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Old 08-03-2010, 02:43 PM
 
105,809 posts, read 107,799,717 times
Reputation: 79425

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Quote:
Originally Posted by Mathguy View Post
Really?

You've mangled the definitions of things like profit margin and haven't even been able to correctly calculate the denominator for the basket of goods and services included....not to mention loan default and other servicing costs.

If it helps, imagine filling out a pro-forma and mapping the cash flows etc.
huh???????????

better look up the term "mark up" its merely the sale price of the goods vs the cost...there is nothing else to be figured... your trying to equate that to the companies bottom line and that is not what i refered to.

the reason i said it is because you would be surprised how many folks go the banks are only making a 5% profit because they are buying it for 0-1% and selling it for 5%... thats why i said the markup is not 5% its 500%...

Last edited by mathjak107; 08-03-2010 at 03:16 PM..
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Old 08-04-2010, 05:08 AM
 
105,809 posts, read 107,799,717 times
Reputation: 79425
until the banks lost all their money, according to business week ,banking and oil would jockey for 1st place as the most profitable sectors..

looking at all those incredible profits banks were making until the debacle says that nice juicy mark up on loans which afterall is their core business does translate to the bottom line as heafty profits..... there now i said it.

that doesnt mean they arent entitled to earn nice profits and to charge you for their services,it just means banking is very profitable.

most business dont earn a 500% mark up on what they sell. more typically goods see a 500% mark up from factory to consumer.

i was a manufacturer of water pumps... our products typically had a mark up to the consumer of about 500%.. but that included our manufactuirers reps who earned a living and our distributors mark up who earned a living. keeping a 500% mark up is an unusual amount in any business unless like the banks they follow the theory of vertical alighnment where one company handles all ends from manufacturing through distribution and keeps all that margin.

again thats not bottom line profits, only what they have before they pay the bills.

Last edited by mathjak107; 08-04-2010 at 05:38 AM..
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Old 08-04-2010, 05:26 AM
 
Location: Los Angeles, Ca
2,883 posts, read 5,869,984 times
Reputation: 2762
I like simplicity when shopping for a bank. Thats why I picked washington mutual when they were in business (then they moved/got bought by chase).

Its part of this nickeling and diming phenomenon of the last 10-20 years. Where "fees" get broken up into so many parts. And "they" hope you don't notice. Or you don't add up all the fees.

Like ebay/paypal. During ebay's heyday, they had 4, 5, 6 fees you'd pay They still do. Final value? Insert a picture? This and this.

This breaking up of fees runs in tandem of the general dumbing down of the culture IMO. I wouldn't be suprised if the banks, and big corporations are in on it with the schools and influencers in this country. They don't really want you "knowing" what you're paying. I don't know. I think its really a conspiracy.

-With banking, they already have a strike against them. They are big, evil, impersonal. They've done some things to change their image. The washington mutual I use to go to looked like a salon. A "lifestyle center". Or something. Some catchy marketing name to make it sound like something other than a bank. Haha. Do those ideas work?
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Old 08-04-2010, 08:03 AM
 
Location: The DMV
6,561 posts, read 11,195,420 times
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Quote:
Originally Posted by mathjak107 View Post
huh???????????

better look up the term "mark up" its merely the sale price of the goods vs the cost...there is nothing else to be figured... your trying to equate that to the companies bottom line and that is not what i refered to.

the reason i said it is because you would be surprised how many folks go the banks are only making a 5% profit because they are buying it for 0-1% and selling it for 5%... thats why i said the markup is not 5% its 500%...
My issue with your analogy is that you're looking at money as a commodity.. Which isn't exactly comparing apples to apples.

Also given banks work on deposit ratios - so that 5% is of a smaller value. So the 500% profit really wouldn't apply....
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Old 08-04-2010, 08:16 AM
 
105,809 posts, read 107,799,717 times
Reputation: 79425
as far as i know their profit is actually higher , they are working leveraged.... if you borrow 10,000 bucks and arent ready to spend it all so you put it in your checking account the bank gets credit for the loan as an asset. they also get credit for the deposit as an asset.

simply put without all the complex calculations they can then lend out about the total of those two less whatever the fed requires as reserves.
in effect they are creating money where there really wasnt any and getting interest for 2 loans in effect on 1 deposit..

