Given the chance there is not one investor in the world who would pass up the chance to make a profit on a short term investment, but you ask how many would take that gamble with no guarantees and it is a totally different matter. In the heady days of the 1980s and early 1990s we saw the trend towards so called “day trading” take off, with more and more people chasing the fast buck in markets that seemed to rise and rise. The technology boom was the perfect market, until the bubble suddenly burst – BANG!

The bursting of the technology bubble in the early 1990s saw many people literally wiped out with the vast majority of so called “day traders” suffering horrendous losses - many were not able to return back to the market. One problem for the day traders was that when the good times rolled, margin (i.e. collateral held by a broker to cover the investment) was no problem, but once the bubble burst losses began to grow and grow and margin calls become greater and greater. Many decided to try and trade themselves out of the market, but this placed more and more investors in impossible situations.

While it would be wrong to say that all day traders lost their investments in the technology boom and burst period, it was only the clever ones, the ones who sold before the top who actually made and kept their money. As more and more people chased the markets, this pushed share prices higher and higher, further feeding the frenzy to get in and make a quick buck – many investors were making thousands within hours, but it could not last!

Short term investment is a high risk game unless you are very astute and actually know what is happening in the wider market place, sectors and individual companies. You could get the right share at the wrong time and lose, when in a better market the same share and situation would have made you a fortune. It was this fact that many people could not grasp, they became greedy and share price valuations shot into outer space – it just did not add up.

Any investment which you make into the stock market should be seen on a long term basis and money which you will not need for some time. If it is money that you cannot afford to lose then you really need to consider whether you should be investing at all. As we are seeing at the moment, economies move in cycles and there are clear times to buy and clear times to sell, although they only become clear after the event!

Long term investments have the potential to give you the best rewards, choose your stocks, your sector and monitor your investments carefully. Long term investment into a good long term company is great and should reward you, but on the other hand, if your investment shows signs of trouble then you should consider whether the investment can recover in the long term.

Stock market investment has proven to be very beneficial in the longer term (outperforming the vast majority of other asset classes over an extended period) and while there may be chances to make a short term profit, is it sensible to invest with a short term investment view?

Rumours are rife in the City that Royal Bank of Scotland will ask shareholders to stump up to £10 billion in order that they can restore their capital ratios near to those of their European counterparts. Despite commenting that no funding raising would be required only two months ago, it seems that the Bank has had a change of heart. But is it all bad news?

Despite the doom and gloom headlines which will no doubt hit the press tomorrow, there is actually a sense of relief that finally we have a major UK bank willing to stand up and say that help is required. There are also many people who believe that the expected call for cash, which has not officially been confirmed, will mark the bottom of the credit crunch crisis (although the situation is unlikely to actually improve for some time).

The possible reason the news has leaked into the market is the fact that prior to announcing the rights issue, they will have held urgent talks with major shareholders and advisers, some of whom may have inadvertently leaked the information to third parties. Now that the Royal Bank of Scotland seem set to show their hand there are rumours that Barclays Bank are also in talks about a possible rights issue next week – perhaps looking to take the shine of the Royal Bank of Scotland announcement and beat them to the punch.

However, while strangely enough this may mark the bottom of the downturn if, as expected, more UK banks use this break in silence to ask shareholders for more money, there may be competition for institutional funds. While no bank would want to “give away” new shares, they will have to be priced at a level which makes them attractive to large and small shareholders alike. It would take a brave investor to underwrite an issue in such difficult markets, so that traditional backdrop may not be there for some banks.

The UK banking sector is very much at a cross roads after years of expanding overseas with many now hit by the credit crunch and their over weight exposure to markets such as the US. While this will not stop further expansion in the future it is sure to make a number of high flying chief executives think a little longer and a little harder before spending shareholder billions in overseas ventures.

If this is the bottom of the UK banking crisis then the UK tax payer may actually see a swift return on the money used to bail out the Northern Rock. It is no secret that the business of the Northern Rock is being reduced in order to get their house back into order ahead of a trade sale some time over the next few years.

We may well look back on this day in the months ahead and realise that it was the turning point in the cycle, but then again who knows what shocks and surprises await us in the future!

It seems that every time the UK economy takes a dip many people start to question whether the stock market really is the place to invest your money in the long term. While the facts and figures speak for themselves, with the stock market out performing any other invest class over the long term, there are times when it might be best to stay out of the market, but in the long term where else would you invest your money?

The stock market is the barometer of the UK economy and whiles some asset classes will do better than others over different time spans, it is the mix of asset classes which offers investors comfort that the long term performance will mirror that of the UK economy. Many people seem to miss the bigger picture with the stock market, assuming that the main aim of the exchange is to allow investors to buy and sell shares, when in fact this is what is known as the secondary market. We hereby list some useful aspects of the stock market which often go unnoticed :-

Treasury Funding

The government use the GILTS market to raise funding to cover the peaks and troughs of government budget requirements. You will see that when the economy is doing well and public spending is under control, the government may actually redeem part of their GILTS portfolio which is held by fund managers and private investors alike. When the economy is under a little pressure as it is now, you will very often see the government selling off GILTS to investors in return for a fixed rate of return and money to fund public services.

