accounts and frankly the rates of interest are so poor that it doesn't seem worth it. A better idea IMO is to invest in natural resources which will hold their value. So something like oil shares such as BP, Shell, Tullow, Soco Intl, Aminex, Afren, Cairn, Dana. Or maybe gold miners such as Allied Gold. This is for long term capital protection. As well as putting them in a share ISA you also have an 8K capital gains limit a year so it is fairly tax efficient whereas your savings are taxed as you earn them meaning you are always losing money in real terms.

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I have looked at foreign bank accounts and frankly the rates of interest are so poor that it doesn't seem worth it. A better idea IMO is to invest in natural resources which will hold their value. So something like oil shares such as BP, Shell, Tullow, Soco Intl, Aminex, Afren, Cairn, Dana. Or maybe gold miners such as Allied Gold. This is for long term capital protection. As well as putting them in a share ISA you also have an 8K capital gains limit a year so it is fairly tax efficient whereas your savings are taxed as you earn them meaning you are always losing money in real terms.

But, of course, you risk losing money. I KNOW for an ABSOLUTE FACT that if were to take money out of the bank and stick into Oil, Gold and Commodity shares that the widely predicted global recession will start immediately, demand will fall and I'll lose my shirt.

If I take such action, I will post it here so that everyone else can short the shares I buy and get rich.

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And the needle returns to the start of the song and we all sing along like before.

Maybe this time... Maybe...

On an infinite time scale I'd hire RB as a currency trader. ;)

I just hope you don't think anything is going to fall against the shitey dollar.

I love the opening line: "HSBC, the UK's biggest bank..."

That's supposed to tell us that they know what the fck they're talking about. Just like our fifth biggest bank with the sound business model (sayeth the BOE our only, and tightly controlled, free-market pork barrel)

Sterling is going to do fine. It'll continue to weaken against the euro but not by all that much. It'll trade in a wide enough range against the dollar that overpaid twits in banks think they can detect a trend.

And, unlike the analysts at Britain's biggest bank, I've 'got lucky' about these things for quite a wee while now. They think it's high so they take a punt that it'll go down. It goes down a bit and the perception is that they got it right. Then it strengthens again and they say the same thing. Rates are going up in this country. No matter how unlikely that may seem to experts at this particular time; rates will go up. The market will embarrass the MPC and they'll squeal to their darling that they canna hold on... that she's breakin' up. And rates will go up . (For the real world will already have higher rates and the BOE will follow them upwards.) Show that to the HSBC and they'll tell you I'm an arrsehole then ask them which arrsehole at the HSBC saw the crunch coming.

Plenty loonies here who do not work at Britain's biggest bank. (And a few who don't even want to keep their savings there.)

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I have looked at foreign bank accounts and frankly the rates of interest are so poor that it doesn't seem worth it. A better idea IMO is to invest in natural resources which will hold their value. So something like oil shares such as BP, Shell, Tullow, Soco Intl, Aminex, Afren, Cairn, Dana. Or maybe gold miners such as Allied Gold. This is for long term capital protection. As well as putting them in a share ISA you also have an 8K capital gains limit a year so it is fairly tax efficient whereas your savings are taxed as you earn them meaning you are always losing money in real terms.

Anyone know about share ISA’s – as far as I know you can invest upto £7000 into an ISA – if you was to pick say European shares would you get any currency adjustments as well as cash if your funds if they do well

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But, of course, you risk losing money. I KNOW for an ABSOLUTE FACT that if were to take money out of the bank and stick into Oil, Gold and Commodity shares that the widely predicted global recession will start immediately, demand will fall and I'll lose my shirt.

If I take such action, I will post it here so that everyone else can short the shares I buy and get rich.

demand may fall, but supply is stagnant to falling too (Peak Oil). This leads to a certain element of downside protection.

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That's why, if the IR don't go up, the pound will be unattractive and my money will be saved in Euros.

Not that it matters, but hey...

