Online Brokers Hate New Late-2014 FOMC Rate Stance (SCHW, ETFC, AMTD)
Most financial firms are supposed to benefit from low interest rates because of the spread they can get by borrowing short-term and investing long-term. The problem is that rates went so low to a non-existent equivalent rate of ZERO that now…
Most financial firms are supposed to benefit from low interest rates because of the spread they can get by borrowing short-term and investing long-term. The problem is that rates went so low to a non-existent equivalent rate of ZERO that now the brokerage firms cannot make any money on investor cash balances. The news given today by the FOMC that rates will remain exceptionally low through at least the end of 2013 rather than through at least mid-2013 is not a welcome for companies such as The Charles Schwab Corporation (NYSE: SCHW), E*TRADE Financial Corporation (NASDAQ: ETFC), nor for TD AMERITRADE Holding Corporation (NASDAQ: AMTD).
While equities and bonds see inflows and outflows depending upon the market, cash balances at brokerage firms remain very high as investors remain timid. If rates were at 1% the brokerage firms would be able to make a much better rate on that cash just sitting there.
Schwab is now down 2% at $12.20 versus a 52-week range of $10.56 to $19.69.
E*TRADE is now down over 4% at $9.13 versus a 52-week range of $7.42 to $18.13.
TD AMERITRADE is down by over 2% at $16.79 versus a 52-week range of $13.43 to $22.90.
JON C. OGG
Contact [email protected] for any questions or corrections.
Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. www.247wallst.com.
