silly gamble on the pound?

Procrastinator333

Example. You need 100k of Euros.

Today at 1.06 that is £94.4k

To illustrate the point I will use an example that gives a nil result, but you can adjust the number to give you the exposure you want.

You spread bet on the rate and bet £898 for every 0.01. You bet it will go down.

Suppose the rate drops down to 1.0. That is now £100k. However you have made a profit of £898 X 6 = £5,388. This actually leaves the whole thing having cost £94.6k. Almost nil.

However suppose the opposite happens and the rate goes to 1.1. This is now only £90.9k. However the downside is you have lost your bet to the tune of £898 X 4 or £3.6k. Leaving you with a cost of £94.5k.

The numbers above are designed to hedge fully against any movement of the currency, but suppose you wanted to leave yourself exposed on a portion.You simply bet less, say £500 per 0.1. The result is that you have reduced both the potential downside and the potential upside.

This was only a way of having a punt with some of the cash if you didn't want to be exposed for the full whack.

As mentioned before it would probably be easier to simply convert say half the money now and half later, but just wanted to explain what I meant by the betting option.

Also, don't forget the Euro base rate is 1.5% so you may get a better rate on your money while it is in Euros.

loveunit

@ Procrastinator333 - thanks for the betting advice, I'll be honest and say I still don't get it, this is a totally new concept to me.

I've had a torrid day of thinking in circles.. this will be my first house, and after 10 years of saving since leaving university, the first really expensive thing I have ever bought..

the location is perfect, and until I looked last week, I thought the numbers were great.. now I can only imagine the Euro reaching parity and all the time and effort and money I've already spent coming to nothing, as I simply have to withdraw from the sale.

thanks to all for advice, and if any one else has some bad news about the Euro, that would really cheer me up.

have a good week-end.

GDB2222

MX5huggy wrote: »

The trouble is that it may never "recover" its not like the FTSE that will one day be back to 6000 it just a matter of when.

Whilst I think you are right about the FTSE, it could be a long time.

The Nikkei got hopelessly overvalued at its peak (around 39000, 20 years ago) and it's going to be a long time before we see that again, as it's currently 8000. The Nikkei fundamentals were completely wrong, which I am hoping is not the case for the FTSE - because the FTSE is on reasonable multiples, so the main reason for a continued major decline would be a severe and prolonged depression in the UK, as it's already discounting an ordinary sort of recession.

Sterling was over-valued and propped up by all the money we were borrowing from overseas, so i don't see any good reason why it should recover.

GDB2222

loveunit wrote: »

I've had a torrid day of thinking in circles.. this will be my first house, and after 10 years of saving since leaving university, the first really expensive thing I have ever bought..

the location is perfect, and until I looked last week, I thought the numbers were great.. now I can only imagine the Euro reaching parity and all the time and effort and money I've already spent coming to nothing, as I simply have to withdraw from the sale.

There's nothing to stop you putting in a lower offer.

What's happening to farm prices generally? Prices for farm produce peaked a year ago, so wouldn't land prices start to fall soon? Is this actually a good time to buy a farm? Why this one? Why portugal? etc etc

I take it you know all about farming?

loveunit

@GDB2222 - Yes, a lower offer is one of my best options, that and buying time..

I personally don't want to take a risk, I'd rather calculate the loss and pay upfront everything.. but I will only do that if I can get enough Euros for my pounds, as there is a lot of work to be done on the place.

as for being a farmer -- well, we all have to start some place!

thanks for the advice.

GDB2222

as for being a farmer -- well, we all have to start some place!

Usually people learn by getting a job working on somebody else's farm

loveunit

well, a farm is a concept really. it's a large open space in the country, but it has no animals or crops.. it was a working farm before, no doubt, but has been empty for 20 years.

the most work will be restoration of buildings, I will grow my own food.. but I'll not intend to grow more than myself and the other people who might live there need.

more than advice on how to farm, I really need to find some solid advice on how to invest.. but it all helps if you've got some tips.

I really feel that a small ( 5 - 10% ) increase in the value of the pound against the euro in the next 6 months is possible.. if not lasting, at lease possible.. that's my question really.. does anyone agree?

cheers.

chopperharris

The price of farms in north portugal , and ruinas are unbeleivably cheap.

Bear in mind the winters can be harsh , its not all sun in potugal.

Its not unusal to see farms from 5000 euros up , of course these are usually a pile of rubble and the land hasnt been worked for years.

Suggest you check out britishexpats and expatfocus for info , theres some on there done or doing the same thing and can give pointers.

Check out the legalities IN detail , twice , our advogado seen no problem with any paperwork for ours last year.I visited the site impromtu and found out there was illegal building work next to it and an new road going through it.Needless to say I never followed it up , and the owner was trying to speed the process up for deposit....as you lose that when you decide not to buy.

GDB2222

I really feel that a small ( 5 - 10% ) increase in the value of the pound against the euro in the next 6 months is possible.. if not lasting, at lease possible.. that's my question really.. does anyone agree?

There are two points I thought had been made already.

a) It's possible the Pound will rise 10%, but it's also possible it will fall 10% (or worse). If you can't bear the adverse risk, then you shouldn't speculate.

b) There's nobody here who knows what the currency will do over 6 months.

97trophy

GDB2222 wrote: »

b) There's nobody here who knows what the currency will do over 6 months.

There is nobody anywhere who knows what will happen over the next 6 months.