CBA - Commonwealth Bank of Australia

[Econinvestor]

I'd hate to suggest you might be ramping this stock.
A somewhat more objective view might be this from "The Australian", taken with thanks from another thread:

How about looking at the logic of the post, and then giving a critique of the analysis? Then we can all get somewhere, and do away with silly attributions about motives. If you can come up with a flaw in the logic, go for it...

Financial journalism is of such poor quality, that I avoid paying it much attention, and when I do, I look for original sources. The Australian often fails to cite its data sources, quotes stockbrokers opinions without attached reasons, etc.

So: can you rise to my challenge and give your reasons? It would help us all.

 

[Econinvestor]

PS, Julia:

Underlying my post is a forecast in Australia of zero growth or a mild recession at worst. Why should all these loans go bad in such a scenario?

The problem with these CLSA forecasts is they exaggerate the severity of the problem for Australia. As I said, no reasons are given by the stockbrokers for the rise in bankruptcies, no mention at all in the article of reasons for a deeper recession than has been forecast: It is all predicated on a need to raise capital due to imaginary bad debts. Where is the evidence that we will have such a severe downturn?

 

[juw177]

The problem with these CLSA forecasts is they exaggerate the severity of the problem for Australia. As I said, no reasons are given by the stockbrokers for the rise in bankruptcies, no mention at all in the article of reasons for a deeper recession than has been forecast: It is all predicated on a need to raise capital due to imaginary bad debts. Where is the evidence that we will have such a severe downturn?

If you care to research on the cause of the unsustainable credit boom instead of reading "poor quality financial journalism" you will see that there is a strong fundamental reason for the bankruptcies and the looming depression. Zero growth is a very conservative estimate.

Imaginary bad debts? More like imaginary profits for the last 10 years. The government, stockbrokers and CEOs will never tell you that the bad debts is caused by fraudulent lending through understatement of risk. The evidence is right in front of you: stock prices, AUD/USD, corporate bonds, government bonds, real estate. The market does not lie.

 

[Econinvestor]

If you care to research on the cause of the unsustainable credit boom instead of reading "poor quality financial journalism" you will see that there is a strong fundamental reason for the bankruptcies and the looming depression. Zero growth is a very conservative estimate.

Imaginary bad debts? More like imaginary profits for the last 10 years. The government, stockbrokers and CEOs will never tell you that the bad debts is caused by fraudulent lending through understatement of risk. The evidence is right in front of you: stock prices, AUD/USD, corporate bonds, government bonds, real estate. The market does not lie.

As I said: where is the evidence of a bad recession, i.e. where are the GDP numbers you are working with, where is the forecast, what is the methodology? I've incorporated the bad debts in my analysis--pretty bad at 16%, but still giving a stock price of $37 for CBA. And that's a bad case scenario of 16% bad debts every year to eternity!

Your "evidence" of further bad debts via a recession is just a here-say rant, and until you give me hard evidence, I'm sorry, but why should I take what you say seriously? We are trying to invest wisely here...

 

[juw177]

Do you have any feel for market dynamics and economic indicators? If not, what about history?

GDP is lagging, not to mention it mostly consisted of artificial demand created by cheap credit. Why don't you look at bond yields, default rates, market capital, agency spreads, corporate bankruptcies, real estate prices, government debt, the list goes on. If that is not evidence, I don't know what is.

You are coming here with a theory and asking me to prove you wrong. I will not argue with you like that.

 

[Econinvestor]

Do you have any feel for market dynamics and economic indicators? If not, what about history?

GDP is lagging, not to mention it mostly consisted of artificial demand created by cheap credit. Why don't you look at bond yields, default rates, market capital, agency spreads, corporate bankruptcies, real estate prices, government debt, the list goes on. If that is not evidence, I don't know what is.

You are coming here with a theory and asking me to prove you wrong. I will not argue with you like that.

No, I come to you with facts and ask you for your facts-- in 'fact' yours is all theory, no evidence.

Also GDP *isn't* lagging, unless we are in a recession now, which is possible, but we will only know looking back at revised data. What is your source for lagging GDP, and what is the figure????

The IMF has forecast a mild recession, private commentators like Access Economics also, others a slowdown or zero growth with no recession.

Your panic list says nothing about a forecast of a recession, which is sustained negative growth. You also provide no numbers.Give me some numbers otherwise, as I said, why should I listen? I've given you my numbers: mild recession (usually a 1 % contraction), a share price ($43 based on six months of stable trade), a write down of bad assets of 16% per annum. Conclusion $37 CBA price.

