r00lish67
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Post by r00lish67 on Sept 18, 2019 10:20:27 GMT
I asked a question the other day in the Brexit thread re: how to effectively hedge against further drops in the £ against the Euro - thanks for all of the tips. Just wanted to pass on the conclusion I came to: I considered using Revolut first, as you can transfer to Euros with zero fees if you do it carefully it seems. However, I was put off by apparent ties to the Kremlin and the possible withdrawal of their European Banking License. I also looked at other options such as N26, Bunq and Transferwise. However, there are nearly always fees involved, no interest of course, and most importantly none of them are protected by the FSCS compensation scheme. One could argue that Transferwise is as good as with their actual banking being done by Barclays under supervision of the FCA, but still..... In the end, I think I'm going to do what I said I wouldn't do - which is to buy some shares. VEUR (Vanguard Europe) seems to be an effective currency hedge against the £ from my analysis i.e comparing returns of AMS:VEUR and LON:VEUR over any time period. Meanwhile, the CAPE valuation, which is a metric I do buy into for long term (10 year returns) is just 18.3 (vs a ludicrously high 29.2 of the USA for example). So, I believe it should a) be a good hedge against further £ falls and b) should return a reasonable amount over a 10 year period (although I'm not expecting fireworks of course). Of course, in the short term, the £ could continue it's recovery, esp. if Brexit is sorted, but then at least some of the rest of my cash holdings would appreciate in value (in euro terms). Thoughts? (I'm intending to buy this aft with Halifax sharedealing countdown commission, so don't delay! )
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benaj
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Post by benaj on Sept 18, 2019 10:26:10 GMT
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hazellend
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Post by hazellend on Sept 18, 2019 10:46:22 GMT
I get plenty of currency exposure through my holding of vanguard all world. I don’t think US is overvalued, PE ratio isn’t a great predictor and I will always want to hold market weight
The forex markets are much larger and more efficient than stock markets. I doubt that you will be able to make any profit from it, even more likely to lose than trying to beat the equity markets.
I know, predictable answer from me!
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IFISAcava
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Post by IFISAcava on Sept 18, 2019 10:53:09 GMT
I asked a question the other day in the Brexit thread re: how to effectively hedge against further drops in the £ against the Euro - thanks for all of the tips. Just wanted to pass on the conclusion I came to: I considered using Revolut first, as you can transfer to Euros with zero fees if you do it carefully it seems. However, I was put off by apparent ties to the Kremlin and the possible withdrawal of their European Banking License. I also looked at other options such as N26, Bunq and Transferwise. However, there are nearly always fees involved, no interest of course, and most importantly none of them are protected by the FSCS compensation scheme. One could argue that Transferwise is as good as with their actual banking being done by Barclays under supervision of the FCA, but still..... In the end, I think I'm going to do what I said I wouldn't do - which is to buy some shares. VEUR (Vanguard Europe) seems to be an effective currency hedge against the £ from my analysis i.e comparing returns of AMS:VEUR and LON:VEUR over any time period. Meanwhile, the CAPE valuation, which is a metric I do buy into for long term (10 year returns) is just 18.3 (vs a ludicrously high 29.2 of the USA for example). So, I believe it should a) be a good hedge against further £ falls and b) should return a reasonable amount over a 10 year period (although I'm not expecting fireworks of course). Of course, in the short term, the £ could continue it's recovery, esp. if Brexit is sorted, but then at least some of the rest of my cash holdings would appreciate in value (in euro terms). Thoughts? (I'm intending to buy this aft with Halifax sharedealing countdown commission, so don't delay! ) If you re concerned about holding currency in Revolut, you could transfer with Revolut and hold with Citibank or other bona fide Euro account. Otherwise your logic is fine, with the exception of "if Brexit is sorted". That's a 10 year time frame at least!
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IFISAcava
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Post by IFISAcava on Sept 18, 2019 11:01:54 GMT
Thanks - just opened a Starling Euro account to spread the load from Revolut/Citi/Transferwise! the FSCS protection is indeed reassuring.
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aj
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Post by aj on Sept 18, 2019 11:15:06 GMT
I haven't been looking for the best way to trade currency but should you wish to, my InteractiveBrokers account allows me to buy and sell pretty much every currency at interbank rates with a 0.2BP (0.002%) commission.
FYI, whether you own x units of AMS:VEUR or x units of LON:VEUR, you still own the same selection of equities. By comparing the two over time, you will just get a graph of the GBP:EUR exchange rate.* (eg: Today 1*VEUR costs 27.21GPB/30.71EUR. By todays exchange rates 27.21GBP=30.71EUR.)
However, VEUR seems a perfectly good fund to hedge against further drops in the pound; it is full of European large caps whose profits should be mostly unaffected by any further drops in UK spending power.
*You're not using google finance for the comparison are you?
