Exchanging Thoughts

Quantitative easing – give us the money!

The Bank of England has had a busy week. Along with its historic interest rate cut, it has also announced plans for quantitative easing.

Quantitative easing sounds very impressive, but for those unfamiliar with the term, it simply involves printing money, £75 billion to be precise, and giving it to the banks. Why? Well, here’s the cunning bit - IN THE HOPE that they’ll spend it, i .e. lend it to businesses to boost the economy.

Now, I may be wrong, but this plan seems to have a couple of inherent flaws.                           

1. £75 billion seems quite paltry. RBS alone has managed to rack up losses of £24 billion, with another £25 billion needed by HSBC from its shareholders, and a newly-discovered £10 billion hole in HBOS. These banks are able to chew through cash with alarming efficiency and the general consensus from industry experts is that the amount of QE needed to make any significant impact via them is closer to £300 billion.
2. The important bit is ‘in the hope’. Although the banks are being given this money, that is as much influence as the government   can have, i.e. they can’t actually make them spend (lend) it. Banks are desperate to rebuild their balance sheets, so they may just choose to deposit it in their coffers where it will never see the light of day, let alone go to help British businesses, and the whole thing will have been a very big and expensive waste of time.

If the end game is to stimulate the economy and boost manufacturing, surely even minimal lateral thinking would conclude that the best people to give cash to isn’t the banks but directly to companies themselves.

Let’s face it, any SME still standing after the last year must have some pretty good management, and is in a far better position to know where and how to invest funds in their business to get it going or growing than the banks are.

It could provide them quickly with the cash flow they so desperately need, and which the banks are withholding from them, to grow their operations and perhaps take advantage of new overseas markets.

The Euro and the Dollar are both giving a golden opportunity to British exporters. At around 1.12 to the pound, the Euro is still some 10% stronger than its 2008 average, making our goods and services attractive to the European market.

Failing that I have another suggestion. If the government is really set on printing and spending money, why not give the job to the people who really know how to do it best – the women of Britain. Give it to us and we can, and would, literally spend for England. In fact, I guarantee that between us we could blow the lot in one Saturday afternoon. Handbag and shoe makers, if nothing else, would be saved.

Technorati Tags: Quantitative Easing, RBS, 4X Currency Corporation, Helen Scott Currency

4X Currency to expand into America

It’s been a busy few weeks and looks set to get even more so. I’ve just returned (and recovered) from Washington, where the city hasn’t yet got back to earth, post-inauguration. It still has a pleasant air of relaxation and satisfaction about it, even down to the immigration officials, one of whom thanked me ‘for smiling’. No matter how much you prepare for that flight back, though, the ‘red eye’ is still a killer…

The reason for the visit was not just to pick up some cheap Obama ‘We did it!’ caps, but to finalise talks to launch our service into America – which will start in the next few weeks. We’ve been getting increasing demand from American companies to use our international payments service, 4X Dealer and now we will have all the necessary licences and compliance in place to deal with them. Guess I’ll have to start getting used to that flight.

It’s been a busy time in the UK as well – 4X is proud to announce that from March we will be working in partnership with Chamber International in Bradford. Yorkshire businesses are reporting some impact of the recession, but not as bad as other regions. We want to do everything we can to make sure they can survive, and even benefit from, these tough conditions, and Chamber International will be putting together some comprehensive cost-saving seminars to help them.

We’re also getting our best frocks ready for the Business Moneyfacts awards evening in March.

4X is shortlisted, along with three major banks, for ‘Most Innovative Product’, for 4X Dealer. We are thrilled to have been recognised at this level, and if we win we might give Kate Winslet’s Bafta speech a run for its money.

All this of course means that I have shamefully neglected to blog and am likely to have even less time to do so in the future. To that end, I shall continue to comment on currency issues, but will also be joined by Chris Norton, social media specialist and blogger extraordinaire of Wolfstar, who will run his jaundiced eye over newsworthy business issues and keep us informed. Take it away, Chris.

