NEWS/BLOG

“Don’t Pack Your Bags”

That’s the title of an article on Metro, (sorry, the link is just too long) where I was quoted about the difficulty in finding a job overseas. Things are tough all over. Writer Luke O’Neil did a good job of summarizing my ramblings.

I did suggest, however, that some people might do well to wait out the recession in one of the countries with cheaper living costs such as Mexico or Costa Rica, where you can live on less than you’d pay in rent on a New York apartment.

A special welcome, though, to all of you who found your way to our website and signed on as associates because of the article.

If you’re among the many people wondering if an overseas move is right for you, or facing another difficult, life-changing decision, I have a book for you – How We Decide. Author Jonah Lehrer describes which parts of the human brain are involved in various kinds of decisions, how we’re often misled and why rational thinking isn’t always the best way to go. It’s a fascinating read.

A number of books about the brain have appeared lately. Among them is How God Changes Your Brain: Breakthrough Findings from a Leading Neuroscientist by Andrew Newberg, M.D. and Mark Robert Waldman. It’s not offering religion as a solution but it explains which parts of the brain are involved in various religious practices, especially meditation, and offers simple practices or exercises that can improve memory, promote relaxation and relieve stress. After doing just a few of the exercises. I found myself remembering numbers that I hadn’t even tried to memorize and putting my fingers on objects I had misplaced months ago. Power of suggestion perhaps, but that’s good enough for me.

Wishing you all a pleasant summer and hoping you’ll send us tips and suggestions to help other expats and would-be expats.

World Leaders Denounce Honduras Coup

The Honduran army forcibly ousted and exiled leftist President Manuel Zelaya early Sunday, waking him from sleep and taking him to Costa Rica. The move was triggered by his bid to make it legal to seek another term in office.

Protesters in Honduras yesterday put up roadblocks in the capital, Tegucigalpa, and demanded the return of their president. Cars have been upturned and set on fire. Those in power have tried shut down communications in and out of the country. We have had no news from our expat contacts in Honduras, where many U.S. citizens live and own property.

President Obama immediately called for Honduras to respect democratic norms, the rule of law and the tenets of the Inter-American Democratic Charter. The Obama administration and members of the Organization of American States had worked for weeks to try to avert any attempt to overthrow President Zelaya, according to senior U.S. officials. (This was revealed on the Huffington Post, which cited a Wall Street Journal story.)

Venezuela’s Hugo Chavez announced that he had put his country’s military forces on alert.  In a later announcement, Chavez blamed the U.S. for the seizure of power. It is true that the military plan that airlifted the president was purchased with military aid from the U.S., but the aid dates back to a cold war policy of the 1980s.

Cuba condemned the events in Honduras as “criminal, brutal.” “I denounce the criminal, brutal character of this coup,” Cuban Foreign Minister Bruno Rodriguez said.

The coup comes as a surprise to many because democracy has been restored to virtually all of Latin America. The actions have also been condemned in such countries as Chile, Argentina and Brazil, where military officials toppled civilian rulers in the 1960s and 1970s.

Central Banks Up to Their Old Tricks

An update from the currency exchange firm World First.

Last week saw a rather subdued market as we witnessed further signs of sterling consolidation. Sterling range traded for most of the week against both the single currency and greenback despite the best efforts of Central Bankers worldwide.

GBP performed strongly early in the week but was pushed slightly lower midweek, after the World Bank’s revised growth forecasts worldwide.  Equities fell off the back of this, and predictably with poor data, back came a measure of risk aversion causing a slight selloff for the pound. However, the week was not one to remember for the euro either, as sterling managed to push for a 2009 high against the euro in the Tuesday morning trading session, as IFO data failed to post a figure positive enough to give the markets confidence. A high IFO was expected due to the positive PMI data previously out of the Euro zone and Germany, the main economic powerhouse of the EU.

Spencer Dale, the Bank of England’s Chief Economist, stated his belief that a weaker pound is more advantageous to the recovering British economy. A return to a sentiment driven market we saw at the end of 2008 was evident midweek, where fundamental data no longer guides prices, and the general feel of the market dictated direction.  Euro also benefitted from statements from some voting members of the ECB panel, including Trichet, that rates will not be cut further in 2009.  This was coupled with a successful auction of ECB treasury debt which 1101 Banks signed up to, showing both support for Europe as a whole, and displaying confidence that rates will not drop below their current 1% rate.

