Submitted by Taylor Cottam of Economy Politics
Another Call For The Fed To Raise Rates, So Big Banks Can Start Lending And Hiring Again
As we explained in our previous article Seeking an interest rate solution,
real interest rates are negative and nominal short term interest rates
are near zero. That is not healthy. What is a healthy interest rate? My
view is that short term rates should be above 1% to make them positive
and closer to 2%. It has caused consumer credit to contract.
Of course, banks would argue that a healthy spread is the key to a
healthy banking sector. Raising the rate would likely flatten the yield
curve. What gives?
How banks really make money
Banks are not in the business of making loans per se. They are in the
business of making more off their assets than their liabilities. In
normal times, underwriting consumer and business loans are the best
avenue for them to pursue that goal.
Banks, and many hedge funds, really make money off the yield curve. They
have assets with a higher duration than their liabilities. Although
banks fund their assets with a mix of checking, demand deposits and some
longer dated term deposits (CDs), they have the ability to swap out
longer term deposits (CDs) to make their liabilities duration almost
zero. Their assets, which are typically loans to consumers and
businesses, have a longer duration. Since the yield curve almost always
slopes upward, they make money off the yield curve spread plus the
credit spread.
In 2008, I did some modeling for a large financial institution that had
duration of liabilities of roughly 3.5 years, based upon mostly term
deposits. They were able to bring the duration on their entire
liabilities portfolio down to a duration of less than 0.25 (3 months) by
transacting a simple fixed for floating amortizing swap based upon
their CD maturity schedule. Every quarter, with the 3 month rate sunk
below 25 bps, we would receive a large cash settlement from our
investment bank counterparty. I didn't stick for the full term of the
swap, but on a 1.5 BB principal, our estimate of earnings from the swap
alone stood at $100MM over three years. Based upon where short term
rates have stayed, they could have made 1.5 times that.
With our cost of capital below 25 bps, we did the thing that any
rational person would do. We stopped lending to people and
businesses and lent to the US government instead. We bought Treasuries.
In this case, the 5-year yields were above 2% bringing our expected
risk free spread above 2 points.
In 2008 and 2009, when it became obvious that Bernanke would likely
leave short-term rates low for an extended period of time, yield curve
risk became an afterthought. Those actions have been largely vindicated.
If we held the Treasuries for at least three years, the term of the
swap, we would just sit back and make money off the spread without
having to originate a single loan.
You get to be a bank, without having to do any work to originate loans.
Who needs a large origination group, when you can make a ton of money
and fire half of your employees?
Pushed or Pulled into Treasuries
During the recession there was often talk of a flight to quality.
Investors would flee risky assets and go into something safe. However,
investors are not always being pushed, they are often pulled. During the
recession, we began seeing a very steep yield curve. The spread
investors are as much lured by the allure of easy money with a steep
yield curve as they are by the fear of risky assets.
bench craft company
Raven's James Bond now 20 months old? <b>News</b> - Page 1 | Eurogamer.net
Read our news of Raven's James Bond now 20 months old?.
House Unexpectedly Defeats Patriot Act - FoxNews.com
It was the Congressional version of never count your chickens before they're hatched.
Fox <b>News</b> focus group in Iowa: President Obama is Muslim | The <b>...</b>
On Sean Hannity's program Monday night, pollster Frank Luntz hosted a focus group of Iowa Republican caucus-goers, gauging their reaction of President Barack Obama's Sunday afternoon interview with Fox News' Bill O'Reilly. ...
bench craft company
Submitted by Taylor Cottam of Economy Politics
Another Call For The Fed To Raise Rates, So Big Banks Can Start Lending And Hiring Again
As we explained in our previous article Seeking an interest rate solution,
real interest rates are negative and nominal short term interest rates
are near zero. That is not healthy. What is a healthy interest rate? My
view is that short term rates should be above 1% to make them positive
and closer to 2%. It has caused consumer credit to contract.
Of course, banks would argue that a healthy spread is the key to a
healthy banking sector. Raising the rate would likely flatten the yield
curve. What gives?
How banks really make money
Banks are not in the business of making loans per se. They are in the
business of making more off their assets than their liabilities. In
normal times, underwriting consumer and business loans are the best
avenue for them to pursue that goal.