Save money by shopping around for the best currency deals

First week back from holidays and already long, carefree, sun-drenched Lake Garda days seem like a very dim and distant memory. The perishing temperatures and permanent torrential rain of September in Britain aren’t helping, combined with the gloomy economic forecast, the rising cost of living and plummeting house prices.

I don’t think anyone’s feeing very chipper at the moment. The thought of another 9 months of this before next summer kicks in makes somewhere where you don’t need flippers to get to the supermarket seem very attractive..

Anyway, one thing I did notice, in preparation for my visit to Euro land, was the ease with which I was able to compare holiday currency deals. Although we have millions of Euros constantly washing through 4X, unfortunately they belong to our customers and are not available to me as holiday spending money. So I went on the rounds of the high street suppliers.

I tried, three – the Post Office, Marks and Spencer, and the little man round the corner. In each case the rates were clearly displayed in the window, as were the commission fees or lack of. There was quite a variance in the rates, but they were very easy to compare and I plumped very firmly for the little man who was giving a significantly better deal than the other two.

Now, I changed £500. The amount I saved by shopping around was probably about £25. Not much, but enough for quite a few Italian ice creams, and worth having. And yet, when it comes to much larger amounts, such as for an overseas property purchase or paying a business supplier, it suddenly becomes so much harder to compare prices.

Unlike Bureaux de Change, currency companies are not obliged to clearly display their rates of exchange, usually forcing customers through a lengthy registration process before quoting a dealing rate. With some 135 such companies in the UK, most of them claiming to give the best rate, this makes price comparison almost impossible.

The usual reason given is that currency prices move around so quickly that the dealer won’t calculate the quote until the customer is ready to do the deal. However, there is nothing to stop the customer asking how the price will be calculated.

Dealers quote a percentage away from the ‘inter bank’ rate (which can be found on BBC.co.uk, or teletext  or ceefax). That percentage is their profit. Naturally this is not something they want to disclose, but if I were going to exchange hundreds of thousands of pounds would certainly want to know what the deal was.

You could either ask them how many ‘basis points’ away from the inter bank rate they will charge, or what percentage. That way comparison of rival providers is relatively simple, and when you come to do the deal you can check that is what you are getting.

The overseas property market has been somewhat in the doldrums over the last months. My bet is that this dreary autumn might start a few more people looking to sunnier climes. Shopping around for the best currency deals can mean having enough left over to furnish the place.

In the meantime, for those of us who can’t afford our villa in the Algarve just yet, I have a suggestion.

Why doesn’t the Government buy a smallish warm or tropical island. One of the Canaries would do. On a certain date, say September 5, the whole of Britain could be flown out to live there for the winter. It might be a bit cramped, but we would be on the beach most of the time so it wouldn’t matter. They could then just turn Britain off and close the doors until spring.

Think of all the money it would save – on heating, lighting, cough and cold medicines – we’d all be rich and happy and healthy and then we could come back when the sun comes out. Just a thought, but it’s still raining and I think I’ll drop Gordon a line…

Technorati Tags: 4X Currency Corporation, Holiday Currency, Inter bank rate

New law protecting against rogue traders needs to be applied to currency companies

I noticed a new law aimed at ‘protecting consumers against rogue traders’ has come into force in the UK recently. 31 specific practices will be banned, and amongst those affected are fortune tellers, astrologers and mediums, who will be required to say their services are for ‘entertainment only’.

Whilst I applaud any changes towards consumer protection in general, and the outlawing of rogue traders in particular, I think it is slightly foolhardy of the lawmakers of Britain to dismiss these practices as mere ‘entertainment’.

Entire civilisations have been built and destroyed on the basis of a belief system which may or may not involve stars, predictions or similar. You only have to look at the very unentertaining mess Julius Caesar ended up in by ignoring the soothsayer and Ides of March and going out anyway. Or how different Joseph’s wardrobe might have been if his dreams about Egypt been dismissed as mere ‘entertainment’. (Although I must admit that if that Russian cult had had a bit of this consumer legislation on their side, some of them might have had a slightly pleasanter and more productive winter…)

But seriously, and more to the point, I note wearily that this 88-page document makes no specific reference to foreign currency transactions and consumer protection. Given that the overseas property market is worth some £20 billion per year in the UK, with the average transaction in excess of £100,000, it seems curious that the compilers of the document think it is more important to give an example of the correct selling techniques for pencils than for currency.

