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Your logic is right, but you are only looking at one particular aspect. If you earn GBP and wish to buy a house in GBP, then currency fluctuations don't really matter to you. Your income and your mortgage have the same currency, thus you are hedged. As long as your house maintains its value in GBP you really have nothing to worry about.
On the other hand, a foreign investor may feel different. If he has a mortgage in GBP then he has a "hedge" against currency movements (house value less remaining mortgage = amount exposed to fx risk). A foreign investor who bought a house cash will have his entire capital subject to fx risk.
Where these type of discussions get more tricky relate to the other aspects, for instance, I could argue that the weakening GBP could lead to a collapse in house prices as foreign investors sell their houses to try and reduce fx losses. At the same time, you could argue that the weak GBP makes UK property prices more attractive to foreign investors and property prices should increase. Third option would be that both scenarios happen, i.e. first one and then the other.
To calculate the GBP 1.2 trillion, I would imagine that the decrease in market cap of the FTSE was used and perhaps some other data coming from the bond markets, but I am guessing that any potential housing market losses are just estimates at this point.
Yes, I was aware of the implications about foreign investments, which I am sure can be quite considerable (although it would be useful to understand what % of a given market, UK for example, is owned by foreign entities), but I do appreciate your insight
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I would agree.
I suspect what they are doing is saying that UK investments are worth $1.5T less than they were (in USD) because of the currency fluctuation, and then just converting $1.5 to GBP. So 1.5*0.81 = GBP1.21T which is of course circular logic, since the assets in GBP are worth the same! (Should be pointed out that the FTSE100 is actually up about 15% higher than it was in June!)
Welcome to the wonderful world of statistics. @SMCJB brings up a valid point regarding the performance FTSE 100 being positive since the Brexit vote and that means my prior post was incorrect.
You would need the detail of their calculations before you can determine whether it is accurate, but as @SMCJB pointed out the calculation was most likely done by calculating the USD loss on GBP household wealth. Technically you can't fault their math, but unless you measure your wealth in $-terms it means very little.
So yes, you are probably looking at an article meant to shock or persuade rather than inform.
Might I ask is the pound very likely drop again? It is $1.272 now. I am going to London in February so I have a selfish reason to ask.
Is there any upcoming event likely to bring a precipitous drop or rise? On a technical level it seems to be bullish, breaking what seems to be a channel. I am thinking I should buy pounds now.
I understand Nigel Farage the Brexit architect is a disliked figure in British politics even by most Brexit supporters and he is now the darling of the president elect. In the news today he is offering to do his best to "build bridges" to the USA.
Our people go nuts at disrespect to our military but the P.E. calls P.M. May very late intentionally? British soldiers fought and died with us and for our national interest. Showing coldness to give Nigel Farage the "Trump Boost" is shameful and I was a Republican. Sorry.
Without getting involved into the politics of it (which by the way are banned from FIO), the only relevant event that at the moment comes to mind and might spook the pound again is the outcome of the appeal the government is going to debate in the Supreme Court about whether May can trigger article 50 without consulting Parliament.
Thank you xplorer, my first day I cannot imagine my fellows saying I am far off the mark in what I said however I understand the politics rule is needed.
I may just buy half ($4k) and spread the transaction.
I do not want to disrupt your thread but as you mentioned it. I have re-read the terms of use and there is no mention of political discussion being banned from the forum?
I can certainly see where gross and absolutist statements would be unwanted but how can trading be discussed in the compete absence of politics? Fundamental analysis is often pure politics. Is there moderator guidance given?
Sorry.