Banks, and many hedge funds, really make money off the yield curve. They
have assets with a higher duration than their liabilities. Although
banks fund their assets with a mix of checking, demand deposits and some
longer dated term deposits (CDs), they have the ability to swap out
longer term deposits (CDs) to make their liabilities duration almost
zero. Their assets, which are typically loans to consumers and
businesses, have a longer duration. Since the yield curve almost always
slopes upward, they make money off the yield curve spread plus the
credit spread.
In 2008, I did some modeling for a large financial institution that had
duration of liabilities of roughly 3.5 years, based upon mostly term
deposits. They were able to bring the duration on their entire
liabilities portfolio down to a duration of less than 0.25 (3 months) by
transacting a simple fixed for floating amortizing swap based upon
their CD maturity schedule. Every quarter, with the 3 month rate sunk
below 25 bps, we would receive a large cash settlement from our
investment bank counterparty. I didn't stick for the full term of the
swap, but on a 1.5 BB principal, our estimate of earnings from the swap
alone stood at $100MM over three years. Based upon where short term
rates have stayed, they could have made 1.5 times that.
With our cost of capital below 25 bps, we did the thing that any
rational person would do. We stopped lending to people and
businesses and lent to the US government instead. We bought Treasuries.
In this case, the 5-year yields were above 2% bringing our expected
risk free spread above 2 points.
In 2008 and 2009, when it became obvious that Bernanke would likely
leave short-term rates low for an extended period of time, yield curve
risk became an afterthought. Those actions have been largely vindicated.
If we held the Treasuries for at least three years, the term of the
swap, we would just sit back and make money off the spread without
having to originate a single loan.
You get to be a bank, without having to do any work to originate loans.
Who needs a large origination group, when you can make a ton of money
and fire half of your employees?
Pushed or Pulled into Treasuries
During the recession there was often talk of a flight to quality.
Investors would flee risky assets and go into something safe. However,
investors are not always being pushed, they are often pulled. During the
recession, we began seeing a very steep yield curve. The spread
investors are as much lured by the allure of easy money with a steep
yield curve as they are by the fear of risky assets.
bench craft company>
Raven's James Bond now 20 months old? <b>News</b> - Page 1 | Eurogamer.net
Read our news of Raven's James Bond now 20 months old?.
House Unexpectedly Defeats Patriot Act - FoxNews.com
It was the Congressional version of never count your chickens before they're hatched.
Fox <b>News</b> focus group in Iowa: President Obama is Muslim | The <b>...</b>
On Sean Hannity's program Monday night, pollster Frank Luntz hosted a focus group of Iowa Republican caucus-goers, gauging their reaction of President Barack Obama's Sunday afternoon interview with Fox News' Bill O'Reilly. ...
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[reefeed]
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bench craft company
Raven's James Bond now 20 months old? <b>News</b> - Page 1 | Eurogamer.net
Read our news of Raven's James Bond now 20 months old?.
House Unexpectedly Defeats Patriot Act - FoxNews.com
It was the Congressional version of never count your chickens before they're hatched.
Fox <b>News</b> focus group in Iowa: President Obama is Muslim | The <b>...</b>
On Sean Hannity's program Monday night, pollster Frank Luntz hosted a focus group of Iowa Republican caucus-goers, gauging their reaction of President Barack Obama's Sunday afternoon interview with Fox News' Bill O'Reilly. ...
bench craft company
Submitted by Taylor Cottam of Economy Politics
Another Call For The Fed To Raise Rates, So Big Banks Can Start Lending And Hiring Again
As we explained in our previous article Seeking an interest rate solution,
real interest rates are negative and nominal short term interest rates
are near zero. That is not healthy. What is a healthy interest rate? My
view is that short term rates should be above 1% to make them positive
and closer to 2%. It has caused consumer credit to contract.
Of course, banks would argue that a healthy spread is the key to a
healthy banking sector. Raising the rate would likely flatten the yield
curve. What gives?
How banks really make money
Banks are not in the business of making loans per se. They are in the
business of making more off their assets than their liabilities. In
normal times, underwriting consumer and business loans are the best
avenue for them to pursue that goal.
