The falling pound

[aot871]

How far would the british pound have to fall before expat brits decided to pack up and return home or decide not to come to Thailand even for a holiday ?

[Old git]

Sterling was strangely overvalued, when judged against balance of payments data, and the Brexit vote was the catalyst that provoked a correction.

There's no compelling argument for a further downward correction, and a distinct possibility of another Asian financial crisis ere long, which would have the reverse effect. However it is hard to know just how deeply Thailand is involved in some of the dodgy banking practices that have been going on in China and elsewhere in Asia - which could blow up at any time..

[Manforallseasons]

For Brits living in Thailand the cost of living is so much less that one's life will go on with slight changes, visitors might think twice, the euro will likely be on par with the dollar but expect the pound to be under pressure till Brexit is resolved.

[fountainhall]

I know of one gay couple who moved here from the UK about a dozen years ago and live on their pensions and a small nest egg. With interest rates since 2008 so low, they have already had to sell their apartment and are in the process of moving yet again from a large rented apartment to a much smaller one. I'm not sure if diversification would have helped them enough to avoid selling the apartment, but their case illustrates the problems of relying on just one currency in retirement.

[arsenal]

Those of us with even half an eye on reality could have told you that 13 years of a Labour government spending so high above its means was going to bring one big fuck off come down. It was always always unsustainable.

[Oliver]

Thank you racists and little-Englanders for your efforts. Soon, a trade deal with the buffoon who's about to mis-run the USA will lead to the demise of the NHS. We'll be at the mercy of corrupt American Big Business with their disdain for the human rights of anyone who's not rich and white..

I'm lucky; I can continue to travel to Thailand three times a year and to continue the support of my boyfriend. Others aren't so fortunate. So, on behalf of them, thank you racists and little-Englanders. You wanted it, you've got it.

[francois]

Could you be more specific ?

[Brad the Impala]

Those of us with even half an eye on reality could have told you that 13 years of a Labour government spending so high above its means was going to bring one big fuck off come down. It was always always unsustainable.

They've been out of power for six years yet it is still all their fault! I think that your politics are clouding your vision, so I suggest that you use more than half an eye!

[goji]

They've been out of power for six years yet it is still all their fault! I think that your politics are clouding your vision, so I suggest that you use more than half an eye!

The Labour party run up loads of debts.
Gordon Brown borrowed 3% of GDP per year in the good years, which rose to 11% after the inevitable pop.

Normally the Conservatives would slowly get borrowing back under control and take all the blame for "spending cuts" from the lefties.
The current administration have unfortunately only done half a job of restoring the finances.
However, it was the Labour party which created the mess.

As for Brits living in Thailand, or planning to do so, it has been very obvious that the UK has been borrowing & running up debts. A fall in the pound has been inevitable.

The first way to reduce Sterling risk is to increase the percentage of assets invested in Asia. I made my first modest step on that road in 1992.

Secondly, rather than live high on the hog and have to progressively downsize if/when the pound falls, ask "What will happen if the pound falls by 50% and to what extent do I need to live within my means now to protect the future?"

[arsenal]

Brad the Impaler wrote:
"They've been out of power for six years yet it is still all their fault! I think that your politics are clouding your vision, so I suggest that you use more than half an eye!"

It doesn't work like that Brad. Economic policies and decisions taken can have repercussions lasting for decades. Look at the economy Labour inherited and look at that which they bequeathed.

[fountainhall]

Discussing who is at fault is surely a secondary issue. The fact is that various factors account for currency movements and those who gamble on future movements are in a crap game.

For whatever reasons, the pound has tanked. But remember it has tanked before. Back in the 1980s it got so close to parity with the US$ that Margaret Thatcher had to persuade the Sultan of Brunei to buy sterling and avoid a total crisis. In the same decade, pressure from the Reagan administration forced the Japanese to increase the value of the ¥. From almost ¥260 to US$1 it rose to ¥110. Some suggest this was a part of the reason for the Japanese recession which was to last for over 20 years.

I'm thankful I learned the lesson early. I lived in Japan for two years as the ¥ was rising but was paid in US$. Not that it affected me much as I was on expatriate terms and allowances and so shielded from the worst effects. But it was a good lesson with a view to eventual retirement. For the time being most of my funds are in Hong Kong in HK$ which is linked to the US$. Soon I will diversify. Thankfully very little of my income comes out of the UK.

I agree entirely with goji. Anyone planning to retire in Asia should start building up assets within Asia as early as possible. Let's just be thankful that we're not Brits living in Malaysia because the Ringgit is also tanking!

