Hi Robin,

Shaky start to the day ..

The dollar traded at $1.5729 per euro at 6 a.m. in Tokyo, after touching $1.5903 yesterday, the weakest level since the euro started trading in 1999.

The U.S. currency traded at 97.33 yen, after touching 95.76 yen, the weakest since Aug. 15, 1995.

It traded at 0.9844 Swiss franc, after dropping to a record low 0.9638 francs yesterday.

There are a lot of expert opinions floating around in the news today but there does seem to be a consensus that the dollar may decline again against the euro and yen (for a fifth straight day).

It looks like the Federal Reserve will cut its benchmark interest-rate at least 1 percentage point at their meeting today.

But I'm not going to bet on it at any rate Robin!

Noreen

Hi Noreen

100 basis points cut.

It's a racing cert!

Neil

Forgive me for being daft but you say that "it is a good time to be holding Euro assets - but not such a great time to be transfering cash abroad" but if i was to sell my apartment in Romania and bring the funds back to the UK surely i would still be hit by the current weakness of the pound ! unless i suppose i kept them in euro's, can you shed some light on this for me.

Rob M

Hi Rob

If you invested £69,000 in an asset worth €100,000 - 6 months ago.

If you (sold that asset and) converted the €100,000 back to sterling you'd now get £77,000.

This is purely a currency gain.

Clearly, an increase in the value of the assets (as calculated in Euros) would also be added when you sold the asset.

Equally, instead of selling the asset you might refinance it - which would release Euros and use Euro income (ie rent) to pay for it.

Anyone with a property in a market where re-finance is relatively easy (Western Europe and Czech) could do this.

Cheers
Neil

As someone who earns their wages in US dollars and then invests it in EU assets I've been hit quite badly recently.

My experience watching the currency rates over the last seven years is simply that you have no way of predicting the medium term trends but the short and long term trends are easier to anticipate.

For example, experts seem to have some bearing on the short term influences such as base rate changes, inflation figures and so on which makes timing a purchase over a week or so slightly easier.

Long term I have found that something in motion stays in motion and typically goes much further than people expect. When I started selling services in USD the ex rate was about 1.46 to the pound, I don't think many believed there was any realistic way that it could reach the 2.0 level but every year the values seem to reach a new high, then fluctuate over the medium term around that high until it becomes the new norm. We then repeat this again and again until we are where we are. I read Richard Farleys book a while back and his addage was that "People over-react in the short term and under-react in the long term." which seems logical.

I am not sure if the EURGBP rate is more difficult to predict than USDGBP because we are proportionally larger trading partners and central banks have more reason to intervene but based on past experience I could see the pound droppng to 1.1 to the EURO in the next year or so and then we will all be saying, it can't go through the 1-1 barrier can it?

Disclaimer: I thought that buying northern rock shares at £3.00 was a good idea. Having written that I suppose that's roughly in line with my theory above anyway.

I bet 2.25% - a cut of 1%

N

Neil

Same as me then.

Mind you I'm not so certain now - the Goldman Sachs news (they have only lost $1 billion in the last three months) is going to cheer things up. That's a tiny amount...for them. And sooner or later this negative sentiment will turn...maybe this bank reporting season - which is taking lace right now. I think the bansk and the markets just want full disclosure, even if it's pretty bad news.

I'll stick with 100 basis points though.

cheers

I'm convinced a lot of this stuff is self fulfulling prophecy. For example by all accounts Bear Stearns assets were good quality not sub-prime but the rumours and inuendo cut off their ability to trade.

I agree that currencies may overshoot but I think that's already happened. I firmly believe that the European situation is much worse than people think and the £ will return to the range it's been trading at for the last few years (1.35 to 1.45). Not before I complete my remortgage in France, however, I hope!

Talking about bad decisions - what about Joe Lewis's decision a couple of months ago to take a big stake (9.4% I think) in Bear Stearns?! Ouch!

yeah Huw

As a namesake my eye was drawn to a headline that said 'Billionaire Joe Lewis loses $1bn' which I guess means he might not be a Billionaire any more?

I think you are right - we have an unbalanced equation at the moment.

Business in Spain is rotten at the moment - jobs are being cut - Andalucia / Coasta del Sol is losing jobs every day to cheaper (and nearby) Morocco.

I know that CEE is growing - and Germany seems to be stubbornly out of the economic malaise loop - but surely the big Siemens profit warning yesterday is a sign of things to come?

How does business look in France? Healthy or slow or sluggish?

Cheers
Neil

I tend to think of France as a 'Healthy Slug' always. Fortunately they have been very conservative with their Credit for so long and they are so entrenched with beaurocracy that consumerism and greed have not been able to get as tight a grip on the culture as in the UK and US.

They are able to learn some lessons from us, if this credit problem wasn't happening here then it might have been very different in France in 5 years time as I think they were heading the same way but very very slowly.

The rental demand is still high in Cannes where I have invested, the predictions for growth are around 2-5% for 2008 but no surprises there as it is very British owned and has seen some huge gains over the last 5 years. The predictions are for higher growth in Burgundy where there are still some bargains, the Swiss and Dutch are moving in there thick and fast for second homes. We are investing there in land but I don't see it as short term growth, just a steady investment without the roller coaster ride you might get elsewhere.