ZIRP takes another scalp

[thriftyandboringinohio]

Savers and retirees have been mighty disappointed for years to earn no interest on their savings.
Now the US insurance industry is showing damage.
Specifically, the companies that sold long-term care policies, intended to pay the the price of nursing home care for the elderly.

From an AP article published here (emphasis mine)
http://www.10tv.com/content/stories/...lder-care.html

...Earnings for life insurers slid 11 percent in the most recent quarter, according to Moody's Investors Service, and long-term care was the chief culprit.
"Insurers that sell these products lose money on them," says Vincent Lui, a life-insurance analyst at Morningstar. "So they're raising prices and also trying to get out of the business right and left."
Four of the five largest providers - including Manulife and MetLife - have either scaled back their business or stopped selling new policies, according to Moody's...

...The industry's actuaries also made a bad call on the bond market, betting on much higher interest rates. That misstep proved critical because insurers buy bonds to cushion against future payouts, so years of historically low interest rates have thrown their accounts out of balance. It's yet another reason why insurers keep putting more money aside to cover claims, resulting in big charges and lower profits...

[don]

Re: ZIRP takes another scalp

Join the conga line, boys, along with the pension funds. Toot, toot, it's the wealth transfer express and you're all on it; no tickee, no matter . . . .

[lektrode]

Re: ZIRP takes another scalp

with apologies to what used-to be the biggest industrial employer of Americans

'but whats good for TBTF,inc is good for....'

wait... what?!!!

[don]

Re: ZIRP takes another scalp

How large a factor is ZIRP in the automation surge?

[don]

Re: ZIRP takes another scalp

MONDAY, MARCH 30, 2015

The Fed Has Failed the Nation, in One Chart

There is only one way to end the financial tyranny of the Federal Reserve--abolish it, and put an end to the predatory pathologies of its policies.


The Federal Reserve has failed not just the nation and the U.S. economy, but more importantly, the American people that it supposedly serves. It has also failed the world, by showing other central banks that they can reward private banks and top .01% with absolute impunity.


The supposed goal of the Fed's zero-interest rate policy (ZIRP) and quantitative easing (QE) was to make borrowing easier for both corporations and consumers, the idea being companies would borrow to invest in new productive capacity and consumers would buy the new goods and services being produced with cheap credit.


The secondary publicly stated goal was to spark a rally in stocks, bonds and real estate that would spark a wealth effect: as households saw their net worth rise, they would feel wealthier and thus more likely to buy goods and services they didn't need on credit.


The real reason for ZIRP and QE was to rebuild the balance sheets and profits of banks on the backs of savers who have earned near-zero thanks to the Fed's manipulation of markets. But setting aside the obvious success of the Fed's real goals--enriching the banks and the super-wealthy who have access to near-zero interest credit--let's see what corporations did with the Fed's nearly-free money.


Did they invest in new productive capacity? No, they bought back their own stocks--trillions of dollars worth, to boost stock prices and managerial bonuses. Note what happened when the last stock buyback binge faded: stocks crashed.


The great stock buyback binge (Fortune.com)


The Fed's free money for financiers enriched the top layer of corporate management and the top 1% who own most of the nation's equities. You can read the details here: Factset Buyback Quarterly.




The other group of financiers with access to the Fed's free money for financiers has been private equity. So did the private equity multi-millionaires borrow the Fed's largesse to build new plant and hire new employees? Did they invest the borrowed billions in productive startups?


No--they used the money to buy existing companies and bleed them dry. The Glory Days of Private Equity Are Over (Via Mark G.):


Private equity has been holding back the economy. When you buy out a drugstore chain or car-rental company and load it with debt, you aren’t investing in the productivity of the economy. More often, by cutting back on new products and services, you are removing productivity from the economy. While generating wealth for endowments and pension funds, private equity can destroy wealth in the economy—my guess is 0.5%-1% lower gross domestic product in an already subpar recovery.


There you have it: the Fed has lowered productivity and GDP and stripmined savers, widows and orphans to further enrich the obscenely wealthy. Recall this from my entry last week, Will Cash Always Be Trash, Or Will It One Day Be King?


Between 2009 and 2012, the first years of the economic recovery, the top 1% saw their incomes climb 31.4% — or, 95% of the total gain — while the bottom 99% saw growth of 0.4%.


There is only one way to end the financial tyranny of the Federal Reserve--abolish it, and put an end to the predatory pathologies of its policies.

http://charleshughsmith.blogspot.com...one-chart.html

[lektrode]

Re: ZIRP takes another scalp

MONDAY, MARCH 30, 2015

The Fed Has Failed the Nation, in One Chart

...
The Federal Reserve has failed not just the nation and the U.S. economy, but more importantly, the American people that it supposedly serves. It has also failed the world, by showing other central banks that they can reward private banks and top .01% with absolute impunity.


The supposed goal of the Fed's zero-interest rate policy (ZIRP) and quantitative easing (QE) was to make borrowing easier for both corporations and consumers, the idea being companies would borrow to invest in new productive capacity and consumers would buy the new goods and services being produced with cheap credit.


The secondary publicly stated goal was to spark a rally in stocks, bonds and ....


colorado farmland?

.... yup.

[don]

Re: ZIRP takes another scalp

Deutsche Bank Doesn't Want Checking Accounts


MAR 25, 2015 3:00 AM EDTBy Leonid Bershidsky

Deutsche Bank is considering the sale of all or part of its retail business or, at the least, serious cuts in the retail division. These days, it seems dealing with private clients may be becoming too much of a hassle -- and not just for Deutsche Bank.

Germans tend to take a traditional approach to finance, and many prefer to keep their savings in banks rather than investment funds or securities. That has recently been changing, however, because banks no longer want their money. Ultra-low interest rates make accepting deposits unattractive -- in effect, a bank has to subsidize depositors, and other sources of funding are cheaper. Some German banks (though not Deutsche Bank) have even introduced negative interest rates on large corporate deposits, and some smaller ones did the same for big private depositors.

Retail banks found themselves squeezed both on the cost of capital and the revenue side. They had to find a way to cut costs. But that isn't easy when you're running a large branch network: Again, Germans are banking traditionalists and many off them would rather stand in line to talk to a clerk than do their business online or with a machine. In 2013, according to an AT Kearney study, Spanish banks cut the number of retail branches by 14 percent, and those in the Nordic countries were cut by 8 percent. In Germany, the number of branches only declined 1 percent. So Deutsche Bank, too, has found it difficult to trim its bricks-and-mortar network. Headcount in its retail division has increased.

So profitability suffered. According to a recent JPMorgan research note, the retail operation showed the worst return on equity of all Deutsche Bank divisions -- just 6.2 percent in 2014, compared with 13.8 percent for the global transaction banking division, which services corporations and other banks, or 10.8 percent for the asset management business. Profit was down 14 percent year-on-year. JPMorgan called the retail division a "problem child" and recommended a spin-off: its analysts are skeptical that Deutsche Bank can deliver on targeted cost cuts of 1.5 billion euros ($1.6 billion).

Deutsche Bank is expected to decide the fate of its retail business by the end of next month. Whatever the decision, it will probably close250 of its 1,800 retail branches.

take deposits and make loans? Nein, nein!
Main Street? Virtual Reality, dummkopf!