Brexit, for once some facts.

[Woosh]

the point is the lower Pound increases your liquid asset valuation.
Let's say you pay $100k for your container last month, at $1.25 for a Pound, that is £80,000 disbursement. The container has just landed, your import is now valued at $1.20 for a Pound. Your container is now worth £83,333. You have made £3,333 without doing anything. You will have to add 6% duty and other costs to it on your stock valuation and it's paper money but the principle stays the same. You will have to reflect the exchange rate in your selling price at some stage but that's another subject.

 

[flecc]

Below are a selection of comments, which took about 30 seconds to find, regarding the FTSE 250 index when the news didn't look so good. As you will see, great importance was attached to the FTSE 250.

Now that the FTSE 250 is doing well, its importance is being played down. Interesting.

You've extracted two quotes from my posts to illustrate this, both wrongly used.

I have for years had a completely consistent view on the two indices and haven't changed that in any way, either currently or previously in this thread.

My view, which is shared by economists, is that the FTSE 100 being dominated by multinationals does not accurately reflect the UK economy. The FTSE 250 with much more UK company content is a far better guide to that.
.

 

[Wisper Bikes]

the point is the lower Pound increases your liquid asset valuation.
Let's say you pay $100k for your container last month, at $1.25 for a Pound, that is £80,000 disbursement. The container has just landed, your import is now valued at $1.20 for a Pound. Your container is now worth £83,333. You have made £3,333 without doing anything. You will have to add 6% duty and other costs to it on your stock valuation and it's paper money but the principle stays the same. You will have to reflect the exchange rate in your selling price at some stage but that's another subject.

Thanks, but If I pay for the container at $1.20/£1 as it lands and when I set my prices I was paying say $1.45/£1 would that not mean I would lose the difference? If when I set my prices I expected to pay £68,965 but actually now have to pay £83,333 does that not mean I am £14,386 down?

Re stock, let's consider I don't have any and all the bikes of straight out.

 

[Woosh]

When we leave we'll loose all these trade deals.

That's propaganda. Trade takes a long time to build up.
Equally a long time to lose.

Our future 'no deal' situation outside the EU is not that much different compared to South Korea or Taiwan. An awful lot of products have zero duty, including bikes. The average duty on industrial products from WTO's open market members is about 3%.
The key sectors that need negotiations are agricultural, fisheries, mining and services.
To be honest, freedom of services cause so much damage to the EU reputation leading to brexit votes that it needs a closer look as soon as possible.

 

[KTM Bike Industries UK]

Thanks, but If I pay for the container at $1.20/£1 as it lands and when I set my prices I was paying say $1.45/£1 would that not mean I would lose the difference? If when I set my prices I expected to pay £68,965 but actually now have to pay £83,333 does that not mean I am £14,386 down?

Re stock, let's consider I don't have any and all the bikes of straight out.

Woosh is assuming you pay for the container before its shipped, therefore all the time its on its way you're essentially speculating on the value of that product. But the time it land you're either better of worse off depending on whether you'd have been better paying when it arrives, or when it was shipped.

This is the same with any currency exchange. We have credit from our European suppliers. I have to make a decision on every invoice if I pay the € bill today, or tomorrrow or sit on it for a week. The product is no different by the cost price can make a big difference to our margin and the profitability of the business.

regarding the profit margin, your numbers are a bit simplistic.

Lets say you sell something for £100.00, and you make 10% profit (very simplied) so your cost price would have been £90.00

If you're cost price has gone up by 20% simply due to the exchange rate changes, your cost price is now £108.00

So that means you've gone from making 10% to loosing 7.4%.

 

[KTM Bike Industries UK]

That's propaganda. Trade takes a long time to build up.
Equally a long time to lose.

I'm not talking about trade, I'm talking about the trade deals. We have 64 currently one with the EU, and then 63 via the EU with the rest of the world. When we leave we won't have any trade deals. So we'll still trade but it will be under WTO rules. You can loose a trade deal in seconds, they can and do take 10 years of negotiation to set up.

 

[Wisper Bikes]

Thanks Col, I do understand but was making a point (maybe rather badly).
Will you be at The Bike Place Show?