Now, I am not for one moment suggesting that the banks or currency companies which deal with consumers in significant amounts of foreign exchange are trading in any rogue way, or employing any of the now banned sales techniques.

What I am saying, though, is that shouldn’t consumers buying currency also be protected from any selling practice that ‘materially distorts, or is likely to materially distort, the economic behaviour of the average customer’.

Surely, and correct me if I’m wrong, the lack of price transparency in the consumer foreign exchange market does just that. How can a consumer make an informed economic choice if he is unable to shop around and compare foreign exchange rates?

And yet, current legislation does not require either banks or foreign exchange companies to provide that information as a matter of course. They may do, but they may equally choose to give the customer only an ‘indication’ of what price he may expect, making it impossible to make an accurate comparison.

There are not just pennies at stake here, or even a few pounds. Choosing the right currency provider can make a material difference of many hundreds if not thousands of pounds. The overseas property market has been growing steadily over the last years, and now something like one in 10 Brits owns or plans to own a place in the sun. This must be one of the biggest consumer groups around.

Maisha Frost of the Daily Express is the first national journalist to pick up on the transparency issue, and I thank her very warmly for that and her extremely accurate article about 4X in last Wednesday’s Your Money section.

In the next weeks and months we will be announcing a number of new initiatives, to try and raise awareness of the issue in the media - watch this space!

I can only hope that this recent law will help to change the way consumer foreign exchange transactions are executed. My crystal ball tells me it will…

Technorati Tags: rogue traders,currency transparency,4X Currency Corporation,Helen Scott

Free exporting event promises to help Yorkshire businesses save thousands

This is just a quick post to let you know that we (4X Currency Corporation) are holding a breakfast briefing, in association with UK Trade & Investment and Leeds Chamber of Commerce on Thursday July 3^rd at the Radisson hotel in Leeds to help advise Yorkshire companies how to save money when importing and exporting.

I will be there and speaking on currency related issues, here is a quick list of the other speakers and their topcis:

· Recognise opportunities as the credit crunch bites (Colin Russell, UK Trade & Investment)

· Benefiting from the effect of the exchange rates on the pound  - (Colin Smith, former head of foreign exchange Commerzbank)

· Dispute resolution on overseas trades (Gerard Khoshnaw, Head of Commercial Dispute Resolution, The Law Society’s Cross Border and International Reference Group, Nabarro)

· Look for an opportunity in foreign VAT recovery (Martyn Redman, Chairman, Eurocash Corporation)

· Reduce the costs dramatically from your foreign currency transactions (Helen Scott, managing director, 4X Currency Corporation)

· International Leeds (Steve Haynes, International Trade Advisor Leeds Chamber of Commerce)

If you want any further information, check out our news release on it, or feel free to drop me an email.

I hope you can make it along.

Technorati Tags: foreign currency events,business advice,Leeds

Banks are ripping you off and are keeping it quiet!

My frustration has reached new heights this week. My wine consumption has increased dramatically with the latest facts that have come to my ears, and I’m not sure they even make a big enough soapbox for me to stand on.

You may remember in my previous writings I had a good rant against the lack of transparency in the foreign exchange market. You can’t compare currency prices between the different banks, because banks will only give you a dealing quote if you have your account with them.

In the absence of being able to obtain any meaningful rates comparisons, the SME market is pretty well stuck with using its own bank. It has been estimated that, in the UK alone, there are several hundred thousand SME companies trading overseas and therefore with a currency requirement. They may well not know how much over the odds they are paying.

At 4X we know we can save an average SME some £12,000 per year on its foreign exchange. If we are conservative and say that only applies to a fraction of the market, say 100,000 companies out of the 850,000 or so SME’s, that is a staggering 1.2 BILLION pounds per year! But we’d like to prove that.

Well, being the resourceful types, we decided we would do our own bit of research. We are exhibiting at the FDI Expo at ExCel in London next week, and thought it would be nice to give our visitors a few facts and figures regarding the rates charged by the various banks compared to using 4X.