Mervyn King further talked down the pound, as the eternal harbinger of doom pointed out that sterling wasn’t in the best position, and prepared markets for the downward leg of the ‘W’ shaped recovery that many predict.

The dollar was volatile against sterling as the market built up to Wednesdays FOMC meeting expecting fireworks.  As it transpired, it was a bit of damp squib with Bernanke coming out with a ‘steady as she goes’ message after the two day meeting.  The greenback did manage to make some gains against the majors after the FOMC meeting had concluded, but fared less well against the commodity currencies as risk appetite returned briefly.

In the week ahead a major talking point will be UK GDP finalized figure for Q1 out on Tuesday. Forecast at -2.1% this figure will become increasingly synonymous with GBP sentiment as we look to the discrepancy between GDP and Public Debt as the main gremlin in the works.  We also have PMI figures out late in the week.

European data of note begins on Friday with PMI manufacturing data and German retail figures. Thursday sees the ECB rate announcement and unemployment rate, before we end the week with Euro zone retail figures out on Friday morning.

U.S. Data is more chaotic this week but watch out for Chicago PMI on Tuesday. ADP unemployment is out on Wednesday expected at -376K.  Due to Independence Day Holiday on Saturday and Friday being a bank holiday stateside we have the volatile Non-Farm Payrolls announcement on Thursday.

Trade of the Week

This week’s trade of the week was for a client selling sterling and buying Euros, who entered into a ‘zero premium risk reversal’.

The client was guaranteed a worst case rate (WCR) of 1.14. If spot at expiry was between 1.14 and 1.21 the client is able to buy in the spot market and if the rate at expiry is above 1.21 they are obligated to sell at 1.21

The client hedged all of their exposure over a 3 month period, with no premium payable for this strategy. For full details of this structure please contact a World First options trader at 0207 801 9050

For more information see www.worldfirst.com.

See disclaimer below. 

The American Dream in Argentina

The South Carolina governor first said he went to Argentina because it was a great place to be. Later he admitted it was for love though neither response went over well with his wife or his erstwhile supporters.

In any event, Argentina is a great place to be whether it’s for a romantic fling, a vacation. or a longer stay or even to live permanently. This is where Paul Terhorst went, with his wife, I might add, then went on to write Cashing in on the American Dream: How to Retire at 35.

The American dream in Argentina? Well, why not? Back in 1988 when Terhorst’s book first came out, some people thought being an expat was unpatriotic. Remember the bumper stickers, America - Love it or Leave it? As though you couldn’t do both. Terhorst’s book is actually about how to live sensibly and frugally.

Argentina is rather amazing. Argentina Insight Guide (Insight Guides) calls Argentinians “a people of passion.” Flip through the book (I have the 2002 edition with the firey cover but a new one will be out shortly.) and you’ll see serene lakes, craggy mountains, riviera-style beaches, cosmopolitan cities. All this plus a population which has survived a horrific economic downturn. Perhaps North Americans have a few things to learn from Argentinians.

The downturn attracted European and North American investors, retirees and others looking for bargains. Although the country has made headway, a report issued in April 2009 showed that real estate sales had slowed by over 30% from the previous year.

Buying property, whether it’s a ranch or a villa or a condo, is the easiest way to qualify for a residency visa. If you prefer to rent, you would only be permitted to spend only six months in the country. You could enter on a three-month tourist visa and then extend it at the immigration office for another three months.

The beautiful city of Bariloche in the lake district has new regulations to prevent foreigners from buying property in an attempt to curb population growth. Elsewhere it’s no problem. Plenty of expats head for Buenos Aires, with its broad boulevards and stately old buildings reminiscent of Paris, but where apartments are spacious (3,000 sq. ft.) and relatively inexpensive.

China Leads the Pack

As of Friday, June 26, the Shanghai Composite Index is up by 61% in 2009 after an end of week rally by Chinese equities. Although there remains concern that the rally won’t be sustained, China’s government stimulus is having a positive effect.

