Sunday, August 28, 2011

Deposit Rates Could Turn Negative in This Bizarro World

Bank’s don’t want your money.  They have the benefit of cheaper wholesale money vs. retail money, and just like a self-storage locker it costs them to secure, insure and heat your money.  If it’s cheaper to buy wholesale vs. used, then why buy used?

This article makes some mentions about the 80/20 rule, and currently we’re in the 80% fear, 20% greed mode.  Retirees are joining their friends at staggering levels, and pretty soon there might be more capital sitting in banks than there is deployed to real assets, and companies are cash-rich. 

Watch the next few years as the adult demographic segment moves to the elderly demographic segment, and 20% of the US population is adult, 80% is elderly or child. 

From Wolfram Alpha, some info on the US population.

population | 309 million people  (world rank: 3rd)  (2010 estimate)\npopulation density | 33.7 people\/km^2  (people per square kilometer)  (world rank: 178th)  (2010 estimate)\npopulation growth | 0.969% per year  (world rank: 138th)  (2008 estimate)\nlife expectancy | 78.1 years  (world rank: 50th)  (2009 estimate)\nmedian age | 36.7 years  (world rank: 56th)  (2009 estimate)


Distribution:

 | child | adult | elderly | all\nmale | 10.3% | 33.42% | 5.501% | 49.22%\nfemale | 9.865% | 33.57% | 7.347% | 50.78%\nall | 20.16% | 66.99% | 12.85% | 100%

The 30-year bond has surpassed commodities as the investment of choice, signaling great fear in the markets as investors park their Ferraris and drive their winter-beater BMWs.  When it flips around, watch for money to fall into things like food, precious metals, and energy.  Until we get another boom of tweens and teens and twenty-somethings, consumer and discretionary will continue to fall by the wayside.

For those retirees having more than $50 million in the bank, watch for your bank manager to treat you like Tony Montana.  We just can’t handle that much money Tony, our investors are asking questions!

Back in November, Geller predicted that a major bank would begin to charge depositors for deposit accounts of over a certain size and earlier in August, the Bank of New York Mellon sent a letter to institutional depositors informing them that the bank would begin to charge fees on deposits above $50 million.

Deposit Rates Could Turn Negative in This Bizarro World

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