Moodys Key Drivers of Spain Downgrade

Thanks to Le Monde

Everyone likes to have a little adventure in their lives, but the prospect of permanently relocating to another country, perhaps one where the language is different and cultural diversity exists, will test the resolve of even the most adventuresome among us.  Planning and preparation are keys to the process and seeking professional guidance is advised if you wish to address every issue that may require attention.

The list of issues can be daunting.  A “short list” can include housing, cost of living, healthcare, children’s education, banking,  investments and pensions, tax considerations, local legal covenants, insurance, and the list goes on and on.  One topic, however, that is often overlooked is how a difference in foreign exchange rates over time may create financial hardships that cannot be easily overcome down the road.  Corporations deal with this type of financial risk all the time, but for the average individual, mitigating foreign exchange, or “forex”, risk is not a subject that is easily grasped or understood.

In the corporate world, treasury analysts use financial instruments to “hedge” their forex exposures, but hedging is not for the untrained or inexperienced.  At some point, you will want to consult a professional to assist your developing a strategy and implementing a plan designed for your individual situation.  For now, it is best to become familiar with the variables that can impact your financial results.  For the purpose of an example, let us assume that you are relocating from the United Kingdom to Spain.  The chart below depicts the pricing history of the Euro versus the Pound over the past five years:

Charts such as this are readily available from the  Top Currency Brokers in your area, where online charting software can yield any forex relationship from the Euro Dollar Chart to one including the Pound Sterling.  The objective is to observe long-term trends and forecast whether they will continue or change going forward.  Since January of 2009, the Pound has strengthened nearly 15% versus the Euro.  If you had converted your assets and income to Euros in 2009, but you still had liabilities to pay in Pounds, the amount of those liabilities would have increased by 15% relative to your ability to pay them by exchanging Euros today.  Hedging can protect against this loss.

How do treasury analysts hedge forex risk?  Your first task is to “pool” your financial resources on a currency basis, both before and after the move.  You will want to pair assets with liabilities, as well as income with expenses, in their native currency.  The “net” amounts are your forex exposures.  Try to minimize these amounts by selectively moving a few discretionary items from one currency to the next, assuming that you do have this flexibility.

Your banker or investment advisor can help you with the next steps.  Plans will vary based on individual circumstances, but in some cases, it may be as easy as scheduling a series of cross-border transfers to Spain to cover local living expenses, while retaining assets in Pounds to cover liabilities back in your previous country of residence.  Timing is a key variable in the hedging exercise, and for longer lengths of stay, longer-term forex options may serve your interests in a better fashion.  A forex option is like an insurance policy.  You pay a premium for protection in case currencies move against you, but if currencies move in your favor, you retain the upside benefit, less the cost of the premium.

Forex hedging, once again, is not for the inexperienced.  Consult a professional to develop your personal plan and ensure your peace of mind.

Expat Financial Advice Spain does not provide quality control and is not responsible for the content of any external site linked to from this website (or subsequently linked to from those sites). We are not responsible for the reliability or availability of any linked websites.

The inclusion of any company’s name, or link to their website, within the http://www.expatfinancialadvicespain.com is for information puroposes and should not be taken as an endorsement of that particular company’s products and/or services, or the views expressed within their website(s) or by their company.

With the United States, and really most of the world, experiencing countless economic struggles in recent years, the ordinary stock markets have been wildly unpredictable, with generally negative trends across the board. Meanwhile, gold has for some of this time been a reliable investment alternative well worth considering. However, there is some data, and there are some trends, that suggest that it may be time to move away from gold.

Specifically, economic recovery seems to finally be in effect across the globe. While many countries will require long, difficult periods of recovery, and there is no telling whether or not major economies will regress in the near future, there are certainly signs that the U.S. and European economies are, ever so slowly, on the way up. The U.S. is showing real signs of recovery, and the dollar is gradually regaining some of its strength. In the process of this happening, the outlook for the price of gold throughout the remainder of 2012 has decreased in the eyes of many economic predictors, which means that you may want to look elsewhere for investments in the near future.