Chinese companies had impressive gains across the board Friday with top performers ahead by more than 10%. The China Stocks and ADRs Index is up by 1.7%, outperforming the S&P 500 by 9.7% over the last month.

For more on types of Chinese investments available in the U.S., see our earlier post at http://www.liveabroad.com/index.php/news/2007/01/

Divergent Data Leaves Pound Stalled

This update is from the trusted currency exchange firm World First.

The pound was dealt a reality check last week, after retail sales figures disappointed and policy makers warned of further pain to come. Thursday’s figures revealed a slump in consumer spending for the last month causing an immediate selloff of the pound, which finished the week marginally up against the dollar and euro.

Equities were driven down by 2% over the week, with the FTSE weighed down by banking and mining stocks. A dovish result for the Bank of England minute’s midweek also took some shine off the pound, as did later forecasts from the World Bank which predicted the global economy is going to shrink by 2.9% this year, a worse figure than earlier forecast.  This saw commodities fall amid speculation that there would be lower worldwide demand for raw materials. Risky currencies followed commodity prices south as their fortunes display high correlation, the Australian dollar performing particularly poorly over the week.

Inflation figures from the Euro Zone, US and UK all painted different pictures, with UK inflation surprising on the upside, US CPI on the downside, and the Euro zone arriving at roughly consensus. UK inflation remains sticky, in part due to the weak pound helping drive exports. This will continue to worry policy makers going forward, because if inflation persists at higher levels, unwinding of the stimulus that the UK central bank has injected may occur at an earlier than optimum time. Reaction to the figures in the currency markets was generally muted, as investors overall seem relieved that consumer prices are still in positive territory.

Not only was the data muddying the waters, opinions from experts were also divergent, regarding what direction the economy would next be headed. Well respected hedge fund manager George Soros commented that the worst of the financial crisis is behind us, while Nouriel Roubini, the outspoken economics academic who famously predicted the crisis, contradicted this, saying that the “crisis is not over.”

The euro continued to struggle as the European Central Bank (ECB) warned that its banks will face losses in the region of £175bn. Sterling continued to push towards its highest levels of the year against the single currency as a result and this trend looks set to continue over the short and medium term. 

This week’s major piece of event risk is the US Rate Announcement due on Wednesday evening. The Euro zone provides PMI readings for services and manufacturing tomorrow, and Industrial new orders on Wednesday. Tier one data from the UK is nonexistent this week.

Trade of the Week

This week’s trade of the week is a Participating Forward Extra for a seller of GBP and a buyer of Dollars.

This zero premium option gave the client a worst case rate (WCR) of 1.60 and the ability to participate in 50% of favorable movement upwards of the WCR.

If, on expiry, GBP/USD is below 1.60, and above 1.45, the client can buy at 1.60. If, on expiry, GBP/USD is below 1.45, for every percent that the rate is below 1.45, the WCR (1.60) also falls by a percent. If, on expiry, GBP/USD is above 1.60, the client is able to participate in 50% of the movement upwards. For full details of this structure please contact one of our options traders on 0207 801 9050.

If you would like to discuss your foreign exchange requirements, please contact the World First Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080.

For more information see www.worldfirst.com.

See disclaimer below. 

China to the Rescue

Will China lead the recovery? Chinese stocks had their highest close in nearly 11 months led by coal and financial shares as optimism grew for prospects for economic recovery. In its latest report, the World Bank has raised its forecast for economic growth this year to 7.2% from 6.5% projected in March. However, this is below the official target of 8%t.

The Chinese stock exchange has surpassed the Tokyo exchange, making it the third largest in the world, after New York and London. U.S. investors may participate the the China A-share or mainland market through the Morgan Stanley China A Share Fund (CAF) and iShares FTSE/Xinhua A50 China Tracker (IFXAF.PK) (or 2823.HK).

CAF is actively managed and invests directly in Chinese A-shares with its allocated QFII (Qualified Foreign Institutional Investor) quota. Its fund manager endeavors to pick stocks that will beat the index. On the other hand, IFXAF is a passive index fund tracking the performance of the FTSE/Xinhua China A50 Index.

Green Shoots Keep Sprouting

This update is from the trusted currency exchange firm World First.

Further greens shoots from the UK continued to strengthen the pound over the week, pushing it to its highest level of the year against the euro, and promising levels against the dollar.

