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Banks charging for holding large amounts of cash


biaggio
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it was announced on CNBC that Bank of NY Mellon is going to start charging a fee for holding onto large amounts of cash.

 

Not only will they not pay much interest but they will charge  you for having cash in your account.

 

I never thought that could happen. Then again, that is like having a monthly fee on your bank account.

 

Looks like we should either get our mattresses ready to hold cash or invest the cash.

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Michael Burry's advice to get a Canadian bank account seems prescient  ;D

 

- Canadian banks are now much more leveraged than their American counterparts -- particularly so when excluding  preferred equity.

 

- Canadian banks continue to lend money on residential real estate that is in a bubble state compared to the US where the risk has dropped significantly on new loans based on significantly depressed property values.  Canadian real estate values are being supported by a commodity bubble - if/when this commodity bubble bursts there will be a lot of pain for Canadian banks.

 

- At this point in time it seems to make more sense for a Canadian to buy American dollars than it seems suggested here.  The Big Mac Index as of very recently had the Canadian dollar 24% overvalued.  So an American buying Cndn $ would be buying a US dollar for $1.24; whereas, a Cndn would be buying a US dollar for about 80 cents.

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it was announced on CNBC that Bank of NY Mellon is going to start charging a fee for holding onto large amounts of cash.

 

Not only will they not pay much interest but they will charge  you for having cash in your account.

 

I never thought that could happen. Then again, that is like having a monthly fee on your bank account.

 

Looks like we should either get our mattresses ready to hold cash or invest the cash.

 

While at first blush it seems strange, it makes sense when you think about it.  They are charged 0.10% of deposits for the FDIC guarantee and they have been flooded with cash which they can't put to use.  At least as of now, it is only on those with the largest deposits, this isn't something that the average joe is paying although of course that could change.  While we all tend to think that the bank should be thrilled with extra cash, there are administrative headaches as well.  As of now, this doesn't bother me in the least.  If it starts spreading to smaller accounts, etc. that would be a different story.  The big boys who are paying this now are certainly capable of moving their funds around with a click of the mouse if they don't like it.  They can invest in LinkedIn or Pandora or something instead.

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Michael Burry's advice to get a Canadian bank account seems prescient  ;D

 

- Canadian banks are now much more leveraged than their American counterparts -- particularly so when excluding  preferred equity.

 

- Canadian banks continue to lend money on residential real estate that is in a bubble state compared to the US where the risk has dropped significantly on new loans based on significantly depressed property values.  Canadian real estate values are being supported by a commodity bubble - if/when this commodity bubble bursts there will be a lot of pain for Canadian banks.

 

- At this point in time it seems to make more sense for a Canadian to buy American dollars than it seems suggested here.  The Big Mac Index as of very recently had the Canadian dollar 24% overvalued.  So an American buying Cndn $ would be buying a US dollar for $1.24; whereas, a Cndn would be buying a US dollar for about 80 cents.

 

The two banking systems should not be compared. I don't see CIBC offering mortgages worth 110% of my home. More leveraged doesnt necessarily mean more risk.

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I would like to open an Australian bank account - the interest rates are much better than in the US, the banking system is stable, and the AD seems likely to continue to strengthen. However, it is fairly difficult to open an Australian bank account as a US citizen because of their taxation system. Has anyone else had success with this?

 

 

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I have looked at international bank accounts and brokerage accounts as a US citizen...it's tough and tougher since the gov decided to put some onerous regulations on foreign banks holding US cash.

 

A good resource is to check out the book "The World is Your Oyster" by Jeff Opdyke.  It is mainly about investing in foreign stocks directly, written back in 2008.  The book is a very quick read, I think I read it in 2 or 3 days (just on the bus) but contains a nice list of foreign brokerages that are willing to work with US citizens.  He mentions in the book in most cases if you have a foreign brokerage you'll need a foreign bank account to hold dividends, and the bank account is easily setup with an affiliated bank because the brokerage account exists.

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