Reply to: Is there going to be a(nother) run on the Pound next week?

[TimberWolf]

Okay, own up, who just voted?

[TimberWolf]

No more voting. Only 46% of people predicted correctly (although only 18% got it wrong), assuming some miracle doesn't happen to the £ in the remainder of the week.

[TimberWolf]

Day 1 went to DimPrawn. $ gained more against the £ than the €.

Day 2 goes to AtW. € gained more against the £ than the $ today.

[Andy2]

Hmm. What about their banks, are they in good shape? They aren't planning any quantitative easing are they?

According to Time magazine they are one of the safest
http://www.time.com/time/business/ar...887090,00.html

[centurian]

If the markets are pricing in such risks before they make their own ratings then their services are a bit ... useless, don't you find?

To a point. Ratings are there for two main reasons

a) Those that can't be arsed to do the research themselves
b) External governance - only being legally allowed to invest in funds of a certain 'quality'


In terms of pricing, people are bothering to do the research and realising that the risks don't fit with AAA and have pushed up the price. Hence UK CDSs are currently priced the same as AA+/AA countries.

But that doesn't stop very low risk funds from investing. They may still feel it is worth the risk. But if we lose our AAA rating, those funds will have to sell their UK bonds/gilts.

[TimberWolf]

norwegian kroner is a good one. They have plenty of oil and a budget surplus unlike other western countries.
DYOR etc

Hmm. What about their banks, are they in good shape? They aren't planning any quantitative easing are they?

[Andy2]

Incidentally I received the information I ordered from First Direct about foreign currency accounts yesterday. I think I will used them, as I am an existing customer and this would save the hassle of opening up a new bank account elsewhere and needing to provide authentication required. Not sure how safe First Direct will be in the event of a major currency crash though.

They provide Euro, USD, AUD, Canadian dollar (CAD), Yen (JPY), New Zealand dollar (NZD), Norwegian krona (NOK), Swedish krona (SEK), Swiss frank (CHF) foreign currency accounts, paying a very small interest rate on some of them.

norwegian kroner is a good one. They have plenty of oil and a budget surplus unlike other western countries.
DYOR etc

[AtW]

They just don't need to - the markets have priced us lower than AAA anyway, so they can wait until after the election in order to "provide additional clarification" about their expectations.

If the markets are pricing in such risks before they make their own ratings then their services are a bit ... useless, don't you find?

[centurian]

Nah, they definately have an eye on politics - in fact they declare this as a factor in soverign ratings - and they still have to do a fair chunk of their business in the City.

And remember they are not a public service, they are a business which aims to make money, which means they are not impartial - something that they often list as a caveat in their ratings reports.

They're not going to risk stirring up a tulipstorm by downgrading a G8 nation this close to a general election.

They just don't need to - the markets have priced us lower than AAA anyway, so they can wait until after the election in order to "provide additional clarification" about their expectations.

[AtW]

If they were to downgrade us now (or announce a ratings review), the Labour spin machine will unleash everything they've got against them saying that they are trying to get revenge on Labour for the mauling they have been given by politicians for failing to do their job properly in the boom (which to be fair, they did bodge up).

How many of those rating agencies are UK based?

They could not give a tulip about Nu Liebor.

The reason they don't downgrade a whole list of countries is because Western Govts (including USA) leaned on them - UK's voice in this is by far not the most powerful.

[centurian]

What's so funny. Rating agencies still have a few sizeable dents in their reputation from the credit crunch.

If they were to downgrade us now (or announce a ratings review), the Labour spin machine will unleash everything they've got against them saying that they are trying to get revenge on Labour for the mauling they have been given by politicians for failing to do their job properly in the boom (which to be fair, they did bodge up).

Whether this is true or not isn't the point. It's politics and the ratings agencies haven't got the stomach for this right now. They'll wait until after the election, so that any flak that comes their way will be the "normal" type that they deal with all the time.

And to be far, they have been dropping quite a few hints over the past 12 months, getting less subtle each time.

[AtW]

In particular the ratings agencies don't want to be seen as interferring in the election by downgrading us beforehand

[centurian]

I think the markets are in a state of suspended animation at the moment, waiting for the result on the election.

In particular the ratings agencies don't want to be seen as interferring in the election by downgrading us beforehand (which would basically say Gordo was talking utter tulip) - even though the markets are currently pricing us at a AA+/AA rather than AAA anyway.

However, if a Labour victory becomes more certain, then the markets may not wait.

[HairyArsedBloke]

This is not investment advice.

The commodity currency's are worthy of further study.

[Green Mango]

The choice of the foreign currency is a tough decision.

However, given the current doubts about the £ and the increased risk of another New Labour win, it may be prudent to have some money outside sterling.