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r00lish67
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Post by r00lish67 on Sept 18, 2019 11:43:15 GMT
I get plenty of currency exposure through my holding of vanguard all world. I don’t think US is overvalued, PE ratio isn’t a great predictor and I will always want to hold market weight The forex markets are much larger and more efficient than stock markets. I doubt that you will be able to make any profit from it, even more likely to lose than trying to beat the equity markets. I know, predictable answer from me! I hold plenty of VWRL too, very glad I do. I'm not trying to beat the forex markets, I agree that would be a mug's game - just hedge against further drops and also allocate capital efficiently (as I hold too much cash at the moment). I should perhaps clarify that I spend about 80% of my time abroad, so currency thoughts aren't just a 'play' from me, they hit my wallet directly. Fully aware the £ could rebound in my face, in fact I think that's more likely than not, but nobody knows. Dunno about PE, but there is some reasonable correlation in CAPE vs long term equity returns - no guarantees of course. Starcapital lay out the detail, EarlyRetirementNow have done a ludicrously useful analysis on how CAPE should influence your equity holding. This said, you might well be right, VWRL could still be a better buy if the USA decides to keep steaming onwards and upwards..
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r00lish67
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Post by r00lish67 on Sept 18, 2019 11:52:07 GMT
I haven't been looking for the best way to trade currency but should you wish to, my InteractiveBrokers account allows me to buy and sell pretty much every currency at interbank rates with a 0.2BP (0.002%) commission. FYI, whether you own x units of AMS:VEUR or x units of LON:VEUR, you still own the same selection of equities. By comparing the two over time, you will just get a graph of the GBP:EUR exchange rate.* (eg: Today 1*VEUR costs 27.21GPB/30.71EUR. By todays exchange rates 27.21GBP=30.71EUR.) However, VEUR seems a perfectly good fund to hedge against further drops in the pound; it is full of European large caps whose profits should be mostly unaffected by any further drops in UK spending power. *You're not using google finance for the comparison are you? I did use Google finance just to confirm the fact that it effectively provides a GBP/EUR hedge, which would have been a helluva lot easier if they hadn't destroyed 90% of their useful functionality a couple of years ago. I suppose on the hedging front, the other factor is that if we have a No Deal brexit (which would of course be the worst (foreseeable) hit to the £, that will still probably hit VEUR not from a currency perspective but just in terms of Europe's productivity being collateral damage to the UK's idiotic act of self-harm. No idea how much that would impact it though.
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corto
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Post by corto on Sept 18, 2019 12:16:27 GMT
I've recently got a Fineco Multi-currency account (mostly for the zero fee EURo debit card and very low .0025 GBP/EUR spread); SEPA transactions are also free. That alone makes it useful for me.
You can have several sub-accounts; GBP & EURO (with debit cards) and a certain number of others (CHF, US,...). The latter are a bit restricted in use and transactions incur fees. Currency exchange fees are still very low.
You do have investment tools in foreign currency. Never used so far.
Depending on what you want from the account it has a few drawbacks. There is a long thread about it at MSE.
Sign up was a bit lengthy but not really a problem.
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benaj
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Post by benaj on Sept 18, 2019 12:37:31 GMT
Fineco Bank feeThe Italian bank debit card is free but shipping is not. The multi-currency account is held in Italy. When withdrawing GBP from Fineco, check with your UK recipient bank. For example, First Direct charges £6 for Receiving £100 Sterling or more from banks outside the UK www1.firstdirect.com/rates-and-charges/charges/#foreign-and-travel-chargesTo transfer money free on Fineco, it's better to make a transfer using a web browser to avoid expensive transfer by mistake on the banking app.
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corto
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Post by corto on Sept 18, 2019 13:08:46 GMT
I'd agree with benaj's comments. The shipping fee for the card is about 3£ via DHL. A second card (GBP or EUR) costs about 10£ plus p.a. plus the shipping fee (unless they waive fees for the first three years, which they may offer online after sign up (or call them?)). You can use the EUR card on EUR ATMs in the UK (at no fee if the ATM says so). It is correct that transfers out to UK banks probably go through SWIFT which can cost and take several days (the price of keeping a national currency). Nationwide and a few others do not currently charge for incoming SWIFT. Whether that Fineco account is useful depends on what one wants.
No fee at Brussels' ticket machines and pubs was good enough for me. And yes, the app can be improved.
