Foreign Perspectives

Archive for February, 2008

If you’re considering investing outside your own country whether it be in shares or in property you need to consider the interest rate in that country relative to your own and the echange rate with your own currency.

The two tend to be linked and can rarely be considered totally in isolation. If you consider relatively stable currencies then a higher interest rate will tend to make a currency more valuable and conversely a lower interest rate will tend to make it less so. I say “tend to” because it’s far from a direct link as exchange rates are notoriously fickle: if markets take a view that a currency is overvalued then it’ll go down regardless of how high the interest rates are raised in that country.

However, unless you’re into short term trading it’s largely trends in exchange and interest rates that are important rather than the value that either may have at a given time. In fact, the neither the interest rate nor the exchange rate at a given point really matters a great deal but what you do need to do is to keep an eye on the exchange rate which is, usually, the most important variable when you’re investing outside your own country.

This also affects how you should keep score. Say you’re in the UK and you’re investing in America. In that case you need to measure the performance of your portfolio in dollars, not pounds. To rate the performance in pounds is just going to create a false performance statistic as it’ll be affected by the ups and downs of sterling vs the dollar and those can be quite substantial: in the last 20 years the pound has ranged from around $1 to the pound to over $2 to the pound. Obviously you’ll still measure your bottom line performance in sterling in this case but the performance of the portfolio itself is best charted in dollars.

When you buy a new business you’re keen to make your mark on your purchase and tell everyone you know about it, aren’t you?

Sure, you’re going to tell everyone that you know, but should you tell everyone else too? Should you really tell the customers who may have been loyally buying from the previous owner for many years?

If they have been buying from him/her for many years then the question you have to ask is: what is it about the business that they’ve been “buying”? Is it the charisma of the previous owner, or something that’s part of them that they’ve been buying? If it is, you’d better find out pretty darn quick because you’re going to lose those customers if you can’t replicate the reason for them to come to your business and you best not hang out that “under new management” sign either.

However, if you’ve bought a business which is in need of turning round then that’s quite a different matter. Did the customer base drop away because of something that the previous owner was doing wrong? Was it that the previous owner just put off the customers? In these cases, then, yes, you would want to advertise that the place is under new management as you will want to disassociate yourself from the previous owners as soon as you can.

Think carefully about it though. Once you’ve hung out that “under new management” sign, then it’s too late to go back and try to regain any previous base of loyal customers that the previous owner may have had.

We get a relatively low rate of turnover of the properties listed on our sites but one thing that always amazes me is that the seller never passes on the information about the advertising they’d done to the new owner.

In pretty much all cases that sale is a straight sale of the business so you’d think that the new owner would want to retain the existing customer base yet never once have we been contacted by a new owner wanting to revive the site through changing the contact details to their own, perhaps a new description, or whatever. In fact, in most cases that we follow up the very first thing that the new owners do is to change the name of the business and change all the contact details so they are pretty much guaranteed to lose all the existing customer base.

For the first time today we by chance caught one of the new owners via a general mailshot. Their first thought was to delete the advert rather than simply change the contact details even though the subscription has already been covered by the previous owner.

So, even if you are planning on changing how the business that you’ve just bought operates, do ask about the advertising and try to get a list of places that it’s advertised in. You may find that ongoing advertising has been paid for in advance so you may as well just change the contact details even if you don’t plan to renew it next time around.

Or is it?

What I’ve to do is to take a dialect word and analyse how it came to be used. So, I’ve to trace the development of the word that I choose as far back as I can. That’s surprisingly easy as it turns out as the Oxford English Dictionary covers a lot of the history of the words within it which, of course, includes the words used in the various dialects.

Anyway, I’m provisionally running with “wee” which is considered very much a Scottish word these days but it turns out that it’s derived from a very, very old Old English word related to our present-day weigh: essentially meaning a small measure. That’s changed somewhat over time and now we have both the word “weigh” for the weight whilst “wee” is very much a synonym for “small” in Scots and several English dialects too. Not only is it not really a Scottish word but in fact it was only really taken up by Scottish writers from the early 1700s.

Now, of course, the question is whether or not I can write enough about it for the assignment.

One of the problems that you have when travelling these days is that every time you go, the airport security seems tighter than it was the time before.

Twice recently I’ve ended up spending almost 30 minutes in security. That’s not 30 minutes queuing to go through mind you, that’s 30 minutes whilst they go through the case after it’s scanned.

How come? Well, if you’ve more than a couple of electronic items in your case the guy looking at the screen doesn’t know what to make of it all so the assumption is that you’re carrying a bomb. Therefore, they go through all the electronic items and swab them, swab the inside of the case then run a little test on the swab they’ve taken to see if it’s picked up any traces of explosives. Then they scan the whole lot again.

Both times, they’ve not allowed for any extra time to do such a thing so even though I went to security when called (and you can’t usually go earlier than that), I just about made it to the gate before the plane left.

Quite what they’d do if, say, I had heart trouble and was carrying some nitroglycerine I don’t know.