Swiss alternative bank breaks negative rates taboo • Hacker News Board

Re: Swiss alternative bank breaks negative rates taboo

#31

Post by chrido » Tue, Nov 24, 2015, 8:28 AM UTC

That's not so surprising, the base rate is negative since more than a year. Because of fear in EUR, many people instead of buying Gold, people bought CHF. One of my friends said: its a beautiful country and has a lot of assets, so there is not much of a difference. The SNB [1] fixed the EUR/CHF to 1.20 for quite long time until it was dropped suddenly at 15.1.2015. From one day to another all goods in the EU cost ~20% less for the Swiss people. As I live near the Austrian/Swiss boarder, there were many Swiss people coming over to Austria that time, buying as much stuff they could get and importing to Swiss. Main problem for the Swiss economy is that suddenly goods from Swiss companies are ~20% more expensive than competitors outside of Swiss. Or employees in Swiss are suddenly 20% more expensive if your main currency is EUR or USD. That's bad for the economy.

On the 15.1.2015 they also changed the policy from fixed EUR/CHF exchange rate to negative interest rates to reduce the influx of money. Currently the rate at which the SNB borrows to the banks is -0.81% [2]. A friend of mine pays a premium of 0.75% on the base rate for his loan on the house, so the currently borrows from the bank at -0.06%.

So what else could you do with your CHF? Buy Swiss Confederation bonds, the current yield is also negative, -0.28% [2]. Or buy EUR, more risky but more interest? Put under your pillow, too risky? Exchange to gold, pay for insurance or to keep it safe? Bonds of a country nearby? Only 0.46% for 10 years in Germany [3] and in EUR.

[1] http://www.snb.ch/en/iabout/stat/statpub/zidea/id/current_in... [2] http://www.snb.ch/en/iabout/stat/statpub/zidea/id/current_in... [3] http://www.deutsche-finanzagentur.de/de/factsheet/sheet-deta...

Re: Swiss alternative bank breaks negative rates taboo

#32

Post by theheck » Tue, Nov 24, 2015, 4:23 PM UTC

seivan wrote: post #30

Analemma_ wrote: post #4

Before you jump in with outrage or bafflement, consider that this isn't all that shocking, nor is having to pay a bank to keep your money totally unprecedented. Consider: if you want someone else to store your car, or your junk, or your data, you have to pay them. The only reason banks normally pay you instead is that your deposits are so useful (for making loans, and profit on those loans), that it's worth it to pay…

Out of curiosity what would ways to mitigate that? Real Estate appreciation/rent or index funds?

Mitigate what, the value of your savings from being debased through money printing?

I'll assume that's your question in this response. Unfortunately there isn't a straight-forward answer, everything (precious metals, stock market, bonds, etc.) is more volatile than holding cash, but your cash is guaranteed to go down in value over time due to money printing, so you get screwed if you do nothing.

There are too many permutations and personal situations to offer a one-size-fits-all solution, but I'll offer some general guidance.

If you're just starting your career, and don't have much to invest, you should just focus on becoming the best in your field, take advantage of any retirement matching that your company offers, and invest it in low-cost broad market index funds (like Vanguard's S&P 500 Index Fund VFINX is one example). Most people who don't have very much money worry about what to do with their money when they would get much better returns just by focusing on improving their skills!

If you have money to invest, you should read about value investing, I'd start with The Intelligent Investor by Benjamin Graham. Even if you don't want to manage your own money (and most people shouldn't unless it's going to be their full-time job), it will give you a great foundation for understanding the financial markets and how to evaluate people who you select to manage your money.

Re: Swiss alternative bank breaks negative rates taboo

#33

Post by auntienomen » Wed, Nov 25, 2015, 2:36 AM UTC

kasey_junk wrote: post #28

nstj wrote: post #25

Earlier quoted context omitted.

This however isn't the same as depositing $ in a bank though, where you're "loaning" your $ to the bank who will in turn loan it out to someone else (hopefully earning interest in the meantime!). If you were simply giving $ to the bank to safeguard and not loan to anyone then you would imagine they'd charge you as there would be no potential interest earnings on your "deposit"

That is essentially what this bank is responding to. They can't make enough lending the money as it takes to hold. So they charge you a storage fee in the form of negative interest. The most interesting thing to me is that they are charging big depositors more than small depositors. This seems crazy given the costs of banks is usually considered fixed per dipositer. This could be more about the banks politics than ac…

I think it's because big depositors are considered (by regulators) to be more likely to pull their deposits at any sign of trouble. It's riskier to hold and relend such assets.