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It expects the pound to fall from around $2.04 to $1.76 against the dollar over the next eighteen months, even though the dollar itself is in danger of losing its status as the world's "anchor currency".

thats a fall of 10% which will translate to additional 10-20% import inflation on anything priced in $ (oil) or derived from $ (oil)... Petrol at 1.20, plus a whole heap of inflation on any imported good, technology, CPI basket items

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And, unlike the analysts at Britain's biggest bank, I've 'got lucky' about these things for quite a wee while now.

And unlike the loonies at Britain's biggest mortgage lender^w^wbank, you're not angling to generate sociopolitical pressure for just one more free hit of crack.

And that's all this one amounts to.

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This leads to a certain element of downside protection.

...which you have of course quantified. ;)

Sadly all you'll need is a ~7% drawdown per annum to underperform sterling vs the dollar (collapse of 13% less interest on sterling deposits).

And that's assuming HSBC get it right. Let's hope they know currency better than HBOS & NR know the mortgage market or Goldman and Stearns know the CDO market ... or the 5 Brokerage house that issued buy recommendations on Tate & Lyle know the corn market ... or Bootle knows the property market ... or ... I can see I'm boring you now :P

I love the opening line: "HSBC, the UK's biggest bank..."

That's supposed to tell us that they know what the fck they're talking about.

Quite.

But fair-dos to RB. The subtle undercurrent here is an implication that interest rates in the UK need to stay relatively (by other countries) high to avoid excessive sterling weakness and imported inflation.

Edited by Sledgehead

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But fair-dos to RB. The subtle undercurrent here is an implication that interest rates in the UK need to stay relatively (by other countries) high to avoid excessive sterling weakness and imported inflation.

The interest rates need to increase because the purchasing power of the injected capital (previously lent to producers) is now already diminished - prices have risen above entry (pre-injection), the value of money has already depreciated.

Or that's what my text-de-jeur says. ;)

[dons flack suit and heads for the bunker]

Edited by ParticleMan

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demand may fall, but supply is stagnant to falling too (Peak Oil). This leads to a certain element of downside protection.

In the short to medium term supply of most (copper, oil, coal, manganese, etc) is fairly fixed as it takes a decade or more to open a new mine even with a known reserve. A recession will probably blow the froth off the top of some of the commodity prices so right now would not be the time to buy, but after the froth has gone, after which the prices should hold steady. It might change if there is a worldwide and long-term depression, but then if that is going to happen then all bets are off anyway.

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Guest mSparks

Well, if this starts to kick off, Ill probably move back to USD.

from being in the US in 2005, some prices:

premium housing rent: $750 pm

cigarettes: $2 a pack

fuel: $2.89 a gallon

premium bread: $2-4 a loaf

standard restaurant: $45 meal for 3 people.

expensive restaurant: $80 meal for 3 people.

Basically in the US, £1=$1 - its like a half price sale at the mall - every day :ph34r:

Since I have a USD visa card I can use from funds transfered to a USD account, WHEN the pound starts dropping against the dollar (but theres still some strength left in it yet, UK is still growing even while the US drops back) then from what HSBC says represents 15% growth in ready cash, If it goes back to the economists theory of price equivalence then thats a 50% growth, but it wouldn't surprise me though if we see $4-5 to the £ before that (which is what it will take for me to make transfer).

How much cash you make is entirely dependant on how well you can predict the future, If you think you already can, put your money where your mouth is, or stfu.

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Well, if this starts to kick off, Ill probably move back to USD.

from being in the US in 2005, some prices:

premium housing rent: $750 pm

cigarettes: $2 a pack

fuel: $2.89 a gallon

premium bread: $2-4 a loaf

standard restaurant: $45 meal for 3 people.

expensive restaurant: $80 meal for 3 people.

Basically in the US, £1=$1 - its like a half price sale at the mall - every day :ph34r:

(Since I have a USD visa card I can use from funds transfered to a USD account, WHEN the pound starts dropping against the dollar (but theres still some strength left in it yet, UK is still growing even while the US drops back) then from what HSBC says represents 15% growth in ready cash, If it goes back to the economists theory of price equivalence then thats a 50% growth, but it wouldn't surprise me though if we see $4-5 to the £ before that (which is what it will take for me to make transfer).

How much cash you make is entirely dependant on how well you can predict the future, If you think you already can, put your money where your mouth is, or stfu.

