View Full Version : £BAE Jerez, will the pound bounce back?
15th Aug 2001, 20:32
For those of you considering Jerez in the near future. As you are aware, the current all-inclusive price of 80,453 euros has in recent months provided us from the UK with a very reasonably priced ab-initio integrated ATPL course which is possibly second to none.
However, with the recent fall in interest rates over here, the pound has taken a sharp plunge in strength on the old stock-market. This has added somewhere in the region of £1500 onto the course price which works out today around £51,000.
Only 2 months ago, this figure was around £49,000. Ok so whats 2K extra when your already prepared to shell out the price of a small house?
Well for most of us, who have sold everything (including the house), saved all the wages we could, and begged our bank managers, family and friends for the rest, £2000 is alot, especially when you will probably need an amount of cash as back-up for any extra hours and / or resits etc.
On top of all that, the pound continues to fall against the Euro with no sign of pulling out.
Is there anybody out there with any International Finance experience that can shed some light on what is becomming a gloomy picture, or are things going to go from bad to worse in these troubled times of of flight training?
Thankyou in advance. :confused: :(
I recieved some advice from Wor last week on this matter as he seems to be a someone in the know perhaps he could give us his considered opinion on this.
He suggested to me that maybe hedging my bets and converting 50% now and seeing how it goes could be one way forward but ultimately it's a gamble.
Call me old Mr.Unadventurous but I think I'm gonna play safe and convert the whole lot now and have done with it. Then on the other hand I may.........argh!! HELP - Advice needed now!!
Will BT shares fall any further before I buy some?, what will the FTSE be this time next year?..................................
It is a difficult one to call.
You could buy now in case it contains to go against you.
Alternatively, and it is a long time since I looked into this area, it may be appropriate to look at currency options.
A call option gives you the option to buy a currency at a fixed price in/before a fixed date (I think I am correct - anyone in the known please correct me).
Whatever you decide you should take some advice from a stockbroker, bank manager whoever......
[ 15 August 2001: Message edited by: PFO ]
16th Aug 2001, 15:45
Remember, it's not the pound that's falling, it's the Euro that's just beginning to regain some of the huge losses it's made since its start-up. If it regains all that ground, expect to pay an extra 20% or more. Seriously.
The prospects for the near future are that both the US and the UK will go for more interest rate cuts. Yesterday's IMF report on the US economy is likely to affect the dollar's strength for a while yet (they didn't like the US negative balance of payments and national debt), and the pound is likely to, as always, loosely shadow the dollar for similar economic reasons. This makes the Euro more attractive for currency speculators, so its value is likely to rise. It's generally regarded to be trading well below its real value, so I think that a return to £0.61/Euro is unlikely for some time, if ever. Incidentally, this has nothing to do with the stock market at all.
So, yes, you would probably be very wise to hedge with a currency buy now. Then put it in a secure, high interest account so that you don't lose out any more.
16th Aug 2001, 16:25
Thanks for sheding some light on the situation, I have (until now), never had to worry to much about foriegn currency, but I guess this is one of the things that I will become more aware of as I make my way into this profession, as it has such a massive effect on international buisness.
However, If the current trend does continue, this is bound to have an effect on training abroad for UK students with companies such as BAE, as one of the main attractions (value for money) may no longer exist.
Maybe I've Just missed the boat! :confused:
16th Aug 2001, 18:51
Also consider the strength of the pound, as many commentators think the Pound is over valued.. In the medium term it is very likely to fall against the Dollar and in particular against the Euro...
There are two reasons for a likley fall are:
Firstly, the UK manufacturing industry is in recession, and the lower the Pound falls, the more competitive our exports become. That is why a lot of pressure is being placed on the government to decrease the value of the Pound...
To decrease the value of the Pound, interest rates need to fall, to be more in line with European rates to stop the inflow of funds to the UK, which is keeping the Pound high. This would help the struggling sectors of the economy...
Downside of a fall in the value of the Pound is that imports become more expensive...
Secondly, as Mr Brown and Mr Blair are working towards creating economic conditions that are suitable for the Pounds entry into the Euro. Therefore they will be trying to devalue the Pound to ensure that when (if?)the UK enters the Euro, it will on the most favourable terms ... i.e. at a lower rate against the Euro...
However, with the recent increase in the value of the Euro, as mentioned by others on this thread, which is an under-valued currency, the UK will probably sit on the fence for a while to see how far the rally of the Euro goes before taking any major actions, hence why the Pounds devaluation is more likely in the medium term...
Wee Weasley Welshman
16th Aug 2001, 20:30
I think you'll find that BAE will vary the course price to compensate for £/Euro movements *IF* they start to run short of students. I can't see that happening to be honest. I believe they are highly profitable at the moment. Which must be a novelty as they traded at a loss for the vasy majortity of the 1990's!
My advice would be to buy now and buy in full up front.
I know that goes against my usual advice of credit cards and pay-as-you-go but:
a) you get a discount (i think they are still doing that)
b) BAE ain't going bankrupt
c) If they did (BAE Flight Training Ltd) you'd still have redress with the parent company and lets face it - they could repay all your money out of their monthly paperclip budget.
I think I will stick to my original plan and convert all my pounds now.
The bank will get a call tomorrow! ;)
Thanks for the advice + opinions everyone.
17th Aug 2001, 23:18
well, its happened, the pound has today........well hesitated from its dive and could save us £8.00 yes a whole £8.00 off the price of the course compared to yesterday! :rolleyes:
18th Aug 2001, 02:37
Hey Lads don`t knock it ...that`s just over a minute in a Twin...!!!! :D :D :D
I know this is an import issue to us all, but I think that people are reading a little bit too much into this...... if you r really that worried, which i can fully understand then change it all now, pay up front and then there are no more 'sleepless' nights to worry about (as per W.W.W)...... but this kind of thing goes on all the time and most of us r oblivious to it cos we don't need to convert large sums of money into foreign currancy. In the next 6 months the rate will go up and down and if you can be bothered you could save yourself some money but quite frankly what is the point when peace of mind is just one transaction away..... do it now and stop looking at the rate, leave that to those guys who choose to do it for a living, and die young thru stress!!!!!
As I told window-seat the other day one other aspect that you must consider when transfering money is the interest that u r going to receive by holding that currancy. Therefore money in GBP at 5% is better than the euro rate, and as you will be holding euros for the year, with 3 payments you will obviously lose on interest over the year period...... if any of you want a euro account ( non current account)I can recommend this web site www.halifax-international.com (http://www.halifax-international.com) as they don't APPEAR to charge anything for transaction and setting up the account and can transfer money to any account same day using CHAPS system, none of the 4 working days etc.
Once we are out there you can open an account in Spain ( probably Bank Santander), as there are no affiliations of UK and Spainish banks (HSBC having just one branch in Spain!!!!), but it will be best to wait until Jan 1st 2002 as all accounts in Spain will then be in Euros.
Also found out about insurance and the School does not provide medical etc so might be worth while checking out this web site www.sanitas.es (http://www.sanitas.es) which is connected with BUPA and provides reasonable cover for about 40 euros per month with dental.
If anyone wants me to get some of my mates to air their opinions then email me and I'll contact some FX traders for the details