Collateral on Retire Rich by Luigi Foscale on Financial Times

Dear Friends,

On the list "Retire Rich by Luigi Foscale" on FT.com , you will read an interesting article regarding the banking system. My advice is to read it because the article continues what I anticipated in this Blog.

Take information.

Yours

Luigi Foscale

Pension Funds have hidden fees

 

We all know all Pension Funds are very expensive in terms of fees. 

 

At this regard I would like to inform you about something I consider absolutely wrong. If you choose to invest in the 401(k) plan, you will get many hidden fees as CNN showed very clearly in this article.

 

Because of this, my advice is: you should personally check out all of your investment fees.

 

Luigi Foscale

New Banker defends predecessor!!!

Dear Reader,

Isn’t strange that a New Banker Defends his Predecessor?
In my opinion…it’s not.

Check it out: this article on the Financial Times.

Luigi Foscale

The Bank always makes profits, even when you lose.

 

Today the Milano Stock Exchange lost 5%.

 

Always remember if you deposit your savings in a Bank, the only ones who always earn are the Bank and your Banker. When you invest in the Stock Exchange (or in bonds) you can make profits or lose.

 

You won’t know it in advance but you have a certainty: you always pay your bank fees.

 

Bank fees are lower if you invest in Treasury Bonds and regular Bonds while they would be higher if you invest in stocks. Obviously there are exceptions but they are very rare. It is indeed quiet right to ask yourself a question.

Who is going to guarantee me that the bank does not invest in stocks while the Stock market is losing?

Remember...the bank makes more money with people who invest in stocks.

With the stock market losing 5% in one day, can you still trust the financial system?

Every day a greater number of people are losing trust in the financial system.

Luigi Foscale

Banks stopped Banking

 

Today the public opinion bashes banks because they use their money to buy public debt of their own country instead of borrowing it to those in need. In practice, even if it sounds weird, banks stopped banking.

The bank’s job is simple: they buy money from you (when you deposit your cash on your account). Then, they sell you the money when you are insolvent (mortgage rates, credit cards, lease). The difference between that little amount that the bank puts in your account and the enormous amount you pay as interest rate it’s indeed the bank’s profit. This was the routine banking procedure. While doing so they used to provide a service to the customers who requested it.

 

In the past twenty years the bank that did not make enough profits from ordinary operations they ventured in high-risk operations (derivative finance), which provided immediate and greater returns.

 

The evidence these were risky investments has been confirmed by the present-time crisis.

Now the problem is very serious: real economy stopped growing.

 

Those who needed liquidity were not able to get it because banks already spent it. And those who pay the price of it are the young couples who cannot afford a mortgage, the business owner who cannot enlarge its store and the companies whose scarce liquidity prevented them to invest and stay competitive in the market.  

And the Real Economy engine unfortunately but obviously stopped working.

Luigi Foscale

Le Banche hanno smesso di fare le Banche

Oggi l’opinione pubblica critica le banche perché impiegano i propri soldi per comprare il debito pubblico del proprio Paese, anziché prestarli a chi ne ha bisogno. In pratica, sembra strano, ma le banche hanno smesso di fare le banche.

L’attività di una banca è semplice. Compra il denaro da te, quando versi la liquidità sul conto corrente. Ti vende il denaro, quando ti indebiti (mutuo, carta di credito, leasing...).  La differenza tra quel poco che la banca ti accredita sul conto corrente, e quello sproposito che paghi di interessi, è il guadagno della banca. Questa, era l’attività ordinaria delle banche che, così facendo, prestavano un servizio a chi ne aveva bisogno.

Tuttavia, negli ultimi 20 anni, le banche, che non guadagnavano ”abbastanza” dall’attività ordinaria, si sono avventurate in operazioni ad alto rischio (i derivati), ma che davano guadagni immediati ancora maggiori. La prova che erano investimenti rischiosi, è stata confermata dalla crisi attuale.

Ora, il problema è molto serio: l’economia reale si è fermata. Chi aveva bisogno di liquidità, non la ha ricevuta, perché le banche l’avevano già impiegata.  E a farne le spese, sono la giovane coppia che non può farsi il mutuo, il commerciante che non ha il leasing per ingrandire il proprio punto vendita e le industrie a cui viene negata la liquidità per fare investimenti.

E il motore dell’economia reale, purtroppo, ma ovviamente, si è fermato.

Luigi Foscale