(The US is a big place (and cigarettes were a lot more than that where I was living; before 2005). Silicon Valley rents are three times that figure. And where do you buy your bread?)

Banks and wags are all playing at genius for they think, given that the BOE is owned by the politicians and Bernanke is a poor lost soul, that central banks will lower rates for that's what 'we' all need.

Indeed, if they had not been doing just that very thing since the Asian currency crash that would be a good thing and maybe even get us out of this mess. Perhaps we might even all get rich as money is pumped in through the housing market and lobbed into outer space in CDOs and related dobs of joobie?

But, after a little while during which it will seem to them that they're in control, it will become obvious that stagflation will not be so easily dismissed.

These people are the people who have torn the global economy apart and they are not equipped to fix it. It will fix itself, in time, but only after 'we' realise that we cannot manipulate things as easily as we wish. (Any more.)

Cable (GBP/USD) is not about to 'fall'; outside of the minds of people who think central banks have just made it easy.

What that means is that it will fall. It will fall enough to make people believe it will fall some more. It will look like a self-fulfilling prophecy. But it will hit the bottom of a range and then it will come back. Speculators will take it down and the invesment bank thugs will dive in for some easy money. But just as it seems the poor pound is toilet paper, people will start to get the idea that prices are going up and up and up, even as our economy cools down. Rates will go up whether central banks and Finnoula Whatever-her-fcking Nationwide name is wants lower rates or not.

The longer term for cable is still upwards for the dollar is dying. And when the investment bank sheep see that despite their best efforts rates simply will not do what they are told; then cable will bungee up to a new range.

Anyone who listens to invesment bank currency analysis needs their heads examined.

But certainly there is money to be made on the downside... for a wee while.

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(The US is a big place (and cigarettes were a lot more than that where I was living; before 2005). Silicon Valley rents are three times that figure. And where do you buy your bread?)

Banks and wags are all playing at genius for they think, given that the BOE is owned by the politicians and Bernanke is a poor lost soul, that central banks will lower rates for that's what 'we' all need.

Indeed, if they had not been doing just that very thing since the Asian currency crash that would be a good thing and maybe even get us out of this mess. Perhaps we might even all get rich as money is pumped in through the housing market and lobbed into outer space in CDOs and related dobs of joobie?

But, after a little while during which it will seem to them that they're in control, it will become obvious that stagflation will not be so easily dismissed.

These people are the people who have torn the global economy apart and they are not equipped to fix it. It will fix itself, in time, but only after 'we' realise that we cannot manipulate things as easily as we wish. (Any more.)

Cable (GBP/USD) is not about to 'fall'; outside of the minds of people who think central banks have just made it easy.

What that means is that it will fall. It will fall enough to make people believe it will fall some more. It will look like a self-fulfilling prophecy. But it will hit the bottom of a range and then it will come back. Speculators will take it down and the invesment bank thugs will dive in for some easy money. But just as it seems the poor pound is toilet paper, people will start to get the idea that prices are going up and up and up, even as our economy cools down. Rates will go up whether central banks and Finnoula Whatever-her-fcking Nationwide name is wants lower rates or not.

The longer term for cable is still upwards for the dollar is dying. And when the investment bank sheep see that despite their best efforts rates simply will not do what they are told; then cable will bungee up to a new range.

Anyone who listens to invesment bank currency analysis needs their heads examined.

But certainly there is money to be made on the downside... for a wee while.

But I could be wrong. ;)

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Listening to too much Del Amitri is bad for your karma ;)

RB's worse than me. He'll be telling us that sterling is snookered into his dotage.

It's funny though, how some journo publishes the musings of a bunch of overpaid ex-public schoolboys and girls and suddenly it's news.

It is astonishing the way our media covers economics. So fcking what that some dick thinks a currency is going to get stronger or weaker?

Even with help from the media these people get it entirely wrong all the time. (That is to say that; planting a widespread expectation can, or should help to, move it in that direction.)

I, on the other hand, often mistake one politician or party for another; makes me look more stupid than it should. I really should remember that they're all the same person. But a twit loses our life's savings and we call him a smart operator. Until we fix our upsidownism regarding the reporting of economics we will get shat upon ad infinitum.

