How far off is an exchange rate of £3 to the euro?

TO start a hedge fund, I'm told, you need several millions of pounds of seed capital. To put together a five year market beating track history will take a couple of hundred million pounds.

You have to know what you're doing and have an intimate knowledge of your subject.

A few weeks ago, I had a conversation with a client who was looking at property for sale in the Dordogne. He had just started a hedge fund in the UK. He sounded like he knew what he was talking about. So, I listened.

He made the "you mark my words" point that the British government were desperately trying to keep the lid on the fact that the British economy is in a lot worse shape than they let on.

Lo and behold, a few weeks later, Alistair Darling the British Chancellor, assures the people of Britain that they can look forward to the worst recession in 60 years. That's doubtful in reality. I can't imagine that ration books and three day work weeks are likely.

But that doesn't matter. The point that struck me was that my client was bang on the money. The government came clean and attempted to tell people the truth.

So, I tried to recall the other gems of wisdom he shared with me that day on our travels in the Dordogne countryside.

There were many. But there were two in particular. Suddenly, everything he had said carried more weight. He was now an authority in my mind.

His first prediction was that the euro-sterling exchange rate would reach parity within a year.

For lots of people thinking of buying a house in the Dordogne this doesn't really pass the "So what?" test. Over the past year they have been watching the euro soar . One euro to the pound is looking more likely by the day.

And for the first time, we're seeing sterling slip against the dollar.

His second was that we can look forward to three pounds to one euro within the next three years.

What if he's right ?


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