When it comes to banks, we all know about checking accounts and hopefully you know about savings accounts too. But there is another way to put your money in the bank and some analysts say 2016 might be a good year to do so.
Buying bank stocks is the same as buying stocks in any other publicly traded company. You buy a share of the company and, if that company does well, your share is worth more money than what you paid for it. While Netflix makes money on monthly subscriptions and Whole Foods makes money on grocery sales, banks make most of their money on interest.
The product that a bank sells is its loans and, just like any other company, the product must be good. If a bank gives a loan to someone who can’t pay it back, the bank’s stock is likely to go down. If the bank gives out successful loans that earn interest, the bank stock value will likely go up.
The recent interest rate hike by the Federal Reserve in December make the prospect of buying bank stock a good one. Federal interest rates trickle down to smaller banks and the interest that a bank can make on a loan increases. While a steep interest rate hike is likely to deter many people from taking out loans, the rate is still low enough to encourage borrowing. But even a quarter-percent increase can mean big dividends for a bank. As the Federal Reserve is expected to increase interest rates through 2016, provided there is still faith that the U.S. economy will grow despite volatility abroad, banks are poised to make more money, increasing the value of their stock.
Locally, Baylake Bank has had a successful 2015 while most other stocks in the financial district decreased. The stock has climbed over 200 percent since 2012 and spiked 13 percent in September of last year after the news of the merger between Baylake and Nicolet National Bank.
If you trust that Baylake, and soon Nicolet, are making good loans that will provide some interest return, it might be a good idea to look into buying some stock in the bank.
Crop prices (Jan. 26)
Rio Creek Feed Mill – Algoma
|Commodity||Price (per bushel)||Basis|
|New-Crop Wheat (SRW)||$4.16||-0.70|
Fox River Valley Ethanol – Green Bay
Basis: The difference between the local cash price for a commodity and the Chicago cash price (where the Board of Trade sets national futures price).
Gas Price Averages
United States: $1.79
United States one year ago: $2.01
Wisconsin one year ago: $2.06
Northern Door: $1.68
Sturgeon Bay: $1.68
Gold: $1,125.60/troy ounce
Silver: $14.29/troy ounce
Sources: aaa.com, agweb.com, gasbuddy.com, cnn.money