GILTS are the most secure of any investment in the UK as they are backed by the government. If the government was ever to renege on repayment of a GILT then we would all be in deep trouble.

Primary Market

While we all see the headlines about new companies listing on the UK stock market, they can raise funds at this stage or it can be used as a way for a large investor to reduce or dispose of their holdings. More often than not the company coming to the market will sell new shares and raise extra capital but this is not always the case.

Secondary Market

The secondary market is probably one of the main attractions of the stock market to investors and companies alike, this is the time when companies will attempt to sell additional shares to investors for what could be a number of reasons, expansion plans, a take over bid or a desperate rescue rights issue to save a company.

A lot will depend upon the reason for the fund raising, how much they are trying to raise and the general state of the market. A company looking to raise funds at this moment in time, no matter how strong the argument, would probably struggle or need to price the new shares lower than a couple of years ago when the market was much stronger.

There is a lot more to the stock market than just buying and selling shares, it is the heart beat of the UK economy and assuming that you give yourself a good spread of investments it is possible to benefit from the long term economic growth which is expected in places such as the UK.

The Gap between Large Cap & Small Cap

The great gap between large cap stocks and small ones is clear at the first sight. Hot penny stocks are those companies with shares trading less than $3 each. And there’re things, which make them truly ‘hot’ peace of bread for investors. One of the biggest advantages of trading small cap stocks is the opportunity to beat institutional investors. Because mutual funds have restrictions that limit them from buying large portions of any one issuer’s outstanding shares, some mutual funds would not be able to give the small cap a meaningful position in the fund. To overcome these limitations, the fund would usually have to file with the SEC, which means tipping its hand and inflating the previously attractive price. With small cap stocks, earnings per share can grow at a faster rate than that of larger companies. The reason: Devoid of layers of corporate bureaucracy, management can respond quickly to changing market conditions. Still, you better keep in mind that classifications such as “large cap” or “small cap” are only approximations that change over time. Also, the exact definition can vary between brokerage houses.

As if the Nick Leeson “rogue trader” episode of 1995 was not enough for the financial markets to digest, we have today seen inter-market fraud taken to a new level with news that ONE rogue trader has taken a $7 billion gamble with the funds of establish French Bank Societe Generale - and lost the lot!

The person in question is believed to be Frenchman Jerome Kerviel, a 31-year-old trader who worked on the firms Delta One products team, which basically involved taking large positions on the future movement of share prices. The fraudulent transactions seem to have taken place between 2007 and 2008, and using a number of techniques which he seems to have gleaned from his time in the back office, the trader has managed to conceal his position until now.

While the Bank will still report a profit for the year, the massive hit on the bank’s asset base will force them into the market to raise more capital to shore up their balance sheet. The banks shares were suspended at the opening of today’s market trading but soon resumed after the announcement, immediately falling 3.6%. Societe Generale are unwilling to give away much detail until a full review has been carried out, but there are major question about how a trader earning less that 100,000 Euros a year has been able to rack up such large positions, apparently unnoticed by the company’s accounts department.

There is also a secondary problem for the bank now that this situation has been released to the public – if one trader could hold the bank over a barrel to the tune of $7 billion, are there any more skeletons in the cupboard?

Until a full review of the banks positions and internal procedures has been carried out – not to mention probable intervention by the regulators – there will be a sense of uncertainty regarding the company and the share price is likely to suffer further during this period.

The stock market has dropped almost ten percent over the past thirty days, is it time to consider refinancing?

Are we headed for a full blown recession? The stock market certainly is showing signs of panic in the equity markets as the sharp declines are indicating that investors are pulling their money out at a record pace. The silver lining to the stock market crash is that mortgage rates have also followed suit a and are dropping agressively as well. Fixed mortgage rates are now approaching levels last seen during the summer of 2003, when they touched record lows during the war in Iraq. If you are a homeowner who has equity and may be considering refinancing out of a adjustile rate mortgage, then the stock market collapse will be welcome news to you as mortgage rates trend lower. The other key component of this marketplace is volatility and while rates have dropped sharply, they could just as easily jump back up if their are reports of good economic news. The lesson to be learned is that if you are in the market for a new mortgage, it may be a good time to start comparing mortgage
quotes to be prepared to lock into a loan program should the market start to recover.

