FinanceBAM News

On 06 June Jeremy Gates wrote an article for MSN Money under the topic “Are Premium Bonds worth it?” Some financial advisors struggle to say a good word about them, Premium Bonds mark their historic half century this month at the height of their popularity. On June 1 1957, ERNIE – the Premium Bonds prize draw machine - picked his first winner, with the jackpot a princely £1,000. That would have been enough to buy a new Morris Minor, a caravan to tow, return flights to New York or a top of the range black and white TV. £1,000 in 1956 is worth about £16,729 today.Fifty years on, an estimated 23 million British adults, 40% of the population, hold more than £32 billion in bonds. (more…)

On 13^th June Alpesh Patel wrote an article for Msn Money about how to handle the FTSE when it is on a rollercoaster ride. According o Patel the only way is PPP: Plan, Prepare and protect. He says that if you risk too little on each trade the returns will be too low to overcome transaction costs, small losses and over­heads (quote feeds, electricity, rent, costs of books and so on). While studying finance it is often taught “High Risks High Returns” but one bad trade can put you in dangerous waters. Traders use different formulae to work out how much money they should put on any trade. Gibbons Burke provides one such useful formula. (more…)

According to an article written by Nick Louth on 23^rd May for the Msn Money the “Sharia investment growing in appeal”, he says that the British Muslims face problem in dealing with most of the banks. This is for the reason that most bank accounts, mortgages and investments offers are against Islamic teaching as the offer interest, or riba, which it categorises as usury. Muslims have certain prohibitions when considering investment.

These include abortion, alcohol, defence, gambling, human cloning, pornography, most forms of entertainment and anything to do with pork. However, the usury prohibition bars investment in conventional banks and insurers, and any company which has a gearing of more than 30%. That removes many thousands of potential investments. Due this reason Islamic bank accounts have been available in the UK now for three years (more…)

Recently the government Bonds have found there way to the main headlines John Stepek says in his 25^th June’s article “Why a recession is on the cards” for MSN Money. Although things have stabilised somewhat now, the yield on a 10-year gilt (UK government bond) last week hit a seven-year high of nearly 5.5%, while in the US, the yield on a 10-year Treasury (US government bond) also shot up.

Roger Bootle of Capital Economics said in The Telegraph, “It may seem esoteric to you, but the yield on government bonds is the foundation on which all asset values rest.” Hence, if you can get a yield of say 5.5% by lending your money to the UK or US governments (which are regarded as virtually risk-free), then anything riskier (which is just about anything) needs to offer a better return than that. Thus for yields to rise, prices have to fall. (more…)

According an article written by to John Stepek on 28^th June for the MSN Money “The US housing market should be the world’s biggest worry”. The stock markets throughout the world have been experiencing a seemingly inexorable rise. One of the key worries is the condition of two hedge funds run by investment bank Bear Stearns. The two hedge funds included - the High-Grade Structured Credit Fund and the High-Grade Structured Credit Enhanced Leverage Fund. These have invested heavily in securities related to the US sub-prime mortgage market which every one else is trying to ignore.

The troubles emerged when Bear Stearns stopped investors in the second fund (the ‘enhanced leverage’ one) from pulling money out - which is, as Bloomberg put it, “the first sign of an impending collapse”. So naturally, “the investment banks who had lent money to the Bear Stearns hedge funds said – ‘We want our money back.’ And if we can’t get our money back right away, we may seize collateral and sell it,’” Janet Tavakoli of Tavakoli Structured Finance told CBS.

This idea of the funds collapsing has made some analyst worry. “The demise of two Bear Stearns managed Leveraged Mortgage Funds could be the tipping point of a broader fallout from sub-prime mortgage credit deterioration that would lead to cascading de-leveraging and ultimately [end] with higher rates to new mortgage borrowers,” reported Bank of America analysts last week. (more…)

The June 29, 2007 edition of Telegraph explains how Sports Direct, the retailer that own Sports World chain and the Lillywhites store in the UK has purchased Everlast, the well-known American boxing glove manufacturer, for 84 million pounds.

Sports Direct, being in financial trouble, hopes that this move will help them break into the lucrative US sportswear market, as it does very little business in the US currently.

Dave Forsey, chief executive of Sports Direct, said: “The Sports Direct board is confident that this acquisition will benefit our wholesale, licensing and retail businesses, while providing us with a significant stepping stone into the important US market.” (more…)

Mark Atherton wrote an interesting article in the June 27, 2007 edition of Times Online. In it he explained that the Financial Services Authority (FSA) announced plans for a massive shake-up of the financial industry. Critics say that it still has not gone far enough.

In its Retail Distribution Review, the FSA has put forward plans which, were drawn up the industry itself, designed to make the actual cost of financial advice much more clear and distinguish it from the cost of financial products.

It is proposing a tiered structure for financial advice with advisers falling into the category of one of the tiers. The advisers on the top tier would be able to advise on anything from savings accounts to investment trusts. A second tier would include those who could give primary, simple advice at a lower cost such as banks, insurers, some existing financial advisers. (more…)

An article in the June 28, 2007 edition of Daily Mail, showed how property prices have increased 1% in the month of June.

Nationwide stated that property values were raised by 1.1% during that same time. This was more than double the rate of increase seen the month before.

The typical home in the UK is now valued at approximately 184,000 pounds, more than 18,000 pounds higher than last year during the same time. From this it can be concluded that houses are rising in value at approximately 50 pounds per day.

The resilience of the housing market will put further pressure on the Bank of England’s Monetary Policy Committee to raise the base rate next week. On Tuesday, Sir John Grieve, deputy governor of the Bank of England, gave a clear indication that rates would rise because of the increase in borrowing to fund huge massive private equity buy-outs in the City. (more…)

On 19^th June Chris Gilchrist wrote an article for Everyinvestor.co.uk. According to the article more banks are pushing up savings rates to well above the Bank of England’s 5.5% base rate. It’s now easy to collect a no-string 6% on your money. Although the Bank of England have not raised interest rates in June its boss has given speeches in which he’s made it clear there are further interest rate rises in the pipeline. Many of the banks have taken the hint are now offering 6% on instant-access accounts. At the moment the best genuine no-strings accounts are from Sainsbury’s Bank (6% from £1), Icesave (5.95% from £250), ICICI Bank (6.05% from £1), and Northern Rock Online Silver Savings (6% from £1, 50+ only).

However there are two good ‘with-strings’ accounts where you need to watch out to avoid withdrawal penalties. HSBC Online Saver pays 6% but you get no interest for any month in which you make a withdrawal. Birmingham Midshires Websaver pays 5.95% but you may make only six withdrawals from the account in a 12-month period. (more…)

In an article written for MSN Money, Naomi Caine on June 20^th stated that HM Revenue & Customs wants to claw back hundreds of millions of pounds from people with offshore accounts. The department have long suspected that people are hiding money offshore for this reason they set up the Offshore Fraud Project Group (OFPG) to try to nail the tax cheats. in 2002. However they faced a lot of difficulty in extracting information from the banks due to their confidentiality agreement.

There was initial resistance from the big banks, but last year the taxman forced Barclays to disclose details of its offshore customers. The other big banks were also hit by disclosure orders after they failed to cough up the information voluntarily. Smaller banks and building societies have now fallen into line. There are also unconfirmed reports that tax officials have demanded that credit card companies disclose details of customers with offshore accounts. (more…)