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The British Are Coming!

Author: Bob Lang (info)
Website: http://trade-mentor.com
Posted: April 25th, 2007 at 8:35 pm EST
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Those were the words of Paul Revere during his midnight ride nearly 230 years ago warning of an impending attack on the colony. Well, we’re far from any military attack by our British friends…but could we possibly be for sale?

A lot of ballyhoo lately on the rising British pound, or just the lack of a rising dollar. The pound recent hit the $2 level…something not seen in quite a few years. What’s it all mean, really? Well, goods abroad for the Brits are substantially lower…as you get 2 bucks worth of items for every pound spent. That’s good buying power, as it’s nearly 10% better than it was some months ago. The markets in Britain have been robust lately…real estate values are firm and inflation is not much trouble. What’s interesting is how the Brits will use this buying power, and will that in turn mean a heavy purchase into US assets. (continued after chart)

British Pound/U.S. Dollar

We know Asian countries are the biggest holders of US debt. We also remember back in the late 1980’s that Japan with a strong yen and market were on the verge of buying up US properties left and right. I remember article after article talking about the selling of America…the Japanese picking up golf courses, buildings, you name it…they wanted it here. What would stop our English friends from crossing the pond to go shopping? Not much…in fact, with an impending drop in housing prices…the next year or so may be a perfect buying opportunity. With low financing (interest rates in England are low relative to inflation) the Brits can get some great value as the housing market continues its inventory and price correction. How does this affect our markets? Well, certainly demand from abroad will help stabilize prices. With continued low rates the bloodbath in mortgage markets can subside.

So far we haven’t seen this happening as of yet…but don’t be surprised if we start hearing footsteps…by then another midnight ride may be at hand.

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