Banks are headed towards rough waters and it's not just me who believes so. You may be getting the rose-colored glasses edition from the media and Wall Streeet (ahem, banks!) but all you have to do is read past the soundbyte laden 1st paragraph or so. Take this recent article from Bloomberg quoting the FDIC: FDIC Says Bank Profits Rose in Third Quarter, Warns of Credit Risk [8]. We're going to ignore the credit risks potion (which is an entire article on its own) and focus on a singe sentence where the FDIC agrees with Reggie in that the Fed's monetary policy is B@llsh1t!: [9]
"In the environment of low rates, interest-rate risk and credit risk have increased..."
Let's parse this statement. "In the environment of low rates, intereste -rate risks and credit risks have increase..." So, the premium on the interest that you are charged for being (or operating in a) high risk is not being charged, despite the fact said risks "have increased"?!?!?! Basically, teh safety cushion that modern markets price into higher risks has been removed and rates are low despite the fact that the risks about dicate rates should be high? Tell me, what's wrong with this picture?
Here's another snippet causing me to reminisce on a blast from the past:
"Revenue growth for the industry as a whole has been modest since 2009,” he said. “This is partly a reflection of the challenging interest-rate environment.”
Uh huh! Listen these clips from 2011 below...
You've heard me pontificate on these topics before...
- Mark-to-Fantasy Becomes an Ugly Reality with the Impact of (S&P) 500 Enrons [10]
- ... le in most mark to model contraptions is the prevailing risk free interest rate - the same (not so) risk free rate that the world's central banks (including the Fed) are trying to so hard to synthetically su ...
- Created on 01 November 2015
- The Global Currency War - USA Edition [11]
- CNBC ran a very interesting article this morning, basically laying out the groundwork for the Fed to push interest rates lower - that's right, lower! This video puts it into perspective. Th ...
- Created on 15 October 2015
- Reggie Middleton's Prognosticated Market Crash and False Positives in Interest Rate Raise Promises [12]
- ... forbid the Fed actually follows up on one of its many bluffs and does inch interest rates up. The real estate markets will collapse. Those who visit NYC and Miami know there's rampant construction ala 2007 ...
- Created on 24 August 2015
- As I Promised, the Nordic States' Central Bank QE Program Slides Backwards and Starts To Collapse [13]
- ... xed exchange rate Free capital movement (absence of capital controls) An independent monetary policy It is both a hypothesis based on the uncovered interest rate parity condit ...
- Created on 26 June 2015
- How to Blow a Trillion Dollars and Look Like You (Don't) Know What You're Doing While Blowing It [14]
- ... Let's see how much tens of billions euros and a trillion dollar promise is worth in terms of buying time from an interest rate and currency storm... The Trillion Dollar Promise worked for 4 month ...
- Created on 06 May 2015
- 2010 Contrarian Prediction of the Disastrous Consequences of ZIRP & Free Money Policy In the Banking System, Year 5 [15]
- ... ing affected by low interest rates— they are killing its spread income. Now, go to the 0:55 marker in this video and listen for a minute or two, then continue reading. Chairman and Chief Executive ...
- Created on 17 April 2015