Banks, and many hedge funds, really make money off the yield curve. They
have assets with a higher duration than their liabilities. Although
banks fund their assets with a mix of checking, demand deposits and some
longer dated term deposits (CDs), they have the ability to swap out
longer term deposits (CDs) to make their liabilities duration almost
zero. Their assets, which are typically loans to consumers and
businesses, have a longer duration. Since the yield curve almost always
slopes upward, they make money off the yield curve spread plus the
credit spread.
In 2008, I did some modeling for a large financial institution that had
duration of liabilities of roughly 3.5 years, based upon mostly term
deposits. They were able to bring the duration on their entire
liabilities portfolio down to a duration of less than 0.25 (3 months) by
transacting a simple fixed for floating amortizing swap based upon
their CD maturity schedule. Every quarter, with the 3 month rate sunk
below 25 bps, we would receive a large cash settlement from our
investment bank counterparty. I didn't stick for the full term of the
swap, but on a 1.5 BB principal, our estimate of earnings from the swap
alone stood at $100MM over three years. Based upon where short term
rates have stayed, they could have made 1.5 times that.
With our cost of capital below 25 bps, we did the thing that any
rational person would do. We stopped lending to people and
businesses and lent to the US government instead. We bought Treasuries.
In this case, the 5-year yields were above 2% bringing our expected
risk free spread above 2 points.
In 2008 and 2009, when it became obvious that Bernanke would likely
leave short-term rates low for an extended period of time, yield curve
risk became an afterthought. Those actions have been largely vindicated.
If we held the Treasuries for at least three years, the term of the
swap, we would just sit back and make money off the spread without
having to originate a single loan.
You get to be a bank, without having to do any work to originate loans.
Who needs a large origination group, when you can make a ton of money
and fire half of your employees?
Pushed or Pulled into Treasuries
During the recession there was often talk of a flight to quality.
Investors would flee risky assets and go into something safe. However,
investors are not always being pushed, they are often pulled. During the
recession, we began seeing a very steep yield curve. The spread
investors are as much lured by the allure of easy money with a steep
yield curve as they are by the fear of risky assets.
bench craft company
bench craft company
Raven's James Bond now 20 months old? <b>News</b> - Page 1 | Eurogamer.net
Read our news of Raven's James Bond now 20 months old?.
House Unexpectedly Defeats Patriot Act - FoxNews.com
It was the Congressional version of never count your chickens before they're hatched.
Fox <b>News</b> focus group in Iowa: President Obama is Muslim | The <b>...</b>
On Sean Hannity's program Monday night, pollster Frank Luntz hosted a focus group of Iowa Republican caucus-goers, gauging their reaction of President Barack Obama's Sunday afternoon interview with Fox News' Bill O'Reilly. ...
bench craft company
bench craft company
Raven's James Bond now 20 months old? <b>News</b> - Page 1 | Eurogamer.net
Read our news of Raven's James Bond now 20 months old?.
House Unexpectedly Defeats Patriot Act - FoxNews.com
It was the Congressional version of never count your chickens before they're hatched.
Fox <b>News</b> focus group in Iowa: President Obama is Muslim | The <b>...</b>
On Sean Hannity's program Monday night, pollster Frank Luntz hosted a focus group of Iowa Republican caucus-goers, gauging their reaction of President Barack Obama's Sunday afternoon interview with Fox News' Bill O'Reilly. ...
bench craft company
Raven's James Bond now 20 months old? <b>News</b> - Page 1 | Eurogamer.net
Read our news of Raven's James Bond now 20 months old?.
House Unexpectedly Defeats Patriot Act - FoxNews.com
It was the Congressional version of never count your chickens before they're hatched.
Fox <b>News</b> focus group in Iowa: President Obama is Muslim | The <b>...</b>
On Sean Hannity's program Monday night, pollster Frank Luntz hosted a focus group of Iowa Republican caucus-goers, gauging their reaction of President Barack Obama's Sunday afternoon interview with Fox News' Bill O'Reilly. ...
bench craft company
Raven's James Bond now 20 months old? <b>News</b> - Page 1 | Eurogamer.net
Read our news of Raven's James Bond now 20 months old?.
House Unexpectedly Defeats Patriot Act - FoxNews.com
It was the Congressional version of never count your chickens before they're hatched.
