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soyabean89 joined discussion · Aug 23 14:35

$Western Alliance Bancorp (WAL.US)$ 150% benchmark Woot. mor...

150% benchmark Woot. more power than $DBS Group Holdings (D05.SG)$
satki man
rate cut more better days for banks before the crash by BOJ rate n war or some shit
$Western Alliance Bancorp (WAL.US)$ 150% benchmark Woot. more power than $DBS Group Holdings (D05.SG)$ satki man rate cut more better days for banks before the...
$Western Alliance Bancorp (WAL.US)$ 150% benchmark Woot. more power than $DBS Group Holdings (D05.SG)$ satki man rate cut more better days for banks before the...
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  • tothemoooonnn : broo can explain why rate cuts will be better for banks i cant understand it well enough about rate hikes and rate cuts. can help explain abit pls

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  • soyabean89 OP tothemoooonnn : from my lameman understanding. I might be wrong so not fa.just my personal thought. feel free to share your view too

    3 things for consideration that impact by rate

    1) currently majority of bank were suffering huge opportunity cost losses as they lock in old bonds that yield very low yield before the first  rate hike. same for bank that issued fixed interest loan rate to business/personal loan (e.g before covid maybe the bank offers 1% interest rate vs 2024 peak 5.5% fed rate (+ maybe 1% more for bank to earn)

    2) as fed rate up for the past year, bank have to increase their interest on their saving plan to attract new fund from deposit, for them to do investment and offset borrowing cost from us fed..be it buy new higher rate treasury bond since no one wants to take their older lower rate bonds that are worthless in high interest rate environment . this costs lots of money for the bank.

     but if they can offer high rate for saving, surely they can impose higher interest on the loan to earn higher interest to offset, is it? here comes 3rd point

    3) higher rate on loan increase risk of bad debt, non performing loans as many debitors faces bankruptcy. also the banks in USA have to borrow fund from us fed for their daily activities..with us fed increase rate, bank have to find more ways to gap the differences.

    also many consumers will be off putting to make big purchases like home n cars..render banks have limited loan interest revenue under higher rate environment

    companies rather issue more shares to raise funds than borrow money ( see why so many dilution in the market...fml) reduce their opportunity to earn interest revenue

    so if the rate finally dropping...more stimulation for consumer to finally take loan to replace their old cars or houses and stimulate more revenue for banks. bank dun have to pay higher interest to fed reserve n borrowing of liquidity

    this short video sums up all lol
    youtu.be/xenBiA...

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  • soyabean89 OP : so why BOJ rate hike we should be afraid of while us fed is slashing rate?

    simple...Japan has been in negative interest rate since Abenomics policy...this makes many money makers to borrow yen to buy higher rate bonds or exchange to USD n invest in us stock market. especially if U compare -0.1% Japan rate  vs 5% us rate...

    which will U borrow money n park your money ?
    this also causes yen value to tank like shit vs us dollars

    so if Japan raise rate..all the borrower have to fire sales their Portfolio to raise funds to payback Japan loan before further rate hike.

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  • soyabean89 OP : black monday 5th aug happened because BOJ increased hike that week while us poorer job data spook the market

    hopes this give some picture why we should be wary on BOJ rate... we want both Japan n us fed rate drop to have win win situation...but it's not possible...Japan has endure too long on their spiraling inflation n devaluation of their yen

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  • tothemoooonnn soyabean89 OP : ahhhh thanks alot , so if the rates cut it will be beneficial for banks also because they can lower their interest rate for other customers to loan or borrow $ from them. then the other stocks market "stocks" will also go up gradually because of lower rates

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  • tothemoooonnn : so if rates cuts.  higher chance we will see the banks stocks goes up higher and hitting New ATHs.

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  • soyabean89 OP tothemoooonnn : correct, especially reit[undefined]

    reits has been banished to the abssy of hell and they will likely rebound as they have to endure high borrowing (gearing ratio)..

    so if U scoop high quality reits ( hotels, industrial, logistic) for past week congrats[undefined]
    Ur gain will slowly climb back

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  • soyabean89 OP tothemoooonnn : that is if BOJ or tension in middle east don't spill over..that's the risk...

    and mpox development...everyone fear for lockdown 2.0

    but if these are manageable, in theory yes ..but life is not always Rosey sweet [undefined]

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  • tothemoooonnn soyabean89 OP : then like that better get bank [undefined] ill gauge the new entry point for this before the rate cut happens

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  • soyabean89 OP tothemoooonnn : gl and all the best[undefined]

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