Banks swimming in money

[USGrant1962]

Per this article: https://www.cnbc.com/2020/06/21/ban...-in-deposits-since-coronavirus-first-hit.html

$2 trillion has been deposited in banks since January. "The personal savings rate hit a record 33% in April..." and "Personal income actually climbed 10.5% that month..." from stimulus checks and unemployment benefits. "...checking accounts below $5,000 in balances actually had up to 40% more money in them than before the pandemic."

Looking at the source, the flow flattened out in May/June, but banks are still sitting on $2.5T more assets than in January.

https://www.federalreserve.gov/releases/h8/current/ See Table H.8; Page 3, line 33 for $B.

Obviously spending has been down sharply. To me, this means bank account interest rates will continue down, and eventually much of this cash will be spent or moved into stocks and bonds.

 

[VanWinkle]

With no sports gambling, the young and restless day traders are bringing new money into the market. My own 32 year old son is playing with oil futures and depressed airline and cruise stocks. He did follow my advice, and keep it to an amount he could lose without affecting his life.

 

[audreyh1]

Just like in 2008, the US savings rate spikes during tough economic times. If I remember correctly, the US savings rate remained elevated for a number of years, so that extra savings does not get turned into spending quickly.

Yes, the US personal savings rate kept climbing and didn’t drop until 2013, and didn’t return to the low pre-2008 levels. But this recent spike blows away the 2008-2013 levels!
https://fred.stlouisfed.org/series/PSAVERT

 

[Kwirk]

My savings rate has certainly spiked. I don't go to restaurants, I don't fly, I don't stay in hotels, and I can't take my grandchildren to movies or parks. My wife has no use for new jewelry, new clothes, or new shoes.

Maybe I'll move to a better house but that sounds like work.

 

[Koolau]

My savings rate has certainly spiked. I don't go to restaurants, I don't fly, I don't stay in hotels, and I can't take my grandchildren to movies or parks. My wife has no use for new jewelry, new clothes, or new shoes.

Maybe I'll move to a better house but that sounds like work.

We have noticed the same thing. We don't go out (except for groceries). We finally bought some take out a couple of days ago ($14). Last time I bought gas was in March and I've driven less than 100 miles. Our electricity might have gone up $5 but most things are way down (esp credit card statements.)

We had fully expected to take our usual RMD (required). But now that we are not required due to Covid 19, we may not need to. Playing it by ear, but we just are not spending anymore. YMMV

 

[Sunset]

We have noticed the same thing. We don't go out (except for groceries). We finally bought some take out a couple of days ago ($14). Last time I bought gas was in March and I've driven less than 100 miles. Our electricity might have gone up $5 but most things are way down (esp credit card statements.)

We had fully expected to take our usual RMD (required). But now that we are not required due to Covid 19, we may not need to. Playing it by ear, but we just are not spending anymore. YMMV

Last time I filled the vehicle was Feb. Can only go 100 more miles until it's empty, so I'll fill one of these weeks

Since RMD is not required, you can instead do a conversion to Roth of the same amount instead (or more) which is a great benefit for some RMD folks.

 

[frank]

no wonder the banks are flush with cash. no cd interest rates worth looking at, bank interest in general pays nothing, but they still loan out money to people and issue credit cards with high interest rates.

 

[Freedom56]

Many banks are in serious trouble. Their interest rate margins have been virtually wiped out. The have a growing number of defaults and waves of bankruptcies in the horizon. The number of mortgages in forbearance continues to grow. Lending money to people and businesses that can't pay won't help them out.

 

[Sunset]

Many banks are in serious trouble. Their interest rate margins have been virtually wiped out. The have a growing number of defaults and waves of bankruptcies in the horizon. The number of mortgages in forbearance continues to grow. Lending money to people and businesses that can't pay won't help them out.

They stopped buying back stock to conserve cash.
Which I think is good and I always hate companies doing this anyhow, as most do it when the stock is high, and stop when the stock is cheap.

Now the gov't is wanting them to stop dividends, do you think they will stop paying dividends ?

 

[VanWinkle]

Pessimism is rampant some days.

 

[Freedom56]

They stopped buying back stock to conserve cash.
Which I think is good and I always hate companies doing this anyhow, as most do it when the stock is high, and stop when the stock is cheap.

Now the gov't is wanting them to stop dividends, do you think they will stop paying dividends ?

Some banks will have no choice but to suspend dividends. In Q1 banks as a whole paid 2 times as much in dividends as they earned. That is not sustainable. When the CEO of JP Morgan warns that they may have to suspend dividends, investors should be concerned. Large money center banks will be okay in the long run but we will see bank failures among the smaller regional banks.

 

[jebmke]

The Federal Reserve ordered the country’s 34 biggest banks, including JPMorgan Chase, Wells Fargo and Bank of America, to suspend their stock buyback programs and to limit dividend payments to shareholders.

 

[audreyh1]

The Federal Reserve ordered the country’s 34 biggest banks, including JPMorgan Chase, Wells Fargo and Bank of America, to suspend their stock buyback programs and to limit dividend payments to shareholders.

Wow!

 

[CaptTom]

I'm getting word that banks are gearing up for a massive round of mortgage foreclosures once they're allowed to again. Not sure if it'll happen, but apparently they think it will, and they are probably in a better position to judge than I.