Encouraging manufacturing data from the UK caused the National Institute of Economic and Social Research (NIESR) to state “either that the recession is over or that it is close to over.” The Confederation of British Industry (CBI) also confirmed they are more optimistic than previously, revising estimates up, with growth to begin returning in 2010. Other glimmers of optimism were recorded in the housing market, with prices again showing further signs of stabilization.

The euro continued to suffer throughout the week, as worries grew about the extent that a Baltic state crisis would have on its banking system. The euro is a victim of European government’s lack of transparency in dealing with their banks exposure to the looming Baltic state crisis. The uncertainty surrounding levels of exposure will continue to weigh on the euro until European Central Government’s stop sitting on their hands and take some action to instill confidence to their financial sector.

This is in contrast to the UK which has already undergone painful banking nationalizations; write downs and consolidations. Also contrasting is the behavior of the Central Bank, which reacted quickly with ultra loose monetary policy, and a program of Quantitative easing (QE) to combat the crisis. The results have seen the UK economy and pound begin a journey of recovery, while the euro drags its heels.

Fears over the ability of the US to finance its debt saw the dollar slip early in the week. Mumblings that Brazil and Russia would seek to reduce their dependence on the dollar by buying bonds from the International Monetary Fund (IMF), which are denominated in a synthetic mixture of currencies (SDR’s), undermined the dollar strength. However, later comments from the Japanese finance minister stating that their trust in US Treasuries is “absolutely unshakable,” and Russian finance minister Alexia Kudrin adding that it was “too early” to talk about an alternative to the dollar saw the greenback regain some late composure.

Commodity currencies (CAD, AUD and NZD) rounded off their best quarter against the dollar since 1971 in typical fashion, enjoying another strong week. The kiwi benefited midweek after the RBNZ held interest rates at 2.5%, despite warning that more cuts in the short term are possible. Governor Alan Bollard further attempted to talk down the currency as he noted that the current strength of the kiwi was damaging potential growth in export receipts.

Data this week from the UK starts with inflation figures on Tuesday, followed with employment figures and Bank of England minutes on Wednesday. Retail Sales figures due on Thursday will also be closely watched. Most of the US event risk arrives early in the week with Industrial Production and PPI figures due tomorrow.

Trade of the Week

This week’s trade of the week is a Participating Forward Extra for a seller of GBP and a buyer of Euros.

This zero premium option gave the client a worst case rate (WCR) of 1.15 and the ability to participate in 50% of favorable movement upwards of the WCR.

If, on expiry, GBP/EUR is below 1.15, and above 1.07, the client can buy at 1.15. If, on expiry, GBP/EUR is below 1.07, for every percent that the rate is below 1.07, the WCR (1.15) also falls by a percent. If, on expiry, GBP/EUR is above 1.15, the client is able to participate in 50% of the movement upwards. For full details of this structure please contact one of our options traders on 0207 801 9050.

If you would like to discuss your foreign exchange requirements, please contact the World First Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080.

For more information see www.worldfirst.com.

See disclaimer below.

Before Markets, There Was Gaming

Long before I began watching financial markets on a daily basis, I read Peter L. Bernstein’s Against the Gods: The Remarkable Story of Risk and found it intriguing. It’s a history of mathematics beginning with the use of Arabic numbers and tracing the development of probability theory, modern portfolio theory and even chaos theory. It’s probably no surprise to anyone that long before there were financial markets there was gaming, and that’s where ideas of chance and predictability began. Bernstein didn’t write for mathematicians and economists; he wrote for ordinary people who are simply curious about these things. His other books include Capital Ideas: The Improbable Origins of Modern Wall Street.

Yesterday I opened my update from Marketwatch and learned that he had passed away June 5 at the age of 90. I’m taking the liberty of reprinting a couple of paragraphs from their news item.

“For more than half a century, he enjoyed a front-row seat to the parade of ideas and theories that Wall Street transformed into useable—if not always useful—investment products. But he kept his distance from the salesmen and other promoters lining the route. As an eyewitness, Bernstein was objective, clear-minded, and scrupulously honest. As a judge, he was unafraid to question the status quo.