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bg
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Post by bg on Sept 18, 2019 15:26:39 GMT
I asked a question the other day in the Brexit thread re: how to effectively hedge against further drops in the £ against the Euro - thanks for all of the tips. Just wanted to pass on the conclusion I came to: I considered using Revolut first, as you can transfer to Euros with zero fees if you do it carefully it seems. However, I was put off by apparent ties to the Kremlin and the possible withdrawal of their European Banking License. I also looked at other options such as N26, Bunq and Transferwise. However, there are nearly always fees involved, no interest of course, and most importantly none of them are protected by the FSCS compensation scheme. One could argue that Transferwise is as good as with their actual banking being done by Barclays under supervision of the FCA, but still..... In the end, I think I'm going to do what I said I wouldn't do - which is to buy some shares. VEUR (Vanguard Europe) seems to be an effective currency hedge against the £ from my analysis i.e comparing returns of AMS:VEUR and LON:VEUR over any time period. Meanwhile, the CAPE valuation, which is a metric I do buy into for long term (10 year returns) is just 18.3 (vs a ludicrously high 29.2 of the USA for example). So, I believe it should a) be a good hedge against further £ falls and b) should return a reasonable amount over a 10 year period (although I'm not expecting fireworks of course). Of course, in the short term, the £ could continue it's recovery, esp. if Brexit is sorted, but then at least some of the rest of my cash holdings would appreciate in value (in euro terms). Thoughts? (I'm intending to buy this aft with Halifax sharedealing countdown commission, so don't delay! ) What do you mean by "hedge against further drops in the £ against the Euro" exactly though? Do you have some sort of exposure the other way you want to lay off or do you just want to diversify your investments? If it is a proper hedge, then buying EUR equities introduces equity risks which could dwarf the FX move (on a no deal eur equities will surely fall in the short term). If (and I think this is what you are doing) you want to diversify then it seems a fair play, eur equities are 'cheap' but there are some good reasons why they are. For a proper hedge you would need to hedge with the actual currency. As has been mentioned, I would recommend doing FX trades through Interactive brokers. I regularly do large FX transactions on their platform and its as close to 'mid' as you are ever going to get. Of course that then ties your capital up in cash which I wouldn't necessarily recommend. You could look at a leveraged ETF which means you can put down a smaller amount of cash for the same impact, eg EUP3 which is 3x short EUR v long GBP. Even better, I would recommend just doing a spread bet EUR v GBP. This will involve simply posting a small margin and any gain will not be subject to CGT which an equity gain will be. Personally, I think the GBP is cheap. I think whatever the outcome (if we get an outcome) of Brexit it will rebound. What is really depressing the £ is the uncertainty. Deal or no deal it will bounce back medium to longer term and I am positioned accordingly. Just my view.
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r00lish67
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Post by r00lish67 on Sept 18, 2019 16:40:40 GMT
I asked a question the other day in the Brexit thread re: how to effectively hedge against further drops in the £ against the Euro - thanks for all of the tips. Just wanted to pass on the conclusion I came to: I considered using Revolut first, as you can transfer to Euros with zero fees if you do it carefully it seems. However, I was put off by apparent ties to the Kremlin and the possible withdrawal of their European Banking License. I also looked at other options such as N26, Bunq and Transferwise. However, there are nearly always fees involved, no interest of course, and most importantly none of them are protected by the FSCS compensation scheme. One could argue that Transferwise is as good as with their actual banking being done by Barclays under supervision of the FCA, but still..... In the end, I think I'm going to do what I said I wouldn't do - which is to buy some shares. VEUR (Vanguard Europe) seems to be an effective currency hedge against the £ from my analysis i.e comparing returns of AMS:VEUR and LON:VEUR over any time period. Meanwhile, the CAPE valuation, which is a metric I do buy into for long term (10 year returns) is just 18.3 (vs a ludicrously high 29.2 of the USA for example). So, I believe it should a) be a good hedge against further £ falls and b) should return a reasonable amount over a 10 year period (although I'm not expecting fireworks of course). Of course, in the short term, the £ could continue it's recovery, esp. if Brexit is sorted, but then at least some of the rest of my cash holdings would appreciate in value (in euro terms). Thoughts? (I'm intending to buy this aft with Halifax sharedealing countdown commission, so don't delay! ) What do you mean by "hedge against further drops in the £ against the Euro" exactly though? Do you have some sort of exposure the other way you want to lay off or do you just want to diversify your investments? If it is a proper hedge, then buying EUR equities introduces equity risks which could dwarf the FX move (on a no deal eur equities will surely fall in the short term). If (and I think this is what you are doing) you want to diversify then it seems a fair play, eur equities are 'cheap' but there are some good reasons why they are. For a proper hedge you would need to hedge with the actual currency. As has been mentioned, I would recommend doing FX trades through Interactive brokers. I regularly do large FX transactions on their platform and its as close to 'mid' as you are ever going to get. Of course that then ties your capital up in cash which I wouldn't necessarily recommend. You could look at a leveraged ETF which means you can put down a smaller amount of cash for