 

[juw177]

Sigh... alright man. Be sure to come back in 6 months time and let me know how your bank stock portfolio goes.

 

[investorpaul]

We wont have any idea about where the value of a bank stock should be for another 6 months, there is no harm in waiting on the side lines for a while, its not going to do any thing magic at the moment.

 

[dirty_harry]

The big 4 have bad news still to come out obviously and their share prices have been hammered. It depends on how bad these writeoffs will get so it's not without risk, especially with some of the rumours you hear. However so far all provisions are easily offset by profits. A well informed CBA employee told me in '93 not to buy CBA what ever you do - worst advice of the decade.
The big 4 operating profits are still rising by 10%+ just like they have year in year out in the past. So if they can get over their writeoffs say within a couple of years they are all less than half their longer term price. Everyone is completely negative on them right now, and are very short term thinkers.
One thing to note, Buffett has been buying Wells Fargo and it's been going down since. They reported a loss recently, but he looks long term. They bounced 17% last night, so it goes to show how things can move when sentiment changes. When the buying starts it will be quick.

 

[joeyr46]

Not sure if the banks are a good thing long term. they call what other people owe them there assets so they may have alot more pain to go thru first
From this thread and other bank threads I would not say people are bearish
(Also Warren Buffet may be correct but he is only human and his time was then in the bull market may not be right now) The other thing banks make a lot of money from fees and if we stop borrowing(which has started to happen by the slowdown in house sales and approvals let alone business owners cutting back on investments then the banks have a long way to still go down without a lot of toxic debt (which could still happen ) remember this is only stage 1 of the recession, even if it turns out to be only mild it still has a long way to go time wise.
The other thing that usually occurs is the leaders of the last boom are not the good stocks next time in fact when you look at charts the banks are only just starting down even if they do have a bounce sometime this year

 

[CanOz]

A very good mate of mine just bought CBA the other day at 28 ish. I gave him this chart today and said to watch out for the wedge target which is also solid resistance. He's holding out for the Div.

Cheers,


CanOz

 

[Logique]

Yes this is my thinking also, was a little surprised to see it shoot up to $31, even if it was cum dividend. Canaussieuck, what is your wedge target ~$20?

 

[oremo]

I'm interested in the wedge target as well.
I don't know too much about charting but the shape is interesting. can someone shed any light on how it works?

:bounce:

 

[Logique]

In haste, I think I inadvertently placed the wrong interpretation on CanOz's chart. I believe it was actually presented as a falling wedge pattern, with a bullish breakout at the beginning of February, when it ran from 27 to 32, with a breakout target and resistance at 34. To confirm a breakout you'd like it to get above 30 and continue upward.

My talk of 20 was about where the upper and lower lines might have converged if the wedge had been maintained. So the call is whether it will continue as a breakout with legs, or whether the last 5 weeks have just been the start of a new downtrend.

Personally think it would be brave to call the bottom on the banks just yet, but you never know.

 

[Tysonboss1]

Does anyone know when the shares for the recent capital raising are going to be issued.

Is it this month of next month

 

[stl_08]

Finally the divident came, does any1 know why CBS sunk today underperforming the other big 4? Profit taking or suming to do with the dividend?
Also when do the spp shares come online?

 

[Old Mate]

Finally the divident came, does any1 know why CBS sunk today underperforming the other big 4? Profit taking or suming to do with the dividend?
Also when do the spp shares come online?

I think the dividend release pulled it down and I think it was also due for a pullback after it's great rally of late.

 

[roofa]

Finally the divident came, does any1 know why CBS sunk today underperforming the other big 4? Profit taking or suming to do with the dividend?
Also when do the spp shares come online?

CBA had outperformed the other 3 until today, WBC is now infront of CBA by 1.5%. Followed by ANZ and then NAB.

 

[stl_08]

I meant cba, and also when A company goes ex dividend why does there share price drop? And who's your pic out of the top4?

 

[semochen]

I'd say it's people selling the SPP to take a profit.. as I did for half of my purchase (these shares came on yesterday, but today's the first day they can be traded.. so today was the day they were sold)

Selling today at $36 would mean a profit of 38%... and since it has gone up by roughly the same amount in the recent rally, and with the massive gain in the US last night, traders would likely take the profit

Also... the day dividends go into your account (as today) has nothing to with the share price.. only the ex-div date