{"id":55816,"date":"2014-08-11T23:58:25","date_gmt":"2014-08-12T03:58:25","guid":{"rendered":"http:\/\/countingpips.com\/?p=55816"},"modified":"2014-08-11T23:58:25","modified_gmt":"2014-08-12T03:58:25","slug":"this-is-what-low-interest-rates-can-do-for-bank-stocks","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/08\/this-is-what-low-interest-rates-can-do-for-bank-stocks\/","title":{"rendered":"This is What Low Interest Rates Can Do for Bank Stocks"},"content":{"rendered":"
August 11, 2014<\/div>
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By MoneyMorning.com.au<\/u><\/a><\/p>\n

The boom times roll on again.<\/p>\n

What Iraq conflict?<\/p>\n

Russia? Ukraine? The market doesn’t know what you’re talking about.<\/p>\n

There are more important things on the agenda…such as wallowing in all those lovely bank profits.<\/p>\n

Think what you will of the banks<\/strong> (and we don’t care for them much), but there’s no denying that happy bank share prices also tend to mean a happy market.<\/p>

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So if you want this rally to last, you better hope the banks keep cranking up the profits…<\/p>\n

If you’ve subscribed to Money Morning<\/em> for the past six years you’ll know that for much of the time we’ve had a confrontational relationship with the Aussie banks<\/a>.<\/p>\n

Heck, we’ve had a confrontational relationship with the whole global banking system.<\/p>\n

It’s a system built on the creation of money from thin air. It’s a money system backed by nothing. It’s a money system where the banks hold roughly two cents in cash for every one dollar its customers have on deposit<\/em>.<\/p>\n

In short, the whole thing is a giant and precarious house of cards…and there’s a storm approaching.<\/p>\n

The only thing is, no one knows for certain exactly when the storm will hit. So until it does, investors need to do one thing: take advantage of it while it lasts.<\/p>\n<\/p>\n

Another market collapse that didn’t happen<\/h2>\n<\/p>\n

Now, that doesn’t necessarily mean going out and buying bank stocks<\/strong>.<\/p>\n

Of course, if that’s what you want to do, that’s fine. Good luck.<\/p>\n

In fact, we’ll be honest. We’ve just recommended an emerging markets bank stock<\/a> in a bonus report released to New Frontier Investor<\/em> subscribers last week.<\/p>\n

Some would say that’s super risky. Maybe it is. But it’s arguable whether the emerging markets bank stock <\/strong>is any riskier than an Aussie bank.<\/p>\n

After all, all banks<\/a> in the world operate under the same money system and pretty much the same rules. That’s what makes the whole system so fragile. It’s why the markets go into a fit whenever there’s a panic over some obscure European bank. Such as the one that’s on the ropes right now.<\/p>\n

Can you even name the bank that’s been in the headlines lately?<\/p>\n

We’ll help…<\/p>\n

It’s European…<\/p>\n

It’s Portuguese…<\/p>\n

It’s Banco…Banco Espirito…Banco Espirito Santo [ELI:BES]<\/strong>.<\/p>\n

You got it. The share price has fallen 84% over the past month. Oops!<\/p>\n

For a few days many in the market wondered if this would be the bank failure to send all the world’s banks crashing.<\/p>\n

We told you that was junk. In order for the banking system to collapse the cause will need to be a crisis in the US dollar, and therefore a crisis in the US banking system.<\/p>\n

Anything less than that just isn’t relevant. So again, make the most of it while you can.<\/p>\n

Low interest rates — a boon for banking profits<\/h2>\n<\/p>\n

Over the past two weeks the Commonwealth Bank of Australia [ASX:CBA]<\/strong> share price has fallen 3%.<\/p>\n

Much of this fall is down to the global macroeconomic fears playing out in Europe and the Middle East. Quite what any of that has to do with CBA is beyond us.<\/p>\n

But who are we to argue with the might of the mainstream and the pack of crazed investors who clearly know much more about this sort of thing than your editor? Or they think they do anyway.<\/p>\n

But yesterday, as the Australian<\/em> reported:<\/p>\n

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‘Bendigo and Adelaide Bank has said earnings rose and margins improved as the Australian regional bank continued to boost lending amid rising competition particularly in home loans.<\/em><\/p>\n

‘Net profit rose by 5.7 per cent to $372.3 million in the 12 months through June from $352.3m the year before, the bank said in a statement today.<\/em>’<\/p>\n<\/blockquote>\n

After that good news the market will now pay full attention to CBA’s full year profit result, which is due out on Wednesday.<\/p>\n

According to the same newspaper, ‘Commonwealth Bank is set to crank up earnings season with a record $8.6 billion annual profit and higher dividend…<\/em>’<\/p>\n

Analysts expect the dividend to hit $2.17 per share. That would take the total annual dividend to $4.<\/p>\n

These bank results shouldn’t surprise anyone. This is what happens in a low interest rate world. Bad loans fall, borrowing increases…and bank profits soar.<\/p>\n

With this in mind, the mainstream is getting back on board the ‘bull market’ bandwagon.<\/p>\n

Who says there’s no way to make money in this market?<\/p>\n

Here’s one heck of a bull market<\/h2>\n<\/p>\n

The fact is there are many ways to make a buck in this market.<\/p>\n

Buying shares in CBA is possibly one of them — although it’s not our favourite play.<\/p>\n

Given a choice, we’d rather buy into a market that has a lot more obvious value. That’s one reason why we launched an emerging markets<\/a> investment advisory last month.<\/p>\n

Those markets have taken a pounding in recent months. They’re high risk for sure. But you know what goes with high risk? That’s right, the potential for high reward too.<\/p>\n

Of course, if emerging markets isn’t your bag, there are always plenty of speculations available on the Aussie market. In fact, the Aussie market is one of the best markets in the world for spectacular short-term punting opportunities<\/a>.<\/p>\n

Look, all we’re saying is investors have every right to fear a potential economic collapse. The fact that it will happen one day is inevitable. But that doesn’t mean that every story to hit the headlines is the<\/u><\/em> story to send the market crashing.<\/p>\n

If you want our advice it’s this: keep a good portion of your investable wealth in cash and precious metals (25–50% in total, depending on your circumstances), and then with the rest you need to divide it into a combination of assets that stand to make you the best return on your investment.<\/p>\n

For that, nothing beats stocks. The Aussie market<\/a> has done well since 2009, but it’s by no means grossly overvalued. Buy a handful of dividend stocks by averaging in over the next 4–6 months, and buy a handful of speculations to boost your returns.<\/p>\n

If you do that, our bet is that by this time next year you’ll be glad you did, because we’ve still got this market pegged for one heck of a bull market rally over the next 12 months.<\/p>\n

Cheers,
\n Kris+<\/a><\/strong><\/p>\n<\/p>\n

Join Money Morning on Google+ <\/u><\/a><\/strong><\/p>\n

The post This is What Low Interest Rates Can Do for Bank Stocks<\/a> appeared first on Stock Market News, Finance and Investments | Money Morning Australia<\/a>.<\/p>\n

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\nBy MoneyMorning.com.au<\/u><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au The boom times roll on again. What Iraq conflict? Russia? Ukraine? The market doesn’t know what you’re talking about. There are more important things on the agenda…such as wallowing in all those lovely bank profits. Think what you will of the banks (and we don’t care for them much), but there’s no denying […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-55816","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/55816","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=55816"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/55816\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=55816"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=55816"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=55816"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}