the same impact, eg EUP3 which is 3x short EUR v long GBP. Even better, I would recommend just doing a spread bet EUR v GBP. This will involve simply posting a small margin and any gain will not be subject to CGT which an equity gain will be. Personally, I think the GBP is cheap. I think whatever the outcome (if we get an outcome) of Brexit it will rebound. What is really depressing the £ is the uncertainty. Deal or no deal it will bounce back medium to longer term and I am positioned accordingly. Just my view. It's a bit of both is the answer, I could probably do with some more equity exposure, and I'm over heavy in GBP cash given the fact that I live more in Euro-land than the UK. Given that, it seems sensible to kill two birds with one stone in my position. To the highly speculative value of the GBP - I agree that if there's a deal of any sort (or no brexit) it will rebound. It's the more likely scenario IMV definitely. On the other hand, and without wishing to get too 'Brexit thread' about it, what's going at present in my view is truly alarming. It could fundamentally weaken the UK in the medium and longer term in my view, and not just because of No-Deal Brexit, but because we have a Government who seems to regard the law as an inconvenience at best and optional at worst, and the ongoing and lasting impact to business due to, as you say, the uncertainty. Anyway, I think with my small additional purchase today I'm where I want to be roughly. Which is at 50% equities. Even if the £ goes to less than 1 USD, then the FX uplift deadens most of that negative impact to me, and if I return to the UK even better than that as inflation wouldn't carry through entirely, what with retailers ever increasing ability to absorb costs and make twix bars smaller. If the £ alternatively goes up sharply, then well at least the other half of my portfolio will suddenly seem much worthwhile when in sunny Spain or wherever. I would like to be up at 75% equities given my investing time-frame, but for that I'll sit and wait patiently for bankers to start throwing themselves out of the window (metaphorically, I hope, in most cases).
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bg
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Post by bg on Sept 18, 2019 16:56:09 GMT
To the highly speculative value of the GBP - I agree that if there's a deal of any sort (or no brexit) it will rebound. It's the more likely scenario IMV definitely. On the other hand, and without wishing to get too 'Brexit thread' about it, what's going at present in my view is truly alarming. It could fundamentally weaken the UK in the medium and longer term in my view, and not just because of No-Deal Brexit, but because we have a Government who seems to regard the law as an inconvenience at best and optional at worst, and the ongoing and lasting impact to business due to, as you say, the uncertainty. I agree that in the short-medium term view Brexit weakens the UK. In the longer term, I think we are better off in but nobody knows for sure. There are many countries that do very well who are not in the EU. Once the UK has adjusted at expect us to be in the same boat. Brexit will not weaken the UK by 25-30% in the long run as the market seems to be pricing. More importantly I think all of this is already in the price. Markets hate uncertainty more than anything and in my view, yes there will be a weakening in the £ on a no deal but it will soon bounce back once people realise that the sun still rises every day. What I think is more damaging is prolonging the arguments, I don't think the Brexit genie can be put back in the bottle and if the remain MP's do manage to reverse brexit it leaves us in a worse position in the long term. The arguments will run and run and we could even end up with Farage as PM. What a nightmare. For me, what trumps all this is the prospect of Corbyn ever becoming PM. If that ever happens that will seriously weaken the £ further.
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r00lish67
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Post by r00lish67 on Sept 18, 2019 17:06:17 GMT
To the highly speculative value of the GBP - I agree that if there's a deal of any sort (or no brexit) it will rebound. It's the more likely scenario IMV definitely. On the other hand, and without wishing to get too 'Brexit thread' about it, what's going at present in my view is truly alarming. It could fundamentally weaken the UK in the medium and longer term in my view, and not just because of No-Deal Brexit, but because we have a Government who seems to regard the law as an inconvenience at best and optional at worst, and the ongoing and lasting impact to business due to, as you say, the uncertainty. I agree that in the short-medium term view Brexit weakens the UK. In the longer term, I think we are better off in but nobody knows for sure. There are many countries that do very well who are not in the EU. Once the UK has adjusted at expect us to be in the same boat. Brexit will not weaken the UK by 25-30% in the long run as the market seems to be pricing. More importantly I think all of this is already in the price. Markets hate uncertainty more than anything and in my view, yes there will be a weakening in the £ on a no deal but it will soon bounce back once people realise that the sun still rises every day. What I think is more damaging is prolonging the arguments, I don't think the Brexit genie can be put back in the bottle and if the remain MP's do manage to reverse brexit it leaves us in a worse position in the long term. The arguments will run and run and we could even end up with Farage as PM. What a nightmare. For me, what trumps all this is the prospect of Corbyn ever becoming PM. If that ever happens that will seriously weaken the £ further. You might well be right, although (and we are going full-Brexit thread now) surely Corbyn becoming PM has to be considered a serious possibility, maybe even the probability with the next 12 months? edit: after checking betfair, not apparently the probability as yet, as Tories are odds-on - still obvs possible though.
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