London - Seeking that Pot of Gold

It’s soon pantomime time and as we all know Dick Whittington went to the City of London because he thought the streets were paved with gold.

Ever the optimist, Dick arrived in London, penniless, but within a short space of time - three acts, six changes of scenery and load of camp songs - he became Lord Mayor of London, and his pockets were lined with gold. So he got the loot, got the girl and even his cat had a cheesy grin on its face because he got the cream.

The City of London

Now what has this got to do with The City, and money and big business? Well, just about everything. Because many people come to London and work in The City to seek that pot of gold.

Some do this in banking; some in broking - buying and selling shares. Some become hedge fund managers, although most of the biggest hedge funds are not in the City of London but are located in the West End of London, around Knightsbridge and Mayfair.

A lot of people go into insurance, become solicitors or accountants. City solicitors are making seriously big money - up to £3 million a year in fees - each!

And then there are people who feed the financial folk, deliver their packages, ferry them from meeting to meeting and manage general business. They, too, make plenty of money from their customers. So all in all, we can see that the City is a fount of potential riches to all who enter its gates.

Boots to Quake In

But what happens when everything goes pear shaped? When markets tumble and the rumble of shares crashing reverberates around the City and beyond? When banks get the jitters and stop lending money? And what happens when, seemingly, it happens within a matter of a few hours?

Not a tremendous amount, it seems, when it happens in the City. A few weeks ago the markets were in turmoil. People were predicting doom and gloom. Many were looking for the exit, bailing out, jumping ship and were in a state of panic. The newspapers were full of stories of disasters predicting one black day following another. People wondered: was this the end? Except, of course, some of the hardened traders in The City. And, funnily enough, a few of our Top Traders on the Piggybank Fantasy Stock Exchange.

Shares slid magnificently downwards, and tens, sometimes hundreds of millions of pounds were wiped off the value of companies almost overnight. And whilst many people lost a lot of money on their share holdings - especially those who had shares in banks - there were a few canny individuals who were set to make a packet - and did. They did this by selling their shares when they were on their way down, buying them back when they were all the way down, and selling them again when they went back up again.

Meanwhile on the PIGGYBANK® Fantasy Stock Exchange™... This is exactly what one of our Top Traders did with Northern Rock shares. He’s made nearly £4,000 in three weeks!!

It’s the essence of The City. There is always opportunity, even when things are bad. It’s knowing when to act and how to be bold, and brave.

In the end, despite what we hear in the news about the financial state of things, The City bounces back and makes money.

How to Buy a Bank!

Right in the middle of all the woe, when you’d think there wasn’t a penny left in any one’s piggybank, Royal Bank of Scotland, together with a consortium of banks paid nearly 74 billion euro for one of Europe’s largest banks, the Dutch bank, ABN. To illustrate how much money is actually sloshing about, a relatively small bank, Fortis Bank, which was part of this consortium contributed around 13.2 billion euro to the purchase price. Some small bank - that’s about £9 billion!

The Bank of England

We can always rely on The City. After all, it is the centre of the financial world; and in the middle of it all, The Bank of England, which proved, quite literally and very recently, it does stand by its promise to pay.

Glossary

Hedge Fund:

Not something you find in the garden! This is a specialist, high risk fund which uses advanced investment financial techniques in order to make maximum gains. Not a simple way to invest.

Broker:

An agent who handles orders to buy and sell from its investors or clients. Brokers often charge a commission for the work they perform “the trade”. Brokers are often a member of the London Stock Exchange and regulated by the Financial Services Authority (FSA).

Trader:

Actually does the buying and selling of stocks and shares. A trader can be doing the trades for him or her self, or on behalf of banks.

Consortium:

A group of people, companies or banking institutions that club together for a common purpose. They usually do this because when the amount they have to invest is so large, it’s better to divide it up - and spread the risk!

Acquisition:

A term used to describe the takeover or buying of a company by another. Also called a “takeover”. An acquisition is done by purchasing the shares of the target company. Sometimes these takeovers are friendly (by agreement) or hostile (the target doesn’t want to be taken over!). The City Code on Takeovers governs how acquisitions of listed companies (companies on the stock exchange) should be made.

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