Last edited by mathjak107; 08-04-2010 at 08:56 AM..
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Old 08-04-2010, 11:15 AM
 
20,793 posts, read 61,101,312 times
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I keep coming back to the title of this thread and thinking that you are not paying to access your money, you are paying to use an ATM, there is a big difference. You can go to your bank and access your money without paying anything.
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Old 08-04-2010, 11:23 AM
 
9,803 posts, read 16,118,337 times
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Ther is no free lunch.
If you think you're getting one, the cost is paid by others.
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Old 08-04-2010, 01:43 PM
 
77,773 posts, read 59,928,695 times
Reputation: 49160
Quote:
Originally Posted by mathjak107 View Post
as far as i know their profit is actually higher , they are working leveraged.... if you borrow 10,000 bucks and arent ready to spend it all so you put it in your checking account the bank gets credit for the loan as an asset. they also get credit for the deposit as an asset.

simply put without all the complex calculations they can then lend out about the total of those two less whatever the fed requires as reserves.
in effect they are creating money where there really wasnt any and getting interest for 2 loans in effect on 1 deposit..
100% agree. You'd also however need to be considering the equity invested in the bank in order to operate.

For example:

Bank takes in a 100 million in deposits, writes 200 millions in loans and makes say 5million in profits.

Now, did they make a good return for their investors etc? Not if they had to invest $100million in order to operate the business because then their ROE would only be 5%.

I hope this explains how profit margins etc. can be meaningless when comparing across industries which have different capitalization levels...not to mention if you want to start discussing risk adjusted returns.
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Old 08-04-2010, 01:46 PM
 
77,773 posts, read 59,928,695 times
Reputation: 49160
Quote:
Originally Posted by mathjak107 View Post
until the banks lost all their money, according to business week ,banking and oil would jockey for 1st place as the most profitable sectors..

looking at all those incredible profits banks were making until the debacle says that nice juicy mark up on loans which afterall is their core business does translate to the bottom line as heafty profits..... there now i said it.

that doesnt mean they arent entitled to earn nice profits and to charge you for their services,it just means banking is very profitable.

most business dont earn a 500% mark up on what they sell. more typically goods see a 500% mark up from factory to consumer.

i was a manufacturer of water pumps... our products typically had a mark up to the consumer of about 500%.. but that included our manufactuirers reps who earned a living and our distributors mark up who earned a living. keeping a 500% mark up is an unusual amount in any business unless like the banks they follow the theory of vertical alighnment where one company handles all ends from manufacturing through distribution and keeps all that margin.

again thats not bottom line profits, only what they have before they pay the bills.
The largest companies in the world are....drum roll please....oil and financial service companies. Gee, I wonder who would have the largest profits?

I had to cover this concept when exxon made thier "record profits", their return on equity at the time was comparable to McDonalds and lower than companies like Garmin etc.

Feel free to link the article or source and happy to discuss.
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Old 08-04-2010, 01:53 PM
 
77,773 posts, read 59,928,695 times
Reputation: 49160
Quote:
Originally Posted by mathjak107 View Post
huh???????????

better look up the term "mark up" its merely the sale price of the goods vs the cost...there is nothing else to be figured... your trying to equate that to the companies bottom line and that is not what i refered to.

the reason i said it is because you would be surprised how many folks go the banks are only making a 5% profit because they are buying it for 0-1% and selling it for 5%... thats why i said the markup is not 5% its 500%...
The only place we are disagreeing is that you are claiming the ONLY cost a bank has is the 1% interest they pay you and thus if they get 5% the markup is 500%.

In reality the bank is giving you: 1% interest, free checking, free ATM access, direct depost and various other services which costs the bank money to provide.

We will just have to agree to disagree I guess that the banks service costs should or should not be included in the denominator when calculating mark-up.

P.S. The 5% number in the numerator would also need to be netted for loan service costs and defaults.
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