Don’t Expect Higher Deposit Rates

Tyler Linsten Uncategorized

The Wall Street Journal is out with a piece on how interest rates are up, and claims (and pretty much fails) to explain why rates on bank deposits (checking and savings) aren’t up.

Here’s an idea about why deposit rates aren’t up, and likely will go up very slowly if rates continue to rise: less competition.

The chart above shows how the largest five banks have seen their assets explode higher right along with how much market share they control. Since 1990, you can see the top five went from 10% to roughly 40% of all assets.

What’s the big deal about competition for deposit rates? Let’s think about being a banker. If you have less small-to-midsize competitors then it’s a lot easier to act as an oligopoly (a small group in power) with your other banker friends. You can raise rates on loans, suppress the amounts you pay on deposits….and profit big time. Less competition and more cooperation among the big banks should mean that the pace of deposit rate increases will be tempered because no banks with any clout in the market will try to gain market share since they already own it!

What to do?

Investors would be wise to be systematic about how much cash they’re sitting on. Keep checking account balances low, max out an emergency savings fund with a reasonable FDIC-insured yield (at least 1% right now), and avoid having excess cash sitting around. You won’t get rich with an indefinite 1% yield so it’s crucial investors make smart decisions about striking the right balance between liquidity (yes, with the big bankers) and long-term investments (in stock and bond markets).

2016’s Investing Garbage

Tyler Linsten Investing, Personal Finance

I like to make sure you know I’m doing my homework, Dear Reader. As a bit of a contrarian (and weirdo?), I like to take pictures or screenshots of some of the stupid investing-related stuff I come across on either the internet or print. The garbage accumulates in my Google Photos library and it’s fun to see what has piled up over a given year.

Consider this post to be a visual “spam folder” for the year 2016. Here are some of my favorites:

BIG MONEY!*

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*You’d need roughly $436,000 invested in your Rewards Money Market Account to earn a thousand dollars interest over their five months teaser term. Don’t move up your retirement date just yet.

Beware the Golden Shoes!

This was one of those “40 Under 40” photo ops where financial advisor recipients may or may not have paid for the right to appear in this picture. The humble parts of the investing profession are working hard to reinforce their reputation as working for clients while remaining grounded – so how, exactly, Golden Shoes Guy(!), does your footwear choice move that cause forward?

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The Wolf of Wall Street was not meant to be a how-to guide

Self-explanatory Garbage Post from Business Insider

There’s always some technical indicator predicting the next crash and coincidentally they tend to occur most frequently on slow summer news days. No, we didn’t crash. Yes, equity markets are pretty much at all-time highs right now. Avoid these articles – always.

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An Homage to “Step Brothers?”

This picture was taken in Seattle’s booming/bubbly SoDo district.

Fake-sounding business name? Check. Unrelated, vague business units? Check. At least they appear to be diversified! Sort of.

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You make the call:

“Prestige Worldwide: the first word in entertainment.

Management, financial portfolios, insurance, computers, black leather gloves, research and development.

Putting in the man hours to study the science of what you need.

Last week we put liquid paper on a bee and it…died.

Security.

Investors? Possibly you!”

All jokes aside, I wish you luck, Logic 20/20.

Bad Advice in the Reach for Yield

The following except of an article was highlighting how to earn more in a low-rate environment. I shudder when I think of how many people are trying to get creative instead of remaining disciplined.  You will be in for a rude awakening if you start to choose stocks versus bonds based solely on their yields.

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Russian 401(k) Roulette

Choose wisely! You only have a 25% chance of survival in this game.

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It only seems proper to conclude with my favorite .GIF of all time:

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Why We Plan

Tyler Linsten Longshore, Personal Finance

To every smart investor, diversification means more than just an investment portfolio composed of varying asset classes. Diversification must also be present in potential sources of income. Consider this development for Teamsters union members in New York:

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New York Teamsters relying solely on pension benefits and Social Security are in tough shape right now. Both are expected to be cut. To have the pension/Social Security rug pulled from under retirees, or those near retirement, is a major risk which should be accounted for in any financial plan.

Further: the plan in reference is a multi-employer pension plan, in an industry shaken by the threats of automation and declining union influence. I don’t have to explain the parallels to waterfront workers living in the wake of Hanjin’s bankruptcy.

The only thing to do: plan. Smart saving and investment decisions made well before retirement are quickly becoming the most important factors of a sustainable retirement.

 

Shipping’s Lehman Moment?

Tyler Linsten Longshore

Or just a blip on the radar? However history remembers Hanjin’s bankruptcy, the parallels are worth considering.

Disclaimer: this is just a fun speculative exercise. This is not a prediction nor a prognostication. You can see my other Hanjin post here

Some industry commentators surprisingly point to conspiracy theory, which I seriously doubt. In the end, this is likely a conclusion the container shipping industry just simply deserves.

Could the financial industry’s notorious crisis, ten years prior, be a reasonable comparison? They are both very important pieces of the global economy, after all. Let’s have some fun with questions and headlines. First:

Debt-fueled expansion with questionable fundamentals?

Then:

 

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We all know how this worked out

 

Now:

 

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Forced consolidation between strange bedfellows?

Then:

 

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Now:

 

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A major industry player allowed to slip away?

Then:

 

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Now:

 

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Tongue-in-cheek comparisons aside, the next few weeks are going to be very interesting. Let’s just hope Hanjin’s bankruptcy is indeed a blip and container lines are on the road to recovery.