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  • Writer's pictureIshfaaq Peerally

Time to buy BANK OF NEW YORK MELLON Stocks?

The best performing of all my YouTube videos is the one I made about the Bank of New York Mellon $BK . I told you in that video that the Bank of New York Mellon (BNY Mellon) is the world's largest custodian bank with over $33 trillions in Assets Under Custody(AUC) and $1.7 billions in Assets Under Management (AUM). What exactly is a custodian bank? it is a bank which doesn't engage in traditional banking practices such as deposits and loans. Custodians banks don't usually have branches and ATM. They are only a place for wealthy individuals or corporations to store their assets. I gave you the example of Apple $AAPL last time. Where do you think they store their $250 billion cash pile? They use a custodian bank. Why would they do that? If you deposit your money in a traditional bank, the bank doesn't save your money. They actually use it immediately by lending it to other people. If anything goes wrong with the bank and it goes bankrupt, only some of that money is ensured by the government. You may pay additional fees to insure from a private insurer such as AIG $AIG or Travelers Companies $TRV but as we know what happened in 2008, it is not always safe. The safest place you can store you money or any other assets is a custodian bank.

Why was my video so popular? It is mainly because the stock price has been falling in recent months. The reason for this is because of a strong US Dollar $USDOLLAR and a weak Pound Sterling $GBPUSD . The US Dollar is strong because of the measures of the Trump administration and the Pound Sterling is weak because of Brexit. 23% of their exposure is in the UK, 22% in Germany and 10% in Japan. To understand why it is important for them to have a weaker US Dollar and a strong Pound Sterling, you should understand what is an ADR (American Depositary Receipt). Let's take for example, a British company being traded on the London Stock Exchange. Americans want to buy shares of this company in New York. BNY Mellon will buy the shares in London and create an ADR which they are going to sell in New York. In order for them to make the most money form this the GBP-USD currency pair $GBPUSD must go up(I explained with a demonstration in the video how it exactly works).

The market, like always, overreacted and that's why the stock price has been falling. For me, it is not worth an investment right now. BNY Mellon is not a stock which will grow at a slow rate and I better invest in other companies for the time being. I also own JPMorgan chase $JPM which is the main competitor of BNY Mellon and the second largest custodian bank in the world. JPMorgan Chase is more than just custodian banking, therefore, it is better for me to focus on JPMorgan Chase. Will I ever buy BNY Mellon? Well, everything has a price.

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