After reporting annual profits of over £2.5 billion earlier this year there must surely come a time when the giant that is Tesco will simply run out of markets to dominate? Not yet say the management……

While the supermarket business is obviously the core area of profitability and where they get their reputation from, it has spawned a vast array of new and potentially very lucrative business ventures. The Tesco brand has now broken into areas such as Tesco loans, Tesco insurance and just lately Tesco diets to name but a few.

These are not small markets, these are markets which have major players already, they have been around for years but Tesco has still managed to take a major foothold. The beauty of the Tesco business model is the fact that their customers are very loyal, the majority have signed up to their club card service and they actually trust the Company. This has opened the door to direct mail shots, telephone sales and heavy promotions in store.

A trip to the supermarket now may not be all about food and drink, it can see you come home with credit cards applications, a new bank account and even cover for your next holiday. There is also immense speculation that Tesco are looking to break into the property market and potentially take on a role similar to that of an estate agent. So where will it all stop?

The fact that Tesco have started to expand into the United States and a whole host of other overseas markets is a sign of their intent. It may also have something to do with the fact that they have come under increased pressure from UK regulators who are concerned at their strangle hold on a number of areas of the UK market.

At this moment in time it seems that Tesco can do no wrong, how long that lasts remains to be seen, but if their future plans come to fruition, their profits will be growing for some time yet!

Those of you who checked the price of your banking shares on Friday would have been dismayed to find that the sector is yet again in the spotlight and under more pressure.  While the debacle of Northern Rock is bad enough, there are rumours that at least one other UK bank is in trouble, with Barclays Bank being the name mentioned by many.  So what is happening?

The problems of today can be traced back some time, to an age where new and exciting financial instruments were created and sold around the world to a whole host of banking giants.  In the good times these instruments often forge ahead in value, but when markets hit a rocky patch they can collapse with many unsure where the final buck will rest.  It is this uncertainty, and knock on effect from the credit crunch, which has opened up Barclays Capital to a number of rumours. 

Barclays Capital has been one of the main drivers behind the rise in stature and profitability at Barclays, although it is often hidden away from public viewing.  The division has built a great reputation for creating and investing into a number of modern day investment instruments, often creating massive profits and commission payments along the way.  However, alarm bells started ringing a few weeks ago when one of the company’s senior mangers went AWOL.

While Barclays have refuted allegations that they have approached the Bank of England about a rescue loan, the rumours will just not die.  This is not the first time that Barclays has been rumoured to be struggling, with the Bank apparently in talks with the Bank of England around about the time Northern Rock hit the buffers. 

It will be interesting to see what happens with Barclays Bank, as this has the potential to drag the sector lower and lower as investors look for the next casualty.  Credit crunch part two has certainly begun, but when it will end is anyone’s guess.

In a move which is sure to have epercussions for world stock markets when they reopen on Monday, the Dow Jones was rocked on Friday, falling over 2% after a raft of downbeat announcements.  It  seems that the combined effect of announcements by Caterpillar and Bank of America have brought home the delayed impact which the recent credit crunch will have on the economy.  As we all know, if the US sneezes, the rest of the world catches a cold, so influential are their markets.

So what does this mean in the short term?

In what some may see as a healthy correction, you can expect a fall in world wide markets in the short term and it seems inevitable that interest rates in the UK and US may have to move lower to lessen the impact on economies. 

What happens if the economy slows?

A slowing economy can have a massive effect on employment, investment and the government budgets for public services.  The more people unemployed will reduce the tax intake, which will mean either additional borrowing by the treasury or less money for public services.  The economy is like a large ship which is very hard to steer, and takes a long time to change direction.

The authorities now have an excuse to reduce interest rates, and while there have been reductions overseas, the Bank of England have held steady and not taken any knee jerk decisions so far - which has been applauded by many, but criticised by others.  The next few months will be vital!

Another day another rumour about the future of troubled bank, Northern Rock, only this time a new name seems to have entered the fray in the shape of Richard Branson’s Virgin Group.  While this is the latest in a long list of rumours, there does appear to be some substance behind the story.

It has been reported in a number of UK newspapers that Virgin are in talks with various US investors who would supply the finance for the group going forward, with Virgin looking after the day to day business of the bank.  While there is some confusion as to whether they would take overall control of the group, or just take a controlling stake, it seems that something is definitely going on behind the scenes.

As a number of observers have suggested, it looks as though the Northern Rock name may soon disappear, with the bank reverting to the Virgin Money brand if the deal happens.  In a short space of time this would remove the uncertainty about the future of the bank, as well as offering a much strong financial set-up.  The Virgin Money brand is also on the up, and while this would be a big move for the business, it is more than capable of taking on such a venture.

However, there has also been much speculation about other potential offers for the troubled bank, with US and other overseas parties being mentioned.  While the likelihood of a bid battle for the group is unlikely, bearing in mind the current situation, the likelihood of the group surviving in some shape or form seems to be improving with each day.