Knowing that we couldn’t get these ourselves, we contacted a few of our friendly customers to see if they would each ask their respective banks for a Euro rate. Easy enough, you would think, just synchronise the time for the requests and Bob’s your uncle.

Not so! Two of the banks contacted – HSBC and Nat West – wouldn’t give a currency rate EVEN TO THEIR OWN CUSTOMERS!!

HSBC firstly insisted on seeing the funds in the account before they would quote a rate. When told they would be transferred from another account they said they would only give a rate when the customer had made the transfer and was at the point of doing the trade, therefore skilfully removing any possibility of shopping around in advance. Clever.

Nat West, on the other hand, insisted on having the request in writing. Once it had been processed, they said, they would call the customer back with a rate and give him 20 seconds to accept or reject it, again removing the option of shopping around. If the rate was rejected, the customer could try again (and here comes the joke) the next day!

The next day!! One rate a day! Currency rates move up to three times a second. 4X provides more than half a million rates per day. How on earth is a business supposed to get the best deal if it can only request one rate a day? The whole thing is completely scandalous.

Of the others, Barclays would only give an indicative rate, reserving the right to change it at the point of actually doing the deal. The indicative rate was some two cents below the rate 4X was charging to buy 165,000 Euros, and even if they had honoured it, that rate would have cost the customer a whopping £1,784 extra.

Bank of Scotland, to their credit, did give a rate, and it would only have cost £876 extra compared to 4X, which, given the competition, makes them look almost like saints.

What can be done? Well, on the face of it, nothing. The banks have got the SME market right where they want it, and legislation is on their side. There is no obligation to disclose prices, or indeed the profit that the bank has made out of the deal.

The whole situation is completely unacceptable.

There is no reason on earth why the banks can’t be completely transparent with their pricing, except that they don’t want to be. They have the technology to get and display up-to-the second rates, just as we do. But if they did, it would simply expose the huge profits they are making out of the SME market in foreign exchange deals. The aforesaid £1.2 billion would a) make a big dent in their profits, and b) be rather embarrassing.

So, all we can do is start to put pressure on, and bring the whole sorry shambles to light. I am being featured in the Daily Express  soon, and I will make every endeavour to bring price transparency into the arena. Here at 4X we are completely transparent with our dealing rates and are determined to make others be the same.

So that’s it. End of this week’s rant. There will be more, but I must stop now. I just need to pop out and commission a specially large and robust soapbox – I think I may need it.

Exporting businesses could save thousands by simply checking their rates

Last week I decided I needed a new car. So I went down to the local garage, because it’s the closest and most convenient, and they had one in stock. I asked how much it was but they were a bit vague, they just said ‘about £10,000’.

I wanted to check whether I could get it cheaper elsewhere, so I popped into another couple of garages. But they wouldn’t tell me how much their cars were at all unless I opened an account with them. The first one looked OK and it would do the job, so I agreed to buy it.

Yesterday I got my bank statement through the post, and found out they had actually decided to charge me £11,000 for the car. Plus a delivery fee, and a bit extra for luck, all of which I thought was fair enough.

OF COURSE I DIDN’T! That would be utterly ridiculous. Unless money is no object, nobody in their right mind would buy anything unless a) they know what they’re paying for it, and b) they don’t think they can get it significantly cheaper elsewhere.

Nobody likes to think they are paying more than the next person for exactly the same thing. I have been on package holidays which were ruined on day one because someone found out the people on the next table had got theirs £20 cheaper with a free key ring thrown in and spent the rest of the week in sulky resentment.

So why, I ask myself, are businesses, presumably for the most part run by intelligent and commercially-aware individuals, happy to accept treatment similar to that described above from their banks on foreign exchange transactions?

Currency transparency is not there

The answer, I’m afraid, is rather depressing. Because although almost every other commodity in the world is now openly and transparently priced, allowing you to see whose mortgages, insurance or baked beans are the cheapest, the one thing that has slipped through the net is currency.

You can’t go to a competitor bank unless you already have an account there, and a specialist currency provider is also unlikely to quote you a dealing rate unless you are registered as a customer and on the point of doing the deal.

