Markets on Wednesday responded to three-week old news from the Fed’s meeting that it was shocked at the poor jobs number for May and was taking a wait-and-see attitude on Brexit before moving on rate hike.
Come on, was there fear of a rate hike? Certainly it’s not in the bond market with 30-year bond yielding 2.1% and the 10-year paper at 1.3%.
And yet that’s the story we get, that equities turned on the close of European markets and then the Federal Reserve’s release of the last meeting.
US bank stocks turned green at this time, despite a yield curve that is as flat as the Great Plains. Oh, I forgot, most banks are being allowed to buy-back its shares — with the exception of Deutsche Bank and Santander Bank.
They are not going to deploy that cash to work in the form of lending to spur growth, no buybacks and dividends.
And then we wonder why there is a huge divide in income between the haves and the have-nots.
Putting that cash out to lend for small business loans or mortgages is too risky, since rates are so low. They will use some of the phantom cash to issue new credit cards since the cost of capital in nil and the rate of interest charged is 18%, that’s a margin the banks love.