“Above all, Bernstein put investors first. Gently, but adamantly, he advised investors to have broadly diversified portfolios, so they might stand a fighting chance to survive the market’s worst. Bernstein was, as one admirer put it, a master of the ‘art of holding hands.’ Investors will always feel his reassuring grip”

Pound Suffers from Political Jitters

The following update is from the trusted currency exchange firm World First.

Former Prime Minister Harold Wilson once stated that “A week is a long time in politics.” While it was no doubt a long week for the Labor party as they struggled to retain their tenuous grip on power, sterling’s energy was also drained as the effects of ongoing political uncertainty took its toll.

The pound finished the week down, and far off the highs of 2009 it reached earlier in the week against both the single currency and greenback. After managing to post highs of 1.6660 against the dollar, and 1.1665 against the euro it closed the week on the back foot. The catalyst for the decline in risk appetite, which has been rampant in recent weeks, was a rumor that Gordon Brown was to resign.  While this was immediately denied by the government, sterling was sold off heavily on the back of this and speculation about the European elections results.

The week began with positive consumer confidence figures from the UK, met with a measure of surprise. While confidence has been high recently, this can be attributed to the recent equity market performances rather than underlying fundamentals, and as confidence figures tend to lag about 6 months behind the employment levels, we expect these figures to ease in the coming months. But sterling was in a bullish mood, and manufacturing data from both Britain and China added impetus to the rally.  Further support in the form of Construction PMI from the UK arriving at 48.5. Although still indicating a contracting sector, when viewed in the context of the previous month s figure of 33.7 it is not hard to see why markets lapped it up.

With conventional economic policy well and truly exhausted, the meeting of both the BoE and ECB turned out to be a non event, with both bodies leaving rates unchanged at 0.5% and 1.0% respectively.  This was in line with our predictions and general market expectations, and so passed rather insipidly. 

The dollar recover strongly on the back of a Non Farms result released at 345K vs 520K expected, the smallest figure recorded since September 08. This fueled speculation that US economy is recovering well, and stemmed the recent flow out of dollar positions. Latvia hit the headlines throughout the week, as a government debt auction failed to raise any bids. This caused a sell-off for the Swedish Krona, as their banking sector has a high exposure to the mess within the Baltic States.

The week ahead is rather quiet one, but look out for Tuesdays RICS House Prices and BRC retails sales which will drive UK assets.  Wednesday heralds US trade balance and UK Industrial and Manufacturing Production figures. Thursday reveals the BoE Inflation Attitudes Survey coupled with the ECB Monthly report, and US Retails Sales Data and we round off the week with US Michigan Consumer Confidence.

We will also keep a close eye on the political situation in the UK this week, as this is bound to be a major driving force behind equity movements and sterling. Whatever the future holds on the UK political horizon, we can only hope that it isn’t a repeat of Harold Wilson’s first term in office, largely spent fighting the inevitable devaluation of the pound.

Trade of the Week

The trade of the week is relevant to a seller of sterling and a buyer of euros. This zero premium structure enabled the client to hedge their exposure for a six month period through a ‘window convertible forward.”

The client has a worst case rate (WCR) of 1.13 and can benefit 100% of any and all upside up to a rate of 1.25 during the relevant window period. Should GBP/EUR hit 1.25 at any point in the window period, the structure reverts to a forward contract at 1.13. For full details of this structure please contact one of our options traders on 0207 801 9050.

If you would like to discuss your foreign exchange requirements, please contact the World First Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080.

For more information see www.worldfirst.com.

See Disclaimer below.

Cell Phones for Overseas

Which phone should you take overseas? We’ve heard stories of unsuspecting Americans racking up thousands of dollars in roaming charges, but we’ve also had recommendations of websites that can be helpful in making your choice.