All the best, David

 

[KTM Bike Industries UK]

Thanks Col, I do understand but was making a point (maybe rather badly).
Will you be at The Bike Place Show?

All the best, David

HI David.... sorry yes I understand the point, I know it all to well. Which brings me onto the next point. No I'm afraid we won't be at Bike Place. We pulled out. Our margin has been halved even with putting prices up, so we've had to look at every cost and a lot of the marketing has been pulled.

 

[Wisper Bikes]

HI David.... sorry yes I understand the point, I know it all to well. Which brings me onto the next point. No I'm afraid we won't be at Bike Place. We pulled out. Our margin has been halved even with putting prices up, so we've had to look at every cost and a lot of the marketing has been pulled.

I understand Col, it's all been a bit of a disaster financially for all concerned. Looking forward to seeing you soon.

 

[tillson]

You've extracted two quotes from my posts to illustrate this, both wrongly used.

I have for years had a completely consistent view on the two indices and haven't changed that in any way, either currently or previously in this thread.

My view, which is shared by economists, is that the FTSE 100 being dominated by multinationals does not accurately reflect the UK economy. The FTSE 250 with much more UK company content is a far better guide to that.
.

flecc, I wasn't trying to show that you have an inconsistent view. If that came across, then an apology is due and please accept it.

KTM was saying that a high and rising FTSE is not a good thing when caused by a devalued pound. I was pointing to previous examples where people had suggested that a falling FTSE was also bad news. Rise or fall, both being reported as bad and it doesn't seem to matter as long as they can blame BREXIT for it.

Many people have pensions and other investments which are linked to the FTSE. The increase in stock value which we are currently seeing is positive in this respect.

 

[KTM Bike Industries UK]

flecc, I wasn't trying to show that you have an inconsistent view. If that came across, then an apology is due and please accept it.

KTM was saying that a high and rising FTSE is not a good thing when caused by a devalued pound. I was pointing to previous examples where people had suggested that a falling FTSE was also bad news. Rise or fall, both being reported as bad and it doesn't seem to matter as long as they can blame BREXIT for it.

Many people have pensions and other investments which are linked to the FTSE. The increase in stock value which we are currently seeing is positive in this respect.

No I'm not saying FTSE rising is a good or bad thing. I'm just saying that you can't say its because of confidence in the UK, when its actually caused by the slump in the value of the £. The result might be a good thing for pensions etc etc etc, I'm not denying that. All I'm saying is don't say the cause is positive.

 

[Woosh]

I'm not talking about trade, I'm talking about the trade deals. We have 64 currently one with the EU, and then 63 via the EU with the rest of the world. When we leave we won't have any trade deals. So we'll still trade but it will be under WTO rules. You can loose a trade deal in seconds, they can and do take 10 years of negotiation to set up.

Trade does not stop because of brexit if our WTO membership is restored - hopefully in time for brexit,
We should then be able to continue trading on existing terms before the new deal takes effect.

 

[flecc]

flecc, I wasn't trying to show that you have an inconsistent view. If that came across, then an apology is due and please accept it.

Thanks Tillson. My opinion on the Brexit outcome is entirely and solely based on the facts of the UK record in recent decades. I've taken and will take no notice of other's opinions or forecasts, whether from economists or other experts, politicians, businessmen or public. Whether they agree with me or not isn't going to change my opinion.
.

 

[Woosh]

I have been listening to Mrs May's speech.
UK is looking for transitional arrangement.
Pound has recovered a bit, $1.23.

 

[flecc]

I have been listening to Mrs May's speech.
UK is looking for transitional arrangement.

Maybe two years to negotiate it, then the transitional period probably lasting at least five years.

The ardent Brexiters will die of boredom waiting for us to be out of the EU.
.

 

[Woosh]

The ardent Brexiters will die of boredom waiting for us to be out of the EU.
.

there is nothing in Mrs May's speech for the JAMs.
If anything, opening up UK for more trade outside the EU will reduce the number of well paid factory jobs and the city boys will be busier making money than ever before.

