Introduction

With base rates at historical lows, many savers and investors are frustrated with the interest rates that are being offered by banks and other financial institutions.

In fact it will not surprise you to learn that a bank considers its customers as it cheapest source of funds, offering less than half a percent on current accounts and up to a generous 3 to 4 % on longer term savings and bonds.

With credit again starting to become tight between banks the London Interbank Offer Rate known as LIBOR is starting to rise well above the bank base rate. With the base rate at 0.5% 1 week Libor is now 0.91% and 1 year Libor is now 1.699%.

If you also factor in that inflation is running around 4% to 4.5% with the current interest rates being offered, savers and investors are losing purchasing power by holding their savings in the banks.

It used to be considered very safe to hold your money in a savings account, but as the current credit crisis has highlighted the banks are not as safe as savers once thought. Even though most governments around the world have guarantees in place to protect savers funds, it should be noted these guarantees only cover in theUKup to £85,000. This guarantee also only covers a financial group, therefore if your funds add up to a total above this amount across a number of institutions all covered by one banking licence you are still running a risk.

Make sure your funds are in different banking groups. You can check which banks belong to which group at the FSA website. For example both RBS & Nat west are covered by the RBS banking licence.

It should be remembered that income tax needs to be deducted from those very generous rates offered by the high street.

The Search for Alternatives

A lot of savvy investors are now looking for alternatives to the traditional high street bank or building society in order to preserve their capital against the ravages of inflation. Remember at a time of high inflation borrowers benefit at the expense of savers as the true value of their debt is eroded by inflation. The government wants this as it reduces the real value of the government debt and helps them manage the servicing of that debt.

What we have now is an environment where Governments around the world are in effect penalising prudent savers and investors in order to help out the profligate spending of the government and domestic borrowers.

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There are now a number of ways that individuals can now become banks themselves and cut out the traditional banks & building societies. It should be noted that these alternatives though paying a higher return do come with some form of risk either in terms of credit risk (i.e. the borrower defaults on their loan, a bit like Greece is about to do) or liquidity risk (i.e. you will not have access to your funds for a given period of time)

The Growth of Peer to Peer Lending

This is a term that has been used in the press to describe borrowing and lending between parties that does not involve a traditional financial institution. Examples of which can be credit unions or some of the new internet based business such as Zopa.com

Zopa is an internet based business that matches up borrowers and lenders on its website, with the advantage of providing higher returns to lenders and lower rates to borrowers. Zopa takes a small commission between the two parties which is significantly lower than the running costs of a bank.

Zopa offers a number of different markets that the lender can choose from, they include the following:

36 month loans 60 month loans Credit score individuals A*, A,B & C Young people.

Interest rates on loans start at around 5.9% pa for a 36 month loan to an A* borrower to 9% to a young person for the same term.

60 month rates are slightly higher and start at 7% and go to 9.8%. The higher rates reflect the fact that your money is tied up for longer.

Zopa tries to manage the risk of default on loans by undertaking a detailed credit scoring on the borrower which is considered much more stringent than that undertaken by the banks.

Risk is also managed further by allocating your funds across a number of different borrowers so that if anyone defaults your loss is minimized. Zopa states that if you have over £500 in the system your money will be spread across over 50 different borrowers.

If you need to withdraw your funds prior to the lending period being completed, there is a facility to input a request to withdraw your funds. The system will match your withdrawal with another lender that wants to put their money into the system and that will enable you to withdraw your funds.

A Higher Return Alternative to Zopa

Traditionally Zopa is for smaller lenders who want to earn higher rates than those offered by the banks.

If you have an amount of over £10,000 to invest there are a number of better options out there where your return can achieve returns of 12% per annum.

A number of bridging companies borrow funds from investors at 1% per month and then lend to individuals and businesses at higher rates. The money is secured against the value of the property with the bridging company having a first charge on the property purchased.

In some cases the bridging company with take a floating charge over other assets of the individual or business if they don’t feel there is sufficient security for the loan.

The bridging period can be for as little as a day normally up to 12 months with the average being 6 months. This is normally the period where a borrower can refinance with a mortgage and reduce their borrowing costs.

There are a number of companies in the market place that pay these attractive rates but, you must feel comfortable that the bridging company is well managed and there legal documentation is well written to protect the security of your funds.

It should be noted that a good bridging company will never expect you to deposit the funds in their account. The funds will normally go direct into an escrow account managed by a solicitor with the sole intention of lending against a particular property purchase. If a company asked you to transfer your funds into their account directly, DO NOT DOES IT.

A well managed bridging company will have a number of deals in the pipeline i.e. property investors wanting to borrow funds as well as a number of investors of funds to match the amounts required.

