How to make money off the pound, post-Brexit?

September 1, 2016 5:13 AM

American here, just wanted to know if there were ways I could channel my money into British bank stocks to make some money once the pound comes roaring back, post-Brexit.

I have no idea, no financial wizard here, but it seems some money can be made by buying British stocks now while the price is relatively low, and making some money once it comes rebounding back. Anyone have suggestions for an American who has a 401(k)-style financial tool?

posted by Pocahontas to Work & Money (8 answers total)

FX speculation goes well for no one; even large banks.

I HIGHLY recommend you take advantage of the falling pound by visiting the UK and enjoying the stronger dollar, not by attempting to buy British stocks etc.
posted by larthegreat at 5:15 AM on September 1, 2016 [14 favorites]

This comes under the general heading of "a fool and his money ...". Our Government have no real clue how this is going to pan out, or over what timescales or whether, or not it will be advantageous to the economy. The fact that you ask this question here causes me to gently suggest you do not understand the environment you are thinking of speculating in.

British bank stocks have been depressed for a while now, partly because of the fallout of your own banking crisis, and partly due to ill advised foreign expansion. Some of them had to be bailed out by the Government. Brexit hasn't helped but their woes predate Brexit. Finally, if the level of the Pound is the motive for your question then you should be aware that bank share prices are a very poor proxy for the level of Sterling.
posted by epo at 5:58 AM on September 1, 2016 [4 favorites]

LOL. As you asked for advice: Relatively low in comparison to what? Historical levels pre-Brexit? Past performance is no indicator of future performance, so it goes.

Exactly how much financial knowledge and acumen do you have to predict future FX rates? I work in finance and I still have no idea what the GBPUSD rate is going to be 1 year from now. From the way you have structured your question, it seems that your financial knowledge and acumen is rather lacking -- you don't know what you don't know, see Dunning-Kruger effect. (I don't mean this disrespectfully, I call it as I see it).

If you can tell me how the British economy and trade balance will be affected by Brexit, and how the gilts and Bank of England are going to react, and how consumer confidence and inflation will or will not pick up, and THEN only you can confidently tell me that the British £ is cheap, and THEN only we can throw out some ideas on how to take advantage of this.

My best advice for a novice is to invest long term, don't look at short-term market fluctuations, and enjoy cheaper British holidays and imports for now.

P.S. Current views from experts are leaning towards further falls in the British £, not increases.
posted by moiraine at 5:59 AM on September 1, 2016 [3 favorites]

Setting aside the 'should' of it all: if you have an IRA at a brokerage, you can buy Barclays, Lloyds, etc. as they have US-traded stocks. In your 401k you probably don't have a fund specific enough (you'd need one that just tracks the UK financial sector and at best, you probably just have a few European-focused funds.)
posted by michaelh at 6:00 AM on September 1, 2016 [2 favorites]

you want an exchange traded fund in sterling. that's roughly equivalent to buying pounds.
posted by andrewcooke at 6:11 AM on September 1, 2016 [2 favorites]

In general, if it's obvious that a thing is going to happen, that event is already factored into the price of an asset. The thing that moves asset prices is new information that market participants don't already have. (This is another way of saying a surprise.) Current prices are based on the consensus view of what the future holds.

So while it may be obvious to you that an event will happen in the future and move asset prices in a particular way, that is not clear to everyone else.

Brexit may work out to be really harmful to British trade, and harm the economy so that the banks' profits get hurt. Or, they may just find a way to keep all the meaningful parts of British integration with Europe the same, and then it's Brexit in name only. There are many potential paths for this to take and it's not obvious how British banks will be impacted. It's also quite possible that some other, unrelated event will occur which will overwhelm the impact of the recent vote. Political scandal, technology, war etc.

Get a fee based financial planner. Invest in a Vanguard target date fund. Find another way to scratch the gambling itch. You can open a pretend money brokerage account online and see if your idea plays out. It's fun. I nailed my call on Greek and Russian stocks, but blew up on my bet on interest rates. I don't let those ideas anywhere my real money.
posted by thenormshow at 7:44 AM on September 1, 2016 [1 favorite]

As a general rule, anyone who would give you specific speculation advice for free either doesn't know what they're talking about or are lying. The few people who have the knowledge you're looking are selling it or are exploiting it without ever telling their competition.
posted by FakeFreyja at 9:24 AM on September 1, 2016 [1 favorite]

The big British banks all had significant dips just after the vote. Some of them have ADRs traded on US exchanges; I bought equal amounts of Barclays (BCS), Lloyds (LYG), and Royal Bank of Scotland (RBS) in early July. I'm up 25%+ on BCS, 20%+ on LYG, 15%+ on RBS, so overall 20% gains in about two months.

At this point, I am looking to sell, not buy. My thinking is that if you are looking for Brexit gains, you have already missed the most obvious window.
posted by kindall at 11:45 AM on September 1, 2016 [1 favorite]