A choice recommended by one of our associates is Telestial’s Quad Pack International with the Motorola V191 Cell Phone and Dual US/UK Number SIM card. The phone is quad-band, which means you’re covered in all international service destinations, and the Passport international Dual US/UK Number SIM card offers free incoming calls (on the Global UK number) in many destinations. This international cell phone is great for regular international travelers and offers frequent callers great international calling value. Its features include:
* Unlimited free incoming calls in over 50 countries, including U.S. and Canada on the Global number
* More than 30 minutes of initial outgoing talk time included (for 65 countries)
* Service in more than 160 countries
* Excellent coverage in over 130 countries
* Airtime rates starting at just $0.49 USD per minute,including the United States and Canada
For more information, see www.telestial.com/promo/quadpack.php/

If you don’t plan to spend a lot of time overseas, you might consider renting a phone such as the National Geographic Talk Abroad cell phone. It offers:
* Unlimited free incoming calls in over 60 countries
* More than 30 minutes of initial outgoing talk time included for 65 countries
* Service in more than 160 countries
* No contract or bills
It’s also possible to purchase this phone, which included T and radio reception and a camera, for $199. For more information on renting or buying the phone, see www.cellularabroad.com/travelphone.php.

Then there’s the Lonely Planet site (don’t these folks usually have the answer?) which provides a list of SIM cards starting at $9. some can be used in many countries, some are specifically for, say, China or Brazil. Prices per minute vary as well. Most likely there’s a SIM card here for every need. See www.lonelyplanet.ekit.com/ekit/MobilePurchase/Sims.

Can you use your U.S. phone abroad? Is it best to buy individual SIM cards? For some advice on making the best selection for your specific needs, including a decision matric, see www.thetravelinsider.com/2003/0801.htm.

If you want technical information about bandwidths used in different countries, see www.thetravelinsider.com/roadwarriorcontent/quadbandphones.htm.

If you have cell phone experiences you’d like to share with others, let us know.

Sterling Redemption Underway

The following update is from the trusted currency exchange firm World First.

“Our greatest glory is not in never falling, but rising every time we fall.” Perhaps sterling took some inspiration from Confucius, China’s famous ancient philosopher, as last week the pound surged to multi-month highs against the dollar and euro, a far cry from the lows of 1.36 and 1.02 reached just months ago. Sterling concluded the month of May recording its best monthly performance against the dollar since the mid 80’s.

Last week saw worldwide sentiment continuing to provide a positive outlook for risky assets worldwide, with equity and commodity markets advancing, albeit slowly.

Good news from the UK came in the form of housing data, figures from Nationwide revealing a positive bounce of 1.2% for house prices in the month of May, indicating that while this may not be the bottom of the property market, the free fall is at least moderating. However, we do suggest that there is further weakness still to be realized, with worrying signs including the low levels of housing stock being shifted (owners aren’t selling unless they have to), and unemployment levels yet to peak. However, if further stability in housing prices is witnessed in coming months, lenders may be more willing to loosen lending criteria, further aiding in the recovery process.

The pound wasn’t the only currency bathing in glory over the week, commodity currencies in general continued onwards as investors search for a higher yield. The Aussie dollar reached eight month highs against the US dollar, on the back of increasing bullish PMI readings from its major trading partner, China. Commodities have continued on strongly, with oil reaching $66 per barrel, over double the lows of $32 reached in December.

The euro zone was delivered some sobering news, with inflation figures arriving at a flat 0.0% (consensus 0.6%). This raised fears of deflation within the euro zone, and provides further headaches for the ECB as they attempt to combat the recession. German business confidence figures also showed that full economic recovery is still a while away. Despite this, the euro was able to push the hapless dollar into the 1.42’s, largely due to dollar weakness than euro strength.

The week ahead sees rate decisions from the European Central Bank (ECB) and Bank of England (BoE), with the latter likely to be a non event. From the US, we have non-farm payrolls late in the week which have a consensus reading of 521,000 jobs to be lost in the month of May. The euro zone also provides retail sales figures on Thursday

Trade of the Week

The trade of the week is relevant to a seller of sterling and a buyer of dollars. This zero premium structure enabled the client to hedge their exposure for a six month period through a ‘window convertible forward.’

The client has a worst case rate (WCR) of 1.60 and can benefit 100% of any and all upside up to a rate of 1.75 during the relevant window period. Should GBP/USD hit 1.75 at any point in the window period, the structure reverts to a forward contract at 1.60. For full details of this structure please contact one of our options traders on 0207 801 9050.

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If you would like to discuss your foreign exchange requirements, please contact the World First Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080.

To view any past or present currency blogs please click on the following link http://www.worldfirst.com/blog

For more information see www.worldfirst.com. 

See Disclaimer below.