Tuesday, May 24, 2016

Wells Fargo Braces for ZIRP

May 24, 2016
Wells Fargo lowers targets for returns on equity, assets

Since Wells Fargo's 2014 guidance, it has taken actions to prepare for lower interest rates for a longer period of time. Banks typically do so by getting rid of assets that are sensitive to high rates, and shifting to assets that perform well during low rates. As a result, Wells Fargo said it will benefit less if interest rates suddenly jolt upward.

I wonder what prompted them to brace for a lower interest rate environment? Could it be their 0.01% Way2Save® Savings account? They must already have all the deposits they need, because they certainly aren't getting my money with that offer! Seriously.

Can you say deposit glut?

May 13, 2016
Dennis Gartman: I’m becoming more bullish on gold

The problem with low or negative interest rates is that they encourage people to take money out of banks and hold cash, which is deflationary, he added.

And yet, bank deposits continue to rise. Deposit glut I say. Deflationary I could buy, but the only bank run I see is running to the bank to deposit money. How else do you explain a 0.01% savings account even after the Fed raised rates?

Look. Who are you going to believe? Dennis Gartman talking on CNBC, on a Friday the 13th no less, or a random sarcastic anonymous barefooted sleep-deprived blogger on the internet posting from the comfort of his own couch? Oh, please. It's not even close at all! Dennis Gartman? You're insane! I am deeply offended!

Doesn't change my opinion though. Deposit glut. Makes it hard to make money off of money. Very hard. And it won't be getting any easier either. Sigh.

This is not investment advice.


Who Struck John said...

The lower the returns, the greater the need to save, the lower the returns become.

Stagflationary Mark said...

Which is awesome, because when there's a sale, the more we save the more we spend! ;)