As I said on 29 December 2008, when I swapped my AUD back into GBP, "... there is always a distinct possibility that GBP has overshot its 'fair value' (whatever that is) i.e. is undervalued, i.e. is worth buying. It's not like all the other economies aren't going to tank as well."
Although AUD has gone up by 1.5% in GBP terms since then, other currencies have gone down a few per cent, so overall GBP has gone up by a couple of per cent against the basket of major currencies. I shall hereby give myself a pat on the back for calling the bottom to within a per cent or two, as per the updated chart (click to enlarge):
I have no strong opinion as to what happens now, GBP might fall again, it might rise, or, what's most likely, it might just bump along the bottom for the next couple of years.
Even if I did have an opinion, I'd also have to choose another currency to move into, and there aren't any that appear to be as undervalued as GBP at the moment anyway. Further, I'm not keen on converting significant amounts of GBP into another currency as I don't really trust banks any more, not even with sums up to £50,000.
UPDATE: re Dearieme's comment, here's CAD against the same basket of currencies (since 1990, not just since 2007, click to enlarge):
Has CAD touched the bottom of a fourteen year upward trend-line, strengthening at a modest one per cent per year? Maybe, but I wouldn't get excited about one per cent growth per year.
Friday, 10 April 2009
Smug, self-congratulatory post
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8 comments:
You don't trust banks ANY MORE! WTF! You mean that you did, once, trust them. Good Grief Mr W, I thought that you understood it?
Altermatie currency? Gold?
But I agree about Sterling, up to a point. At the moment Brown is deploying every trick in the book to keep the world from crashing about his head until May 2010. After that all my bets are off...
L, I never trusted them 100% but the rewards used to outweigh the risks (not with Icelandic banks, obviously, we've covered that before).
I have never taken any interest in gold one way or another, neither in shares. I shall stick with GBP for the time being, maybe in six months or a year I'll have thought of something safer/better.
Looks like it is still within the downward channel, but then again it is not a stock so unsure if bollybands apply.
Remember we have another £350bln of debt to deal with.
RT, agreed, outlook for GBP is bleak, but outlook for other currencies is just as bleak, plus GBP is already 20% lower than a long term average (since 1990), which gives you a 20% 'cushion'.
I take it that that is 20% weaker in relation to other currencies? It should be at least that in relation to GDP.
How about Canadian index-linked bonds? Pretty interesting proposition I'd have thought - plenty of oil and gas, banks solvent and a natural safehaven when Americans eventually panic.
L, that's GDP relative to a 'basket' of eight major currencies (USD, CAD, GBP, EUR, CHF, SGD, JPY, AUD). I didn't bother weighting them as the number of currencies from each 'bloc' probably evens out with relative GDP.
D, interesting idea, I have updated the post. But if 300 million US Americans panic about their USD, that might drag down CAD used by 30 million Canadians.
Ah, I was supposing that our hypothetical panic-stricken loonies would buy loonies.
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