Coming to a bank near you – fees on big deposits
- Investor Demand for Bond Funds Relative to Stocks Is Highest on Record 8/11. Basically investors believe there will be more monetary easing to come, meaning lower rates, hence appreciation in bonds.
- NYT – Hard Times in Venezuela Breed Malaria as Desperate Flock to Mines 8/15. As if stuff wasn’t bad enough…
- Tom Mitchell and Yuan Yang of the Financial Times highlighted the IMF’s annual review of China – main concern: credit risk.
- “Almost half of the shadow banking products that have fueled China’s credit boom carry an ‘elevated’ risk of default, the International Monetary Fund has warned in its annual review of the world’s second-largest economy.”
- “‘Wealth management products’ that allow banks to channel credit to local governments, property developers and industries struggling to access normal bank loans grew almost 50% to Rmb40tn ($6tn) last year, according to the IMF’s annual ‘Article IV’ review.”
- “While the IMF noted that China’s big four state banks have relatively small exposure to wealth management products, it added that ‘several other listed banks and [unlisted banks] in aggregate have exposures that are several times their capital.’ Just over Rmb15tn of China’s outstanding wealth management products are held by banks, accounting for 8% of their assets and more than 90% of the capital buffers that protect them from losses.”
- It’s not all bad, just part of the process of the downshift.
- The Economist provided some context of the total tally of financial settlements resulting from the 2008 financial crisis.
- “All told, there have been 188 settlements since 2009, costing $219 billion, according to KBW, an investment bank. “
- “Eleven firms have paid fines in excess of 10% of their market capitalization, with Bank of America having spent the most in absolute terms ($77 billion) and in relation to its net worth (50%).”
- Mauldin Economics – The Bond Rally of a Lifetime – Gary Shilling 8/10
- Basically, if you believe interest rates will continue to go down, then long-dated (20-years plus) sovereign debt is the way to go, especially 30-year U.S. Treasuries (since 1981, this has been a very good call).
- Mauldin Economics – The Crises That Could Bring Down Putin – George Friedman 8/15
- FT – The rise and tragic fall of German internet star – Guy Chazan 8/15
- Look for this story to be made into a made-for-TV movie
- FT – China’s economic policy risk becomes acute – Anthony Chan, Brad Gibson, and Jenny Zeng (AllianceBernstein) 8/17
FT – Banks look for cheap way to store cash piles as rates go negative – Claire Jones and James Shotter 8/16
The Economist – Purchasing power: More bang for your buck 8/13
Bloomberg – Norway Oil Fund Looks Into Trimming $520 Billion Stock Portfolio – Mikael Holter and Sveinung Sleire 8/17
Economist – The world’s most liveable cities 8/18
*Note: bold emphasis is mine, italic sections are from the articles.
German bank charges negative rates on large deposits. James Shotter. Financial Times. 11 Aug. 2016.
The longer negative rates stick around and the deeper they go, expect more of this to follow…
“A Bavarian bank has become the second German lender to say it will levy a negative interest rate on private customers’ deposits, in the latest sign of the strain that the European Central Bank’s monetary policy is putting on the country’s financial system.”
“In an effort to boost the eurozone’s flagging economy, the ECB has slashed interest rates to record lows, and, since March, has charged a 0.4% fee on excess deposits left with it by eurozone banks.”
“The co-operative bank in Gmund am Tegernsee, a small municipality about 50km south of Munich, said that from September 1, it would levy a ‘custodian charge’ of 0.4% on deposits above €100,000.”
“The decision follows a similar move by Skatbank, a small German co-operative bank in the east of the country, which introduced negative interest rates for private clients on balances above €500,000 in 2014.”
“German banks are considering a variety of strategies in response to the low interest rate environment. These range from introducing fees for services previously offered for free, such as paper account statements, to keeping cash in vaults rather than parking it with the ECB.”
Other Interesting Articles
- War against crime in the Philippines – A harvest of lead: Rodrigo Duterte is living up to his promise to fight crime by shooting first and asking questions later
- Nothing to see here: A number of beauty spots are severely restricting tourism
- Pensions – No love, actuary: A report on American pension funds is controversially shelved
Bloomberg – Barrack Says U.S. Real Estate Market Is Getting ‘Bubblicious’ 8/15
Contra Corner – The Daily Data Dive: Since 2007 Stocks Up 54%, Industrial Production Up 0.6% 8/18
Economist – Vladimir Putin’s powerful right-hand man steps down 8/12
FT – Investors stockpile cash to offset economic despair 8/11
FT – Record-breaking US stocks are a sideshow next to bond bonanza 8/12
FT – ‘Irrational exuberance’? Beware Bond Tantrum II – BAML 8/12
FT – London rents fall for first time in six years 8/15
FT – The end of deflation in China will be felt around the world 8/15
FT – Irrational exuberance begins to surface in US stock market 8/17
FT – Dollar hedging costs rise for yen and euro investors 8/17
FT – Hedge fund investors push for ‘hard hurdles’ 8/17
FT – If peak oil (demand) arrives, investors will need to get smarter 8/18
FT – South Korea in show of power as tensions rise with North 8/18
GlobeSt.com – SL Green Sells Stake In Midtown South Office Tower 8/11
NYT – Trillions in Murky Investments Could Rock China’s Economy 8/12
Reuters – Billionaire investors turn bearish as U.S. stocks hit record highs 8/15
WSJ – Pumped Up: Renewables Growth Revives Old Energy-Storage Method 7/22
WSJ – How Junk Bonds Can Look Attractive and Scary at the Same Time 8/17