Negative Interest Rates

[BaldyBob]

Stu mentioned this recently on the 'Essential Reading' thread, and I have to say that I agree with him that they are indeed on the way.

In the Stack Strategy thread, JB3 said

"I take whatever is left over at the end of the month and split it, 50/50. Half goes into a cash savings account for rainy days"

So, the question is, what are the options/ideas from the Forum?   That cash savings account doesn't look so good with negative interest.

I know in some countries mortgages have gone down or received a small rebate , and in others interest rates have actually gone up, but lets be honest in good old rip-off UK it will be in the Bank's favour.

So what are your idea's?

[sovereignsteve]

Having a balanced investment portfolio, including cash, is always a good idea, nobody can really argue against diversification. What ratios you use is open to debate but holding a few months salary in a readily available form is sensible. However, there may come a time when holding this in a bank account may not be a good idea. In a SHTF scenario when you may want to withdraw, there may well be a bank run and you can't!

[Scuzzle]

In a true SHTF scenario it has been proven that the best thing to hold is a huge supply of ciggs and booze for bartering.  If you think the world will remain in some kind of order which I do then I would go for the typical rebel portfolio - silver, gold, fancy coloured diamonds and Bitcoin.

[4Nines7Hills]

unless there is total destruction of the financial system it's probably better to have some money in the bank. If the financial systems fail to that extent gold and silver won't help you either....bigger boys will relieve you of it (by force) way before you work out how to spend it

[Pete]

I didn't think we had negative interest rates in the UK but they certainly do in Switzerland where you pay the banks to keep hold of your cash.
To me that suggests the cash is either stolen, laundered, obtained by dodgy means or being totally concealed from divorcing spouses or more likely the taxman.
Why would anyone want to get back less than they give unless there is something to hide ?

[4Nines7Hills]

Most people can only be paid electronically, like online shopping and credit ( which is part of the problrm) all difficult without a bank account

[Bumble]

If my bank is allowed to 'pay' negative interest, then it is only fair that I should be allowed to pay negative taxes, especially if I have made a negative capital gain on my investments. Also, it is appropriate that the governors of the central banks be paid a negative salary to reflect their negative contribution to managing the economy.

[sovereignsteve]

If only the world was fair and everyone got their just rewards/desserts.............

[StackemHigh]

The Swiss account I have has a high charge on it but still has a + interest rate,  meaning that if I hold enough cash around £800 then I get a small interest deposit but if it's less than that the bank charges would eat into the cash and the account would automatically be closed. 

It also has the hidden benefit that I can walk into a branch of the clydesdale bank and make cash deposits.

I've been going to Switzerland regularly since the mid '80s.  I just love the place. 

[daz]

just heard on the radio that japan has just introduced negative interest rates as well

[SoulUK]

1 hour ago, daz said:

just heard on the radio that japan has just introduced negative interest rates as well

http://www.bbc.co.uk/news/business-35436187

Yep Japan has pulled the trigger

[Stu]

With high levels of QE and now negative interest rates in Japan there is plenty of incentive to spend those Yen or perhaps buy bullion @Oldun 

[Scuzzle]

One by one more and more countries will adopt negative interest rates, they will start at a fraction of a percent but if cashless ever gets through then they could go to whatever the banks need 5%, -10% anything.

[Stu]

This headline on the bbc says it all to me "Wall Street boosted by weak US GDP" how perverse is that? Celebrating producing nothing in order that they can continue with cheap money policies to keep their consumer economy going. An explicit admission that all this extra money is parking itself in stocks and derivatives. I can not believe a mainstream media has openly acknowledged how out of kilter it has all become. 

[Scuzzle]

1 hour ago, Stu said:

This headline on the bbc says it all to me "Wall Street boosted by weak US GDP" how perverse is that? Celebrating producing nothing in order that they can continue with cheap money policies to keep their consumer economy going. An explicit admission that all this extra money is parking itself in stocks and derivatives. I can not believe a mainstream media has openly acknowledged how out of kilter it has all become. 