[arsenal]

Put your money international water companies and arms companies because as one becomes an ever decreasing resource the other will be bought and needed to defend it. Or a Chinese bank will give you up to 4% and the rmb is one of the currencies of the future. In fact if you spend a lot of time in Asia a Chinese bank account will be very useful to you.

http://www.bbc.com/news/business-38644971

[fountainhall]

I agree with arsenal. The RMB used to be fixed to the US$ at a rate of about 8.25. Despite Donald Trump's ridiculous statements, the currency rose to 6.15 last year. With the rebalancing of the Chinese economy, it has dropped down to around 6.92 or so. Eventually it has to go up but I'd wait a few months before plunging in. Some Chinese stocks purchased on the Hong Kong or US exchanges should also be in every expat's portfolio.

[sglad]

Falling pound is great for ordering stuff from Amazon UK and the Book Depository! I ordered all my books in July last year just after Brexit and in time for the new academic year in August. Saved a lot of $$$$.

[goji]

I see 2 separate reasons for investing abroad.

1 Currency Risk. For this, even investments listed in London, but holding overseas assets, such as some of the Asian unit trusts and investment trusts will tend to track the underlying overseas investments. Therefore protecting against falls in sterling. As has been seen in the last 6 months.

2 Major economic risk, leading to currency controls. In the past, the UK has had restrictions on taking money out of the country. Iceland had them from the 2008 crisis until recently. China has some restrictions on the amount that can be moved out of the country in one year. For this, accounts located overseas seem necessary to me.

[Dalewood]

Discussing who is at fault is surely a secondary issue. The fact is that various factors account for currency movements and those who gamble on future movements are in a crap game.

For whatever reasons, the pound has tanked. But remember it has tanked before. Back in the 1980s it got so close to parity with the US$ that Margaret Thatcher had to persuade the Sultan of Brunei to buy sterling and avoid a total crisis. In the same decade, pressure from the Reagan administration forced the Japanese to increase the value of the ¥. From almost ¥260 to US$1 it rose to ¥110. Some suggest this was a part of the reason for the Japanese recession which was to last for over 20 years.

I'm thankful I learned the lesson early. I lived in Japan for two years as the ¥ was rising but was paid in US$. Not that it affected me much as I was on expatriate terms and allowances and so shielded from the worst effects. But it was a good lesson with a view to eventual retirement.

Fountain and I may have been in Japan at the same time. As memory serves, the rate was about $1=Y160 when I arrived, so at Y260 life was pretty good!!

To give you an idea...

Train to Tokyo: Y1200 round trip
Decent food dish: Y500
Better food dish: Y850
One drink at gay bar (No go-go boys, etc.): Y500
My share of love hotel: Y2500
Regular hotel room: Y5500
Run of the mill sushi: Y200 per two pieces

No tips expected for drinks and food. NOTE: You could certainly spend astronomical amounts for food and drink if you wanted to, but it was not necessary. My rule of thumb was to avoid places that accepted credit cards to avoid unpleasantness when it was time to pay the bill. It may sound silly, but it worked.

So if I got lucky and my "acquaintance" had his own place, I could have a good time for $25 US in a first-world capital city.

[arsenal]

An interesting article for anyone who has been to Japan. Or likes fish.


http://www.bbc.com/news/world-asia-38566408

[fountainhall]

So if I got lucky and my "acquaintance" had his own place, I could have a good time for $25 US in a first-world capital city.
I never found Japan expensive back then unless I had to take a client out for an upmarket dinner, but then that was covered by a generous entertainment allowance! With an apartment provided for me in Hiroo and just 4 subway stops to work, lunch with soup and a main course in a tiny Japanese restaurant near the office for ¥700, gay bar drinks around ¥500 and no money boys, I saved a lot during my time there.

[Khor tose]

One other way of protecting your currency from devaluation, without investing in another country, is the oldest investment of all. Buy gold--not my first choice--or silver. I prefer silver as it has many more uses then gold, and by buying right and selling right you can make quite a bit of money. So far I have done much better then many of the investments markets.

[cdnmatt]

Don't forget bitcoin. It's been humming quite nicely the last while.

[goji]

One drink at gay bar (No go-go boys, etc.): Y500
Japan does have host bars, where for about JPY 15000, you can take one & have an hour in bed, or whatever takes your fancy. To be clear the 1 hour is fixed, but they will do anything specified on their page in the catalogue, which is generally all the usual options. And with a smile.

On the foreign exchange issue, the 10 year data JPY-GBP rate shows how far things can move.
Current rate = 139.6
Highest rate = 249 2007
Lowest rate = 117 2011 ie less than half the 2007 rate.

Actually even in 2008, the lowest rate was about 126, so almost halving in very little time.

I make 2 Conclusions

1 Anyone holding one currency and spending another needs to consider that very large currency movements are possible. To mitigate this, they could consider investing in overseas assets to reduce the risk.
2 Gordon Brown really made a pigs ear of running the show.