Is it worth to bet on US Stocks in view of falling £?

consumer

Hi,

Just been wondering regarding US equities, some of which have become attractive like Google.

e.g. Google current price is USD 444, in terms of GBP, it will be roughly around £ 252 (1 GBP = 1.76 USD).

If in an arbitrary situation, the stock price goes up by 10% (which should bring it to $ 488) and at the same time, 1 GBP becomes 1.60 USD, adjusted stock price will £305 ($ 488/1.60).

So, in terms of gain in pounds, it works out 20%.

If pound becomes stronger against USD, it will work negatively.

What are others' opinion in this?

Conclusion- If the GBP remains weak against USD, buying USD equities becomes a bit cheaper....(provided stock prices go up in US)

Have I missed a big thing in these assumptions and got it wrong?

tradetime

consumer wrote: »

Hi,

Just been wondering regarding US equities, some of which have become attractive like Google.

e.g. Google current price is USD 444, in terms of GBP, it will be roughly around £ 252 (1 GBP = 1.76 USD).

If in an arbitrary situation, the stock price goes up by 10% (which should bring it to $ 488) and at the same time, 1 GBP becomes 1.60 USD, adjusted stock price will £305 ($ 488/1.60).

So, in terms of gain in pounds, it works out 20%.

If pound becomes stronger against USD, it will work negatively.

What are others' opinion in this?

Conclusion- If the GBP remains weak against USD, buying USD equities becomes a bit cheaper....(provided stock prices go up in US)

Have I missed a big thing in these assumptions and got it wrong?

If you re-read your post, your premise appears to based in currency speculation, from the title to the subject matter in the post. What happens if the US market takes another leg down and the US$ rally were to retrace back to $1.85-$1.90.
Not saying your idea of US stock speculation is wrong, or foolish, anyone speculating in US stocks, or the stocks denominated in another currency always assumes a currency risk. Am just saying you need to understand primarily what it is you are trying to achieve, if you want to speculate on the currency then I would do that directly, and if your primary speculation objective is in stocks then I would largely forget the currency (unless I believed it was destined for a very big move negatively in which case it might be appropriate to hedge) and concentrate on whether or not I felt there was a good risk / reward in US stocks at the moment.
In summary, both the equities market and the US$ are volatile at the moment which makes for considerable risk, I would be wary of basing my decision about investing in one market largely on what another market may or may not do.

consumer

tradetime wrote: »

If you re-read your post, your premise appears to based in currency speculation, from the title to the subject matter in the post. What happens if the US market takes another leg down and the US$ rally were to retrace back to $1.85-$1.90.
Not saying your idea of US stock speculation is wrong, or foolish, anyone speculating in US stocks, or the stocks denominated in another currency always assumes a currency risk. Am just saying you need to understand primarily what it is you are trying to achieve, if you want to speculate on the currency then I would do that directly, and if your primary speculation objective is in stocks then I would largely forget the currency (unless I believed it was destined for a very big move negatively in which case it might be appropriate to hedge) and concentrate on whether or not I felt there was a good risk / reward in US stocks at the moment.
In summary, both the equities market and the US$ are volatile at the moment which makes for considerable risk, I would be wary of basing my decision about investing in one market largely on what another market may or may not do.

Thanks for reply. I was speculating in stocks.

tradetime

consumer wrote: »

Thanks for reply. I was speculating in stocks.

Fair enough, then the only issue is whether you feel US stocks are cheap currently (in dollar terms) and if you feel the current market position represents a good entry point or not.