I'll trust you on that.
Brexited | the worst threads live the longest
- Thread starter Silva
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I'll trust you on that.
Agree with this.
I was Brand Manager of Persil in my early career
PMA?
Not sure how much hedging a company like Unilever would have in place tbh- they must be exposed to 80% of the world's currencies as it is- they might just roll with that, rather than risk getting it wrong and exacerbating the impact.
I cant imagine they didnt put something in place after the referendum though... even we specifically did and we are nothing like Unilever size
Dont understand. What does that mean?
I dunno tbh, their sterling input costs obviously plummeted on the flipside.
Oh wow - you remember that?! Cool!
That was just before I joined the company but it was famous and very successful ad!
But each operating entity is different and would be largely exposed to only 2-3 currencies. I am quite sure the local treasury depts of all their entities will be hedging the fx risk and seriously so.
This about sums it up for me too. I worry for family and friends, but then some got suckered into voted out anyway, but the industry I'm in and the main supplier my little company deals with should thrive more now without the cheap crap euro shite on the market.
So I'm not overly concerned for myself so in that I'm still positive. But I just despair that it's the people who voted to leave that will suffer most, and it's largely those who want Labour back in but have just handed all the new 'power and control' right to the tories for the forseeable future (especially with the mess Labour have put themselves into) which will further feck them. That irony seems lost on them though.
He's saying that when we see the deal on the table we may actually want to stay. We went on to say that if at the end of negotiations we were not happy with the terms of leaving and wanted to stay the EU may be willing to change the rules to keep us.
They might have a centralised treasury team.
That is extremely unlikely to the point of being counter productive.
Anyways my point was that a company like Uniliver will always have fx hedge for the short term. They were just taking the piss with the price rises.
Its nearing 4 months since the vote, it this still considered short term? Would they have hedged against such a large drop?
So May has said no extra money for the NHS now. I wonder why and can we hear Boris's opinion on the issue, I wonder.
The beauty of it is that once youre hedged, youre hedged unless your counterparty goes bust or if youre trying to be a smartass by covering only a part of the fall. Typically short term would be 3-6 months but companies of the profile of uniliver cover themselves upto a year.
That said, we should see substantial inflation by next summer (possibly) running on until we are completely out of the eu and can start sourcing non-eu produce.
Non EU produce will probably be purchased in USD or equivalent so no savings on the exrate there.
Dont think you understood what I said. Non-eu produce does not have the EU agricultural protections priced in plus once out of the eu, UK can remove the tariffs currently imposed on non-eu stuff. That should somewhat mitigate the food inflation.
Also technically speaking, you are wrong on the USD part. Sourcing out side of eu will mostly be in either in Sterling or in local currency. That does not matter though as Sterling will have simillarly fallen to other currencies as well.
If they make a deal without tariffs.
On the USD part, have been trading for 30 years, most of the goods purchased outside the EU are purchased in USD or else the USD equivalent of the local currency. Just a small example the pound was Ghana Cedi 5.81 /£1 on 22nd June, now its Cedi 4.83/£1. A drop of 17% since the referendum against a 3rd world country. The prices will be linked to the USD (or the Euro in some cases) not the GBP.
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I'd assume that the counter party put in a stop loss, who wouldn't in such a volatile situation?
What you are saying has to happen before the option is traded by means of a second option being sold. I very much doubt unilever treasury would be that cavalier while hedging its risks.
Companies hedge fx risk only in hope that one day they will have their arse saved from such a volatile situation.
Inflation will inevtiably come, but not before next summer.
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The inflation stuff is a bit exaggerated.
Imports account for about a quarter of the British economy. Assuming the pound settles about 15% lower, then on the face of it, that raises prices of imported goods by 15%. But all of those increases won't automatically be passed on to consumers. Competition will see to that. If 8% is passed on, then the price of 25% of the economies goods will rise by 8%. Which represents an overall price increase of 2%.
So there will be an inflation blip of 2%. Since we're in a deflationary economic climate, it's likely to remain a one off event, and work it's way out of the economy quickly.
If everything else in the economy stays the same, including average wages, the average standard of living in Britain will fall 2% - due to a 2% rise in prices with no accompanying rise in wages, or, more technically, a worsening in Britain's terms of trade.
But the increase in the price of imports has other effects. There will be import substitution. Imports will fall over time. More importantly, British exports will get a tremendous fillip from a 15% price drop in world markets. Exports are likely to rise dramatically. Employment will rise. Increased competition for labour will cause wages to rise. It may well be that these positive effects will far outweigh the negative impact of the temporary jump in inflation.
I said as much, the sterling would have fallen by a similar % to any stable currency so it does not matter if things are traded in USD or not.
Maybe in your business like oil, things are traded in USD, but fmcgs and produce is surely not. Few years back I spent a summer faffing about on a currency desk where they were doing this sort of stuff.