Summary

With bank interest rates so low, investors are looking for better returns outside the traditional financial institutions. Before lending your funds to an alternative organisation makes sure you understand the risks that you may be taking either through credit loss or liquidity.  Read the legal documentation thoroughly and make sure you are comfortable with the terms & conditions.

Mark Skeels is the Author and Owner ofhttp://www.alternativeinvestmentsinfo.comHe specialises in seeking out high return investments from non traditional sources,  which can be invested in by the average investor.  He seeks to bring knowledge to help individuals take control of their own finances and  not rely on the expensive self serving advice provided by those in the Financial Services industry. Article Source

Understanding the direction of the market as well as the economic activity will lead to profitable trades. Keep up with our live news feed with TraderMongers.com!

S&P 500

The market previously rallied up for the past week in anticipation for Friday’s quadruple witching day. Sideways trading occurred as expiration of contracts for all stock index futures, stock index options, stock options, and single stock futures took place.

This Wednesday on June 23rd we have the FOMC meeting, which will give us a direction on where interest rates will be heading. With jobless claims still high and the economy still recovering expect the interest rates to be kept the same however watch for any indication in the wording once the FOMC announcement is made.

Currently, ‘shadow inflation’ has been on the rise as airlines are adding additional subcharges, telecommunications are increasing pricing, and banks are adding additional fees for maintaining accounts. This type of inflation will erode potential recovery and consumer savings.

Looking at the technical level on the 5 minute chart for the S&P 500 Index, we are currently below the January 2010 resistance level which starts at the 1125 level. Breaking this level could mean a huge push upwards as investors and traders return into the markets. However summer has already started so be cautious of low volume trading days ahead and expect days with quick rallies followed quick falls.

On the daily chart of the S&P 500, we are between the 144 and 200 day moving averages of 1110 and 1087. Do not expect any major movements unless we break out of this trading range.

-         If we break above 1110 then expect the January 2010 resistance levels starting a 1125 to hold back the market during these low volume summer months.

-         If we break below 1087 then be wary of picking bottoms in the market as we may be expect to go even lower due to the slow down in manufacturing, increasing jobless claims, the European debt crisis, and the fears of another ‘flash crash’

The Chicago Board Options Exchange (CBOE) Market Volatility Index (VIX) measures options activity within the market and is widely used tracking the S&P 500. A common trading strategy for traders and investors includes a VIX level of 30 or above means an immediate switch from equities to cash. Traders and investors are retreating from the markets and finding safety and protection within the Treasuries, gold, and the dollar.

The Market Volatility Index is currently below 30, which usually means that traders and investors are switching from cash to riskier assets such as equities and other financial instruments. If the volatility breaks through the 25 level then the markets show an influx of equity purchases. The 25 level is a major level of support for CBOE Market Volatility Index as it is the convergence of the 144 and 200 day moving averages. This index must break down below 25 or bounce above 30 for the markets to show a consistent momentum and direction.

Summary of Major Pivot Levels

1219: S&P 500 52 Week High

Technical Levels Natural Support and Resistance

1125: January 2010 Resistance Level

1100: Natural Support Level

1075: Natural Support Level

Technical Levels 5 Minute Chart

1115: 144 Day Fibonacci Moving Average on 5 Minute Chart

1114: 200 Day Fibonacci Moving Average on 5 Minute Chart

Technical Levels Daily Minute Chart

1110: 144 Day Fibonacci Moving Average on Daily Chart

1087: 200 Day Fibonacci Moving Average on Daily Chart

Monday Economic Calendar

No Economic Numbers Scheduled – Watch European and Asian Markets

3 – Month Bill Auction / 11.30 AM

6 – Month Bill Auction / 11.30 AM

Disclaimer

The content in this website is provided for educational and informational purposes only. We offer no investment advice and nothing in this material should be construed as such. There is risk of loss when you invest; past performance is never a guarantee of future performance. Trading is the sole responsibility of the individual. No reader should act on the basis of any matter contained herein without getting appropriate professional advice. Every investor or trader should consider all offerings of products and services on their own merits and for suitability to the individual’s personal needs and circumstances.

- About the Author: Shamim Ziyaaudhin is one of the editors of TraderMongers.com a one stop trading news feed source for worldwide traders and investors. Their philosophy is to establish the standard for providing market news feed that is comprehensive, accurate, and concise. Providing technical and fundamental trading setups, economic numbers, and calendar events throughout the trading day. Shamim has a Masters in Business Administration from Fairleigh Dickinson University and holds a degree in Psychology from Rutgers University. Click here to subscribe to Tradermongers E- News Article Source

Gold is the most popular precious metal as an investment with investors having a variety of ways to gain exposure to this asset class ranging from bullion, coin or jewellery ownership right the way through to certificates, exchange traded funds, derivatives or shares.