Shockingly currency is completely unregulated

The currency market is completely unregulated. It isn’t covered by the Financial Services Authority, the OFT, the Monopolies Commission (why is there only one of those?) or any other regulatory body.

The net result is that there is absolutely no obligation on anyone, be they banks or specialist currency providers to reveal either the price they are selling at before they do the deal, or how much profit they are making on it. The best you are likely to get is an ‘indicative’ rate – which may appear attractive but is effectively meaningless. It is just what it says, an indication of the price, but may, like my car, bear little resemblance to the price they will actually transact at, and making it extremely difficult to make accurate comparisons.

Here at 4X we support regulation. But even throwing our support behind the proposed 2009 regulation of the currency industry by the FSA doesn’t guarantee that they will go as far as completely opening up on pricing.

Open up pricing

So, we have decided to try to change things from the inside, to put our money where our mouth is and challenge our competitors and the banks to do the same. We have had live dealing rates for individuals on our website for a long time now, and last week we extended this openness to the corporate market.

Just go to www.4xcurrency.com/trial.htm for a free download of our unique dealing software with live tradable rates. No indications, nothing hidden. What you see is what you get and you are quite at liberty to shop around and compare. In fact we think you should, but we doubt whether anyone else will offer the same.

The foreign exchange market is worth absolutely billions. It’s no surprise that the banks and other providers don’t want you to know what they are charging. Profits would slip overnight and we know they can’t afford that.

In the meantime, you’ll be pleased to know I have bought a new car (Nissan Micra - similar to left). I found it on the internet, it was a bargain, and we are both very happy.

Technorati Tags: 4X Currency Corporation,Currency regulation,Currency Transparency

Red Red Wine goes to my carpet!

Last Sunday evening turned into rather an expensive one, and all my own doing. I failed to follow my own advice.

It was a quiet night in with a glass of wine and the rerun of ‘Britain’s Got Talent’. However, one clumsy movement involving the TV remote and there was wine all over the carpet. And of course the wine was red and the carpet is cream…

Now, I know that the best way to get red wine out of a carpet is to pour white wine on it. A quick dash to the fridge for my staple supply of cheap supermarket Pinot Grigio but disaster! Absolutely none in there at all. All I had was a bottle of rather good vintage Champagne that I was saving for a special occasion.

I must admit I did hesitate for a split second, and felt slightly sick. But the thought of the Merlot slowly soaking through the shag pile was too much to bear, and so, with a tear in my eye, I tipped the entire bottle onto the carpet.

So how does this relate to currency? Well, quite closely as it happens.

This extravagance with my Champagne led me to kick myself as to why there was no cheap white wine in the fridge. Then I remembered that I had not stocked up on the last trip to the supermarket because the price had gone up, form something like £3.69 a bottle to £4.39, which I objected to.

Very much like the Euro. Last summer you could get 1.45 Euros to the pound. Now you can only get 1.25, which is a 15% increase. It is hard to swallow, and the temptation is not to buy because you are a) resentful, and b) can remember it being cheaper, so you sit tight and hope it will go back there.

However, as I never tire of telling customers, if you definitely need to buy Euros this is a very dangerous strategy. It might go back to 1.45, but equally it might go to 1.15. Those who held off at 1.35 and were feeling smug, are no doubt now feeling as sick as a parrot.

If you need Euros (or in my case Pinot Grigio) you simply have to pay the market price. And if don’t need them yet, but you will at sometime in the future and you are worried about that price increasing still further, you should consider buying them forward.

Forward contracts are very easy to arrange, and they completely remove any risk of an adverse movement and the currency costing you even more in say 3 or 6 month’s time. You simply pay a 10% deposit and your Euros are fixed at today’s rate, no matter what happens in the meantime. It’s a strategy that works well for businesses that import or export and need to manage their cash flow in Sterling, and for Brits buying overseas property.

The result of all this is that I have learned my lesson. It’s no good preaching about how to mitigate risk of adverse price movements and then not follow my own advice. I have therefore now been out and arranged my very own forward contract. Six cases of the £4.39 stuff, on the credit card. Yes, painful that it costs more than it used to, but who knows, by next week it might have gone up again.

