Zero interest rates arrive at TD Waterhouse
Looks like the age of 0% interest rates has come early for customers of TD Waterhouse in the UK, which just announced the rates pictured for cash held in its various share dealing accounts.
Dealing accounts typically offer terrible interest rates on uninvested cash, but 0% is taking the biscuit (or rather all of the interest the uninvested cash generates).
With the price of bank shares being driven by fear, should we avoid them completely? Or if we do want to get specific exposure to banks, which banks look the best?
As a private investor, I can only tell you what I’m doing (and remind you an index tracking fund should underpin your portfolio, not individual stock picks).
My personal view is that bank shares will continue to oscillate wildly until house prices stop falling. Then banks should begin to strengthen.
Further falls in house prices in the UK (which I expect) will hit our banks further, though I suspect the scale is now manageable after their capital raising and/or government injections. Much will depend on the performance of their other debt, such as loans to companies struggling through a recession.
The positive spin is that absent a global economic meltdown causing 30-40% of homeowners to default, any bank that survives the credit crisis will at some point be worth a lot more than today. Assets such as mortgages that were previously written right down will then be revalued upwards. (See my post on Prodesse, the investor in US mortgages).
Barclays Bank shares rose 72% on January 27th
Source: Digital Look
I don’t know what annoys me more: That Barclays Bank shares rose 72% on Monday while I was still finishing off a post suggesting they might be worth a punt, or that I didn’t buy any myself.
Oh ‘greedy’ side of the fear-greed investing equation, how we’ve missed you.
There are three main things that drive changes in a corporate bond’s yield and so its price:
