Dear Wizard Learner

We are pleased to announce that Wizard Learning has been short listed for the Online Finance Awards in the category of Best Online Educational Initiative. We are up against CMC Markets, Friends Provident, JP Morgan Asset Management and Scottish Widows. The winner will be announced at the awards ceremony on 19 November. Thanks very much to everyone who voted for us.

The world economy: How on earth did we all get into this mess?
Following a turbulent few months, the question many are asking at the moment is "how on earth did we all get into this mess?" To view the timeline of events click here, this is taken from our October CPD - Monthly notes and assessments product.

In simple terms, many banks borrowed large sums of money to invest in vehicles which supported US mortgage lenders in what we now know as the sub prime market i.e. those borrowers who ordinarily couldn’t afford mortgages unless on special deals. In the last year or two, a large number of these borrowers failed to repay their mortgages and the value of the vehicles supporting them as a result became worthless or at best, extremely difficult to value.

This left the investment banks with huge holes in their balance sheets looking for supporters to bail them out. In the case of Lehman in the US, the time had run out for them to find a rescue package. This also illustrates that whilst other banks were interested in buying the business, they would only do so if the liabilities were limited by the US government underwriting the loans.

So how was this allowed to happen in the first place with banks able to expose themselves in a way that was not supported by the cash in their businesses? Huge leveraged positions using special investment vehicles put the system in this position. Hopefully regulatory authorities will want to ensure this cannot happen again and will, once the system has stabilised, set a new regime to monitor and regulate this area.

There is still great uncertainty about the amount of liabilities in the market and it is this which is making banks reluctant to lend to each other and hence the difficulty in finding credit. This ultimately leads to a shortage of funding in the retail mortgage market and is the reason why loans remain expensive compared to the underlying interest rate.

At the moment, it is hoped that the domino effect of collapse will stop with governments such as that of the UK developing rescue plans to bail out banks, and provide capital in order that they can start lending in the markets to businesses individuals and even each other!

Certainly the equity markets have calmed a little after the turmoil of last week which saw the FTSE 100 move well below the 4,000 mark.
This site isWizard Learning is run by Mike Goldsmith a Chartered Financial Planner in association with team of highly qualified, industry experienced individuals in order to assist finance professionals pass industry exams and help meet their CPD requirements. We provide a wide variety of online learning solutions for recognised industry qualifications as well as online training on key skills.
At the moment, many may feel that the banking system and financial companies are not perhaps the place to invest although situations like this will inevitably create some great opportunities for well placed managers and investors to buy shares in sound businesses cheaply!


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Wizard Learning
www.wizardlearning.com

Wizard Learning is run by Mike Goldsmith a Chartered Financial Planner in association with a team of highly qualified, industry experienced individuals in order to assist finance professionals pass industry exams and help meet their CPD requirements. We provide a wide variety of online learning solutions for recognised industry qualifications as well as online training on key skills.

Contact us if you have any comments or questions.

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