 

[KTM Bike Industries UK]

Trade does not stop because of brexit if our WTO membership is restored - hopefully in time for brexit,
We should then be able to continue trading on existing terms before the new deal takes effect.

I didn't say trade stops... I've never said trade stops, that's my point. What I'm saying is trade will carry on, it'll just be that our imports cost us more, and take longer to get here. Our exports will also be less competitive and take longer to get to their destination. So we'll be worse off on both counts. Trade will not stop.

Also we can't negotiate anything until we're out of the EU, so that will be day x... day x+1 we start looking for new deals. We can't / won't have new deals in place on day x+1. It'll have broken all kinds of international law if we did that), hence the need for a transitional deal.

IF / when our WTO membership is restored, after Brexit.... it'll need countries like Argentina to agree to it and it'll take a while to sort out all the details. Its not a case of swapping to a default position on all the schedules because all the quotas and deals on the WTO table are based on the UK being part of the EU. Splitting us out will be a difficult (not impossible) job. We wont just have 1/28 of the pie.

You've said "We should then be able to continue trading on existing terms before the new deal takes effect." These exiting terms were negotiated by countries with the EU, and based on a trading relationship. We will no longer be part of that, so there is no existing term we can keep trading on.

 

[oldgroaner]

Good post. Could not agree more. The current situation epitomises one of big faults with eu. Any dealings are with 28(27?) disparate states...camel designed by committee and all that with god knows how much red tape..
Like Trump said..deal with USA you are dealing with him..
Flecc
For FTSE to perform well 2 criteria must be met. Companies must show profit and confidence for them to continue to do so must be high. My point was both 100 and 250 have done great. There has not been a run on UK companies, which would be reflected in 250 and to a lesser degree on 100..

Deal with Trump? truly only a fool seeks to deal with another, but then hardly a surprise reaction, is it?

 

[Woosh]

I didn't say trade stops... I've never said trade stops, that's my point. What I'm saying is trade will carry on, it'll just be that our imports cost us more, and take longer to get here. Our exports will also be less competitive and take longer to get to their destination. So we'll be worse off on both counts. Trade will not stop.

Also we can't negotiate anything until we're out of the EU, so that will be day x... day x+1 we start looking for new deals. We can't / won't have new deals in place on day x+1. It'll have broken all kinds of international law if we did that), hence the need for a transitional deal.

IF / when our WTO membership is restored, after Brexit.... it'll need countries like Argentina to agree to it and it'll take a while to sort out all the details. Its not a case of swapping to a default position on all the schedules because all the quotas and deals on the WTO table are based on the UK being part of the EU. Splitting us out will be a difficult (not impossible) job. We wont just have 1/28 of the pie.

You've said "We should then be able to continue trading on existing terms before the new deal takes effect." These exiting terms were negotiated by countries with the EU, and based on a trading relationship. We will no longer be part of that, so there is no existing term we can keep trading on.

Yes, it will need Argentina to agree to our membership but stranger things have happened before when it comes to trade.
the current trading terms, including quotas, are part of the WTO schedules.
The point I made about 20%-25% of our trade is shuffling freight through EU ports won't cause delay. The container destined for acme Ltd will arrive in Flelixstowe on schedule, except that the invoice will be from China instead of from the EU.

 

[oldgroaner]

Good posts from Tillson and a very balanced fair one from Woosh.
I think confidence in country is way higher than generally portrayed on here.The 250 sort of suggests similar. I also think with the continual bombardment of countries abilities outside EU by many individuals on here has created a downward spiral of optimism on thread...
UK can and will thrive out of EU, with or without access to single market.

Some folk revel in pessimism. In 80:s we were all going to die from aids. In 90's country would go bankrupt if we left. ERM , and same if we didn't join euro . At turn of century all computers were going to meltdown...what happened in each case...well not what was predicted by many.
What normally happens is somewhere between 2 extremes....unless Blair gets involved...

"UK can and will thrive out of EU, with or without access to single market."

Strange that it couldn't the last time we tried and we are far less capable now than we were then, especially with a bunch of imbeciles in charge.