I’ve also replaced my Champagne. With my Pinot Grigio lake in place I think I’m on fairly safe ground. And who knows, there might even be an occasion to drink it….

Technorati Tags: Euro,Red Wine spillage,Forward Trading,Saving money on currency

The banks gamble and lose but why do we pick up the bill?

So, the Government has decided to prop up the banks to the tune of £50 billion. That’s about £800 for every man, woman and child in the country. The reason? Well, they have made some bad lending decisions, and have lost some money. Had their greed paid off, and the sub-prime market not come crashing down around their ears, they would no doubt now have all been announcing record profits and congratulating themselves with seven figure bonuses for the directors. 

Now, as we all know, if this happened to any other business, to any of the 250,000 or so SME’s in this country, it would simply be hard cheese. You don’t make profits, your business decisions go wrong, you simply shut up shop. Not so with the banks.

Notwithstanding the fact that they cost the small business community a whopping £100 million last year due to errors in processing overseas payments, they are now rubbing salt into the wounds by battening down the hatches on genuine funding needs in the SME community, making it even harder for the struggling small business to get any financial help at all.

From where I sit, the situation is even more galling. 4X was set up without any help from the banks. They wouldn’t lend us a penny, for the simple reason that we would be in direct competition with them by providing the business community with cheaper and more efficient FX services than they were prepared to offer. Nor did we get any government funding or grants. The whole lot was financed out of our own pockets, which has meant growing slower than we’d like to, not to mention a pretty austere personal life for the last few years. We haven’t been able to afford to make any mistakes.

Yet now, I am effectively being asked to subsidise those same competitors, whose greed and incompetence should be their own downfall. With £800 of my taxes! What other industry would get treatment like that? What if we all start going cap in hand to Mr Darling every time we stuff up our business decisions? I can just imagine his reaction. I tell you it makes my blood boil every time I think about it.

And the really sickening thing? I can’t even go on holiday and forget about it all for a couple of weeks, because I just don’t have a spare £800….

Technorati Tags: Banks,Alistair Darling,4X Currency Corporation

New currency exchange service helps reduce risk for small businesses

I’ve been waiting anxiously for news on the members of the Russian doomsday cult which has been living in a cave for the last six months, and finally it came. They’ve all come out.  It all went a bit quiet after they went in there in October, armed with little more than some jars of pickled mushrooms and a conviction that the  world was about to end. Presumably the mushrooms were chosen because they do not fall into the category of processed food or carry bar codes, both of which the group believes are the work of Satan.

Their belief that the end was nigh was instilled in them by their leader, Pavel Kuznetsov, (currently undergoing psychiatric treatment) who predicted that the apocalypse would happen in April or May. Frankly, having survived the winter, which can’t be pleasant in a Russian cave, I’m a bit disappointed that they threw in the towel at the eleventh hour. Still at least they had a go.

Speaking of predicting the future, most of us can’t. And it’s a brave person these days who knows where these currency markets are going, or is willing to take a risk on them.

To that end, the good news is we have just launched our new forward trading service on the dealing platform, 4X Dealer. For those of you unfamiliar with a forward trade, it is simply ‘buy now, pay later’, and is a useful tool against the unpredictable foreign exchange market.

For example, if you are a business that knows you will receive US dollars in six month’s time, you can eliminate the risk of what the currency rate will be by selling the dollars now for settlement in six months. If the dollar weakens, you are locked into today’s rate. Of course, if it strengthens you will miss out on making extra profit, but many, especially smaller, businesses are more interested in minimising risk than taking a gamble on exchange rates.

We have an easy to use demo which shows you how a forward trade works, I have also been through the product in the attached video. If you want further information you can also check out our news release on the new service.

Forward trading may be the safe option, but just think of it this way. Surely it’s a better way of hedging your bets than sitting in a damp Russian cave with nothing to eat but mushrooms…

Technorati Tags: 4X Currency Corporation,Helen Scott,Forward Trading Currency,Russian Cult,SME business benefits