How about this for a round-up in a Beeb article on Northern Rock? "Even though the firm's business itself was sound, the bank depended on short-term credit to run its day-to-day operations."

(This is the bit they stick in at the bottom to tell people what they're talking about. They say it as if it's an indisputable fact; like a name or a place. Their business is sound; they say: This article is not about that because that is a fact. This article is about how even though it is sound they are sucking unprecendented amounts of our hard-earned money to support their sound business.) No wonder chancers are buying them.

Sound. Yes, sound. That would be why it has borrowed £10bn from us because nobody else would give them it. Never mind; we've got all those luvverly non-sub-prime mortgage pools in return. Lucky us.

Edited by dstars

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But fair-dos to RB. The subtle undercurrent here is an implication that interest rates in the UK need to stay relatively (by other countries) high to avoid excessive sterling weakness and imported inflation.

This would fit into the historical pattern. UK nominal interest rates have tended to be higher than US/European rates. If this continues, driven by the pathetic underlying UK economic fundamentals (sick man of Europe etc), then Sterling may be protected relative to USD to an extent.

Of course, PPP suggests Sterling is overvalued but this has been the case for over 10 years. I'm sure there have been many reports like this over the past 10 years predicting its imminent demise.

Stagflation should lead the UK into recession and should also require the higher rates that could protect Sterling.

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Well, if this starts to kick off, Ill probably move back to USD.

from being in the US in 2005, some prices:

premium housing rent: $750 pm

cigarettes: $2 a pack

fuel: $2.89 a gallon

premium bread: $2-4 a loaf

standard restaurant: $45 meal for 3 people.

expensive restaurant: $80 meal for 3 people.

Basically in the US, £1=$1 - its like a half price sale at the mall - every day :ph34r:

Since I have a USD visa card I can use from funds transfered to a USD account, WHEN the pound starts dropping against the dollar (but theres still some strength left in it yet, UK is still growing even while the US drops back) then from what HSBC says represents 15% growth in ready cash, If it goes back to the economists theory of price equivalence then thats a 50% growth, but it wouldn't surprise me though if we see $4-5 to the £ before that (which is what it will take for me to make transfer).

How much cash you make is entirely dependant on how well you can predict the future, If you think you already can, put your money where your mouth is, or stfu.

INdeed. I am still on holiday in the US and have been buying a few items such as Levis for $19 eating out in restaurants for a third of the cost of the UK and renting a Honda Pilot (large CRV with 3.5 litre 6) for $209 p.w. I am staying with my son in his new house that is brick-built, 2000 square foot in a moderately upscale community that he paid $155k for. The house came with access to several community owned swimming pools and parks with tennic courts and othger recreational facilities. Everywhere you go the people are courteous and the level of service in restaurants and shops is outstanding. I have not yet seen any chavs and have only heard the "f" word once! We just spent a few days on South Padre Island, Texas' caribbean resort and stayed at a premium hotel on the beach that costs $69 a night. Went to the local fish restaurant and enjoyed grilled fish and stuffed shrimp with drinks for about $18 each.

I am wondering whether to give up on Gordon's miracle economy and the horrible aftermath we are all facing when the recession hits our shores. I have been on www.coldwellbanker.com to look at house prices in other parts of the country (Texas may be cheap buts it TFH for me). It seems that the average for a moderatley upscale home in a nice area is $250k. That buys you 4 bedrooms, detached, 3 car garage (room for a gym), granite tops in kitchen and jet tub in master bedroom. In my area (South Warwickshire) a similar home, pre-Great Crash 2, costs about 400k. After prices have been laid waste in the worst crash and recession since "The War" that will drop the house to 200k. I think I will move back to the US and just visit the UK on occasions for my fix of McVities and the nice countryside.

The bottom line: is it worth living in Britain these days? It seems to me that it is THE BEST country on earth for a 2 classes of people: the very poor and the very rich.

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I think people often forget that the US is a low wage economy- hence the low prices- Yes there a re a load of mega rich people, but just recall who lost the most in the New Orleans floods it was thousands of poor americans whos homes, to be honest didnt look half bad.

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