Capital Spreads offer exposure through spread betting with their “Rolling Gold” product.

What makes it move?

Like all investments the price of Gold is ultimately driven by supply and demand but unlike some other commodities most of the Gold that has ever been mined is still in existence and could potentially come onto the market if the price was attractive enough. This makes the demand side of the equation a greater factor than the supply side with sentiment being a much bigger driver of prices than the annual production of Gold.  So what makes DEMAND for gold go up?

Inflation.

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time. The consequence of which is the loss of value of money..in effect your hard earned money will buy you less over time. Gold is the only asset class that has historically kept its buying power against a back drop of inflation. If Investors are concerned about inflation then they will buy Gold and when they are less worried about inflation they will sell gold.

Safe Haven.

Often in an economic crisis investors will sell risky asset classes (like equities) to buy safer asset classes such as government bonds and Gold. When the world looks like a risky place for investors we sometimes see what is known as “a flight to quality” and investors will scramble to put their money in an area that is considered safe in a time of uncertainty.

USD

Gold is priced in USD’s and historically has an inverse relationship to the currency i.e. if the $ weakens then the gold price should rise as Investors try to protect themselves from a falling $ by buying Gold which should keep its relative purchasing power. In times of uncertainty this relationship can break down as both Gold and the $ are considered “safe havens” and investors may put money in both asset classes driving prices in both higher together.

Seasonal Demand.

The Indian wedding season runs from late September to December and wealthy Indian brides can be draped in as much as $1.5 mil of 24 carat gold. It is such an important part of the culture that if you can’t afford any gold at your wedding then you simply don’t get married! According to research by JP Morgan the Indian wedding season has boosted the price of Gold every year since 2002 with September showing the biggest average increase. Past performance is no guarantee of future movements but this seasonal demand does place a natural upward bias on the commodity during those months.

We are a free resource for spread betters providing REAL-TIME analysis, news and data in a clear format to give you the best chance of profiting from spread betting.

Article Source:http://www.articlesbase.com/day-trading-articles/how-to-trade-gold-1682139.html

Factors That Influence Forex Market Trends

The Foreign Exchange or Forex is the largest market today for stock trading, and it is continually growing with more and more people investing in it. However, as promising as this market may be when it comes to profit, like any other trade it can be very volatile as well.

It is therefore important to be familiar with certain factors that influence trends in the Forex market if you are decided in joining this arena. After all, acquainting yourself with the many scenarios that can cause currencies to go up or down can help you a lot in making decisions for when to buy or sell.

There are basically three major factors that affect the Foreign Exchange –a country’s economy, political conditions and market psychology.

Economy

Economic factors are the most basic things that create changes in a country’s currency. When such economic conditions as a budget deficit or surplus is present within a country, there will surely be reactions in the market and values will be reflected on currencies. Other conditions may also include inflation trends, and the general economic growth of the country.

The more prosperous a country’s economy is, the more investors will be able to adhere to doing trade in a more positive attitude. Such indicators as a growth in a nation’s gross domestic product (GDP), employment levels and retail sales among others will basically attract more investors and that nation’s currency value will likely go up.

Political Conditions

Another very important factor that influence trends in Forex, are the conditions of a country’s political sector. This is because political instability or turmoil can generally create negative fluctuations to an economy. But if such instances occur wherein a country may rise above political obstacles, the opposite may occur and the economy may improve.

Events in a region can surely create negative or positive interest among investors for a nation’s currency. And so, such conditions surely influence the trends for demands and prices of a certain currency.

Market Psychology

Of course, the perception of traders and investors will greatly influence the Foreign Exchange market in so many ways. After all, the market is highly dependent on whether or not people would want to invest on a country’s economy in order to determine whether currency prices will go up or down.

For example, such conditions wherein unsettling international events may happen, then under the “flight of quality” rule, people would generally want to look for a safe haven for their investments. Whenever there is a greater demand for a certain country’s economy, then a higher price will be given to buyers and the currency’s value will go up and become stronger.

Other events that contribute to traders’ perceptions may be long-term trends where people invest based on what they have seen for a long period and time, and even economic numbers where people may base their investments depending on what numbers show a greater value.

The market in Foreign Exchange is often unpredictable and fluctuating. Therefore if you are interested in doing trades in this market, make sure that you take the time to be knowledgeable about good strategies that can help you play the game.

But more importantly, keep in updating yourself with the different economic trends in the international scene. After all, this currency market would greatly revolve upon events that would occur in the different countries. Familiarizing yourself with the factors that affect the Forex will surely help you make better decisions.