We have lots of experienced traders on MoneyAM who would be glad to help if you have any trading questions.

Another question.
If interest rates go up this week. Would I be right in thinking that a there is a good chance of defensive stocks would be the place to be in?

The big question is - will the market act rationally?

Personally I don't understand why it should make any difference (Not until the interest rates double from their current level) - it certainly didn't when the rates went down. In fact for example I'd be very surprised if many peoples mortgages will go up much, as they certainly didn't follow very closely the rates on the way down!

With the US interst rates @ 1% and no sign of it increasing, more money should be shifted from the US to the UK if rates do go up (weakening the $) - and in turn strengthing the UK Market!

Have to say guys that I think interest rates increase of a quarter percent is already priced into the market, the problem would be if we were on the end of a half point rise, but I dont see that coming.

If you are holding in a finance company though I would start to be looking to off load. If Gordon Brown hikes up taxes as is generally thought and we get the rates increase these type of companys will come under pressure.

Three Gurus have warned on this in the last few weeks, David Schwartz the stock market historian, Evil Knievil and Edmund Jackson.

On the market as a whole I am rather bullish and am hoping for an xmas spike.

Good luck to everyone.

GF.

In fact for example I'd be very surprised if many peoples mortgages will go up much, as they certainly didn't follow very closely the rates on the way down!

Banks look after themselves.
When rates go down they drop them straight away for savers but drag
their feet for borrowers thus maximising their differential.

When rates go up they will raise the borrowers and drag their
feet for the savers.

Don't forget that 0.25/0.5% has a greater percentage effect at 3% than it will
at say 9.0%.

Melnibone

Spot on Melnibone, and your reasoning also adds weight to the problems Finance companies will face as they borrow from the banks at say x interest rate and pass these onto their customers at xxxx interest rates. I dont beleive the finance companies offer any fixed term loans.

gf.

Many thanks for that, Im going to use your example on another board where too many posters are oblivious to the problems caused by rate hikes. Many thanks again.

croc hi,
i'm hunting around for a long term saving plan with the best growth potential.
ive looked at fidelity.co.uk at there multimanager growth portfolio which on the face of it looks quite good.
I plan to stick away 1k a month.
i would be gratefull if you or anyone could help me out.
Many thanks
Easty

This may be a silly question - but very few varible rate mortgages ever got as low as 3%! Most are around the 5-5.5% level!

easty I am not the best person to ask on this, according to Radio4 the other day the record on many of these savings plans is awful.
Anybody have any good ideas?

How do you take a short position on a share?

I use a basic Self Trade account (still!) is it possible to use this type of account to short shares (not CFD's)?

Maybe I should ring them up!

Only asking as it seems much easier (for me) to spot a stock that's about to drop rather than one about to rise.

-- ricardopage,

You generally need an old fashioned dealer for this. Online execution-only accounts don't allow you to short unless you have an account that allows T+ settlement (ie T+10, T+20). In that case, some will allow you to sell stock that you don't have, provided you cover within the settlement period.

However, in most cases, this is either not allowed, or only allowed due to crap systems that don't check your current holding before letting you trade.

Ricardo
Consider opening a CFD account it can be much less expensive as there is no stamp duty.
D.

Morning all, very basic question for the likes of you guys. p/e ratio means exactly what? many thanks!!

Price to earnings ratio

thanks LW. sorry for sounding really thick but how is that calculated.

Sorry - forgot to actual post something!

It'll take me a while to remind my self the exact, but off the top my head its something like the share price times the number of shares in issue divided by the annual turnover

But I'm wrong, and someone beats me to the correct answer please feel free.

I think the important thing to remember with p/e's is to avoid companies with excessively high ones. A company with a high p/e must have incredibubble growth to justify it's high price - so a good starting point can be to benchmark it against it's competitors in the same sector.

Velocity - I'm surprised by what you say - as I was always told the opposite! Avoid companies with very low ones! Admittedly with companies with excessively high ones, I would take a second look to make sure that it is not just a temporary thing (It can be high just because they sold part of the company, which would have inflated earnings for that year only).

P/E ratio is calculated by dividing the share price by the earnings per share, where the earnings per share is calculated by dividing the profit by the number of shares in issue.

So in long form, the P/E ratio is the share price multiplied by the number of shares issued divided by the annual profit

I started by saying ----keep things simple
On reflection--after reading the posts -- I suggest you keep things simple
AFTER you have reached the stage of knowing above.

little woman - I did a bit of research into it, admittedly a few years ago, but the result was very marked. I looked over a timescale of years at companies with very high p/e's, and companies with very low p/e's - ie the extremes of both. I found that in the case of high p/e's the companies share price consistently underperformed those of the low p/e's for the following number of X years. All I know is that the factual evidence showed that the low p/e stocks racked up superior % share price growth vs their higher priced peers. Saying that, I would be quite happy to be proved wrong & I'm sure there are far better skilled fundamentalists out there than me.