Not just oil , everything. If a country can sell its produce to the USA or Europe or countries that base their currency on the USD or Euro why sell it at a lower price to the UK. Sterling will fall further still, they haven't left the EU yet.
The fall in sterling is likely to be more then 15% by all accounts. Also 2% is the BoE target in normal years, I think we might will have inflation running at 4-5% for the next few years. And that is after the initial shock that will arrive once article 50 is triggered.
You are right on the substitution part and it will mitigate some of the price rises. Also, I think we will on the whole consume a lot less of the imports that cant be changed like-for-like such as german cars and european holidays.
Regarding the benefit of devaluation part I am somewhat cautious. Its not going to be all roses on that front with so much incompetence in govt policy. Prime example being student visa rules just proposed, on a weak sterling we should be looking to get as many genuine students in as possible rather than telling them to bugger off.
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While I agree their will be an inflation shock before next summer and running higher than usual inflation for a few years as a results of leaving.
They hedge for everything from Yen and Yuan to Rupee and Rand. Which means they (mostly) deal in one of the two local currencies especilly the ones like unilever.
Think this through for a while and you might figure out that this doesnt even mean anything.
Incorrect. Thats just wrong. As I said, I have seen the workings of currency hedging by several giant transnational corps.
They hedge for everything from Yen and Yuan to Rupee and Rand. Which means they (mostly) deal in one of the two local currencies especilly the ones like unilever.
This is just absurd like your %age calculation from a couple of months back.
Think this through for a while and you might figure out that this doesnt even mean anything.
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I can't imagine any company would hedge against such a large movement, it costs does it not?
Yes it does cost. But you essentially sell all the downside risk beyond a certain point. Those buying an option on any pair with sterling would/should have priced in this risk. So it might have cost companies more to hedge due to the risk posed by the referendum in the first place.
I doubt any (non FS) company would then go in and pick back up a part of the downside risk. Its highly improbable not to mention unnecessary as the gain from doing such a thing would be pennies on the dollar.
Are we doomed then?
http://www.ibtimes.co.uk/theresa-may-no-extra-funding-nhs-after-brexit-1586522
- U-Turns on the NHS
- U-Turns on the much demonised deal with the US
- U-Turns on Turkey (Boris had pledged to help Turkey in their bid to become EU members)
Seriously I wonder how these people can say these things with a straight face. I hope the EU will refuse to negotiate with this charlatans forcing the UK to new general elections. For a country who left the EU for sovreignity reasons its ridiculous that the one whose organizing the dances hasnt been voted as a PM by the people.
- U-Turns on the NHS
- U-Turns on the much demonised deal with the US
- U-Turns on Turkey (Boris had pledged to help Turkey in their bid to become EU members)
Seriously I wonder how these people can say these things with a straight face. I hope the EU will refuse to negotiate with this charlatans forcing the UK to new general elections. For a country who left the EU for sovreignity reasons its ridiculous that the one whose organizing the dances hasnt been voted as a PM by the people.
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Nice to see the Venomous Rajoy holding out a friendly hand to Scotland in the event of Exit. Another EU leader putting personal interest first.
https://www.ft.com/content/33de1fbc-3dfb-11e6-8716-a4a71e8140b0
https://www.ft.com/content/33de1fbc-3dfb-11e6-8716-a4a71e8140b0
UK faces £350m-a-week 'divorce bill' as result of leaving the EU
http://www.independent.co.uk/news/uk/politics/brexit-divorce-bill-350m-a-week-a7359121.html
http://www.independent.co.uk/news/uk/politics/brexit-divorce-bill-350m-a-week-a7359121.html
Scotland is part of the UK and the UK voted to leave. Why should the EU be expected to bend the rules for anybody? Is it even possible for Scotland to be both in the EU and a Brexit UK?
In my opinion, they should consider a fast track membership to Scotland but only if it untangles itself from the UK. There again I also find that difficult to do in practice. Unlike what the Breidiots say (ie Davis, Boris and Fox, not all Brexiteers), the EU is far more democratic than people think, with each country having a VETO. If Spain doesn't want Scotland in the EU then Scotland will not be part of the EU
He has the Catalans and Basques to worry about.
Scotland are in a pretty fecked up situation.
Even if they gain independence, they will have to adopt the euro to get back in.
The EU rule that new countries must adopt the euro us absolutely bullshit. And that's coming from a europhile
Even if they gain independence, they will have to adopt the euro to get back in.
The EU rule that new countries must adopt the euro us absolutely bullshit. And that's coming from a europhile
If scottish independence happens before UK EU deal, scotland will come out much better off.
We were hostile to the idea of the Euro last time but with the way the pounds going now, doesn't seem like such a bad idea.