Looks like selling my house is on the back-burner again. Had it all ready to list when the lock-downs started. But I don't intend to compete with foreclosure sales!

 

[CaliKid]

I'm getting word that banks are gearing up for a massive round of mortgage foreclosures once they're allowed to again. Not sure if it'll happen, but apparently they think it will, and they are probably in a better position to judge than I.

Looks like selling my house is on the back-burner again. Had it all ready to list when the lock-downs started. But I don't intend to compete with foreclosure sales!

As for your first thought what does "getting word" mean? Like you actually have "inside" information or you read an article online? I see no reason why there would be a lot of foreclosure as most people have equity in their homes right now so there is no need to let it go to foreclosure. Just list it for sale. This is not 2008. It's completely different.

List it quick and you'll be fine. The market isn't tanking right now so sell it. Generally takes the housing market at least 6-9 months to follow a recession and this time is different due to all the gov stimulus so likely longer than 6 months before any flood of foreclosure. I would be very surprised if there is any large amount of foreclosures until at least 2021 and probably 2022 more likely. Likewise I don't see major drops in prices this year.

All this pure guessing from a not overly smart layperson so take it for what it's worth. lol.

 

[CRLLS]

As for your first thought what does "getting word" mean? Like you actually have "inside" information or you read an article online? I see no reason why there would be a lot of foreclosure as most people have equity in their homes right now so there is no need to let it go to foreclosure. Just list it for sale. This is not 2008. It's completely different.

List it quick and you'll be fine. The market isn't tanking right now so sell it. Generally takes the housing market at least 6-9 months to follow a recession and this time is different due to all the gov stimulus so likely longer than 6 months before any flood of foreclosure. I would be very surprised if there is any large amount of foreclosures until at least 2021 and probably 2022 more likely. Likewise I don't see major drops in prices this year.

All this pure guessing from a not overly smart layperson so take it for what it's worth. lol.

If everyone could take your advice of just selling, then there would never be a foreclosure. Figure that simply selling would generally lose ~6+% off the selling price in realtors fees and expenses.

Without reading about this, I can easily understand that the loan companies would see a spike in foreclosures ASAP. Assume that prior to this pandemic, they average 1% of their homes default in any given month. (just a PFA number so bear with me.) After being prohibited from foreclosing fro several months, they will have a much larger percentage of defaults on their books. When they are allowed to foreclose, it is time to separate the wheat from the chaff. That will cause a big spike IMO. This is considering a "normal" rate of default. Now consider the loss of income from many homeowners and the ability to make monthly payments. The spike will go even higher. It is a sad state that many live from month to month but a reality.

 

[Sunset]

I'm getting word that banks are gearing up for a massive round of mortgage foreclosures once they're allowed to again. Not sure if it'll happen, but apparently they think it will, and they are probably in a better position to judge than I.

Looks like selling my house is on the back-burner again. Had it all ready to list when the lock-downs started. But I don't intend to compete with foreclosure sales!

If your place is ready to list.
Then do it now, you will be one of the few homes for sale, and no foreclosure competition as it's not allowed.
Should magically the banks be allowed to foreclose next month (doubtful), you can always refuse to sell for less than you wanted, or pull the listing.

Waiting means you will have to wait about 2-3 years, because banks won't simply dump all the houses on the market at the same time, they will dribble them out, just like when the house crisis happened.
Around us, there were a few homes that sat for 5 years before the bank sold them.

 

[unclemick]

Again I fear knowing myself -with reduced travel, entertainment, dining out and age (read RMD) the $ may find 'a few good stocks'. If no football this season I know I'll crack.

Not a trader - but I find myself looking at psst-Wellesley stock holdings among others for bargains.

heh heh heh - small amount of BRK B and VT world stock index so far. Trying to keep a grip.

 

[REWahoo]

If no football this season I know I'll crack.

I can already see a hairline fracture.

 

[GravitySucks]

It's a seller's market here. No inventory per local realtor. If I was selling I'd do it now, rent or travel for a bit and see what it looks like in 3 months. Of course it's always different by locality so YMMV.

I'm getting word that banks are gearing up for a massive round of mortgage foreclosures once they're allowed to again. Not sure if it'll happen, but apparently they think it will, and they are probably in a better position to judge than I.

Looks like selling my house is on the back-burner again. Had it all ready to list when the lock-downs started. But I don't intend to compete with foreclosure sales!

 

[CaptTom]

OK, you guys are making me think about going back to "plan A" and listing it. It's been a real roller coaster these past few months; I keep changing my mind.

The person who shared the "inside" information about foreclosure activity with me is a glass-half-empty kind of guy, so it's very possible it's just the banks trying to catch up with the normal foreclosures which they've been prevented from processing.

 

[pb4uski]

Some banks will have no choice but to suspend dividends. In Q1 banks as a whole paid 2 times as much in dividends as they earned. That is not sustainable. When the CEO of JP Morgan warns that they may have to suspend dividends, investors should be concerned. Large money center banks will be okay in the long run but we will see bank failures among the smaller regional banks.

Jamie Dimon seems to me to be a pretty aggressive but pragmatic guy... if he is telegraphing that JPM may suspend its dividend and IMO they are one of the stronger players then that is very troubling.