Wall Street is strong, Main Street is weak.  I worry about the US stock market, it is propped up by it's top ten companies which are all leisure based, Apple, Google, Amazon, Netflix etc, they were only just celebrating a big rise on Facebook on Bloomberg yesterday.  When times get truly hard what gets cut down on first?

[Oldun]

9 hours ago, Stu said:

With high levels of QE and now negative interest rates in Japan there is plenty of incentive to spend those Yen or perhaps buy bullion @Oldun 

waaaaay ahead of the game mate and don't forget the consumption tax here goes from 8-10% next year so an even bigger hit coming......can anyone say more QE ?

 

The effect of this negative rate will take a year or so to really kick in because it only applies from new transactions from now. It does NOT retroactive.

[Cointreau]

On 28/01/2016 at 12:56, StackemHigh said:

The Swiss account I have has a high charge on it but still has a + interest rate,  meaning that if I hold enough cash around £800 then I get a small interest deposit but if it's less than that the bank charges would eat into the cash and the account would automatically be closed. 

It also has the hidden benefit that I can walk into a branch of the clydesdale bank and make cash deposits.

I've been going to Switzerland regularly since the mid '80s.  I just love the place. 

@StackemHigh  What do you do there? Skiing or hiking?

[MikeOxlong]

19 hours ago, Cointreau said:

@StackemHigh  What do you do there? Skiing or hiking?

http://www.dailymail.co.uk/news/article-2735661/Drive-BROTHELS-hailed-success-year-long-trial-Switzerland-except-escorts-say-paying-tax-means-make-money.html

[goldbones]

Shorting this market, perfect time to get in when the price is higher the risk to your short is lower.

Its not the end of the world but it might look like it if the stock market plummets 50% this year followed by another 50% fall the next year which is what i'm expecting as all the dominoes start smashing into each other.

My target buy price for the FTSE 100 is 1500-1750 in November 2017 i'll retake the buy side on the market when it is priced BELOW fair value, fair value being somewhere around the 3000 mark.

Otherwise i don't see what you can get out of it except another 16 years of sh**y returns.

I'd like to do some real deep value investing in environment where everybody hates the stock market and nobody has a good word to say about it, that's when i might jump in with both feet.

[goldbones]

On 1/29/2016 at 19:24, Stu said:

This headline on the bbc says it all to me "Wall Street boosted by weak US GDP" how perverse is that? Celebrating producing nothing in order that they can continue with cheap money policies to keep their consumer economy going. An explicit admission that all this extra money is parking itself in stocks and derivatives. I can not believe a mainstream media has openly acknowledged how out of kilter it has all become. 

The market went up because of japan, they ignored weak GDP and just think about the carry trade implications of a weaker yen, its the carry trade difference that boosted the the dollar causing most currency's to tank HENCE why markets went up.

If the markets went up because "oh America might be next" well they'd have a shock because America is seen as a success due to being able to raise interest rates, if they actually reversed and went negative like ECB and Japan then every other currency in the world would just crush the dollar , one minute it'd be like a steel ball bearing at the bottom of a bowl of cornflakes and the next minute it would be a cornflake at the bottom of a bunch of cannon balls. 

[sovereignsteve]

That's true to an extent but @Stu is right in that as traders have been feasting on QE and cheap money for so long, they know the central banks will have to keep printing when a slowdown is in sight. So long as this crutch is there, they will all continue to ride it upwards. It's not as though there is anywhere else for then to park all the ill-gotten gains of the past 7 -  8 years.

[Cointreau]

Anne Barnhardt the uber Catholic has the last word on negative interest rates. Be prepared for a schooling

http://www.barnhardt.biz/2016/02/03/personal-update-negative-interest-rates-and-repelling-rapists-with-magic-powers/

I just hope she's wrong.