The bottom line, unfortunately, is that these things generally remain unpredictable. However, if you are wondering when it might be a good time to invest in gold, look to times of economic uncertainty, during which gold represents something a bit more stable and reliable. It is during these periods of time that the worth of gold tends to increase. Meanwhile, during times of prosperity or, as we may be dealing with right now, recovery, you should be mindful of the fact that the worth of gold may decrease to some extent. Ultimately, the most important thing is to just be careful and do your research in advance of any long-term investment.

This guest block is from www.bullionvault.com.

The views expressed here represent a view of the outlook for gold. It is not an investment recommendation from this website. You should satisfy yourself that purchasing gold is appropriate for your situation and that you are happy with your due dilegence.

Reuters are reporting

“More Spaniards are defaulting on loans as the country slides back into recession and the unemployment rate, already the highest in the European Union, creeps upward. Bad loans will continue to rise in 2012 in line with deteriorating economic conditions and a deepening housing market slump, said Raj Badiani of IHS Global Insight.”

Yet this announcement may hide some good news.  The bad loan rate in the property sector is substationally higher than the average 7.9% figure.   This means some banks and some sectors must have defaults below the average.  Maybe it is time to support those sectors to help boost growth in Spain.

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Expat Financial Planning in Spain

Expat Financial Planning in Spain

Greece’s debt situation is as unsustainable as ever; so is Portugal’s; so is the European banking sector’s and so is Spain’s. Even if the ECB were to provide unlimited cheap finance for the rest of the decade, it would not be enough.”

So says journalist Wolfgang Münchau in his latest article about the eurozone crisis. And maybe he has a point. Time for what? Well perhaps time for another refinancing operation and a deferral of debt repayments. Yet does this approach deal with two fundamental issues across Europe. Firstly, there is simply too much debt. Secondly, for nearly all European countries, they are still running a deficit so the problem is still getting worse.

Yet against the backdrop of a difficult situation is the fact that many companies, and larger companies in particular, have very healthy balance sheets and are sitting on cash. It is an extreme example, I grant you, but look at apple with a 491 Billion dollar reserve. Companies will employ these funds when they see a reduction in the uncertainty (particularly the political uncertainty) and when they see opportunities at reasonable prices they will act.

We very much look forward to this use of the funds.

Wolfgang Münchau is associate editor of the Financial Times and was an economics correspondent for the FT when the Euro was launched. You can read his full piece at There is no Spanish Siesta for the eurozone http://www.ft.com/intl/cms/s/0/28a4cfdc-6f6b-11e1-9c57-00144feab49a.html#axzz1paXxIYrZ

The theme this year was Queen.  One of the most famous muscial groups of the 80s.  The efforts of the carnival group paid off as they came 7th out of 65 floats in the Platja d’Aro competition.  The Platja d’Aro carnival has the largest participation from all over Catalunya.

Congratulations to all the volunteers.  A truly marvelous achievement!  We were happy to be part of it and look forward to next year.

Previous seminars covered the following topics:

How do I invest tax efficiently in Spain? Jeremy Ferguson – SEB Life

Where are the experts Investing? Mark Riggall – JP Morgan

Keeping your money safe and making it work for you, Sheena Maddrell – Standard Bank International

International Retirement and QROPS,             David Matthews – Skandia International

As places are limited preregistration your interest here.

The Spectrum IFA Group is a registered trademark, exclusive rights to use in Spain granted to

Baskerville Advisers S.L. CIF B-63/137.020 Correduría de Seguros; No de registro RDGS J2306; Paseo de Gracia 63, principal, 2a,08008, Barcelona.

Seguro responsabilidad civil Chartis Europe No 0131900503.1330 Registro Mercantil de Barcelona, Tomo 35489, Folio 170, Seccion 8, Hoja B-269534

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Source: Standard Bank, Isle of Man

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