Fox <b>News</b> focus group in Iowa: President Obama is Muslim | The <b>...</b>
On Sean Hannity's program Monday night, pollster Frank Luntz hosted a focus group of Iowa Republican caucus-goers, gauging their reaction of President Barack Obama's Sunday afternoon interview with Fox News' Bill O'Reilly. ...
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bench craft company
Raven's James Bond now 20 months old? <b>News</b> - Page 1 | Eurogamer.net
Read our news of Raven's James Bond now 20 months old?.
House Unexpectedly Defeats Patriot Act - FoxNews.com
It was the Congressional version of never count your chickens before they're hatched.
Fox <b>News</b> focus group in Iowa: President Obama is Muslim | The <b>...</b>
On Sean Hannity's program Monday night, pollster Frank Luntz hosted a focus group of Iowa Republican caucus-goers, gauging their reaction of President Barack Obama's Sunday afternoon interview with Fox News' Bill O'Reilly. ...
bench craft company
No matter what kind of job you currently have, most people are always open to making extra money. Whether it be for extra shopping fun, or to help supplement an income that's barely covering the bills, a few extra dollars is never something to sneeze at.
Here are my top suggestions for making extra money, no matter what your situation dictates.
Write for AC
All right, most of you reading this already write for AC, so that goes without saying. However, if you're like me, you often push articles aside to do other things, because the pay is low enough not to warrant it top on the priority list. What you must tell yourself is that while the pay is not much, even an extra $10 a week adds up. If you can get at least two articles a week paid for, it's worth it. And who knows, perhaps that one special article will lead to bigger opportunities.
Get Crafty
A lot of people have at least one great craft skill that they use to make gifts or simply pass the time. What a lot of people don't realize however, is that there is a good market out there for handmade crafts. From quits, to needlepoint, to homemade jelly, people pay good money for original crafts.
In order to find a market for your items, find out what organizations run the craft fairs in your area. The craft fair season usually runs from around August to December, with the bigger shows running closer to the holidays. Setting up at a craft fair can involve fees for space rental, so you should research it and make sure you'll get a return on your fees.
You can also bring your work to locally owned retail shops in your area. Some shops will agree to sell your work in a consignment fashion. There are even shops out there that run as retail co-ops, where you can get space to sell your work as long as you put in some time working at the shop.
The web is also a great place to market your crafts. Great sites like Etsy, and even eBay offer an easy and affordable way to reach thousands of potential customers easily.
Tutor
Have a college degree that doesn't seem to be doing much for you? Look into tutoring opportunities to put your hard earned knowledge to work for you. There are many national tutoring agencies that you can sign up with, setting your own hours and days. You can also look into contacting your local school district to discuss tutoring opportunities.
The great thing about tutoring is that you can work nights and weekends, with a flexible schedule set by you. You can even arrange to have students come to your home so you don't have to worry about commuting.
Teach
In addition to tutoring, there are a lot of teaching opportunities out there that people aren't aware of. Many Adult Education programs allow people to apply to teach courses in which they have expertise, but not necessarily a teaching certification. Teach a six-week course on writing short stories, or a one-day course on making earrings; it's all up to you and your area of knowledge.
Once again, this can be dictated by your availability. If you can only do a one-day Saturday course, then that's what you apply to teach. While there is an interview process and paperwork, it's a rewarding experience, a great way to interact with the community, and to make a few extra dollars sharing what you love.
Spring Cleaning
Getting rid of your old stuff is a great way to make money while ridding yourself of needless clutter. What you might consider junk, someone else may be needing or wanting desperately. Take an afternoon to go through your stuff, especially all of the things hiding in your basement. Once you've made a significant "junk" pile, sell your items on eBay or hold a good 'ol fashion yard sale.
Odd Jobs
Own a lawnmower? How about a shovel? There are always odd jobs that people need doing. Post your talents on CraigsList or local classifieds. Raking leaves is a great way to spend an afternoon outdoors while making extra money. More likely than not, if your willing to do someone's household chores, they're willing to pay you for it.
Whatever your niche, there's money out there to be made. Even if your current schedule is tight, there's a lot of opportunity out there to squeeze in something here or there to make money. It's only limited by your imagination, and your willingness to get your hands dirty.
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