CBA sell signals?

[stevieb]

quote:Originally posted by stevieb

quote:Originally posted by KW

A rising share price means a company is continuing to increase profits. However, this is not likely for the banks, which is why the sector is on the nose, due to:
- interest rates rising means less borrowing, therefore less profits

Actually no, interest rates rising means less NEW borrowing not less total borrowing (= new + EXISTING), in fact higher interest rates usually make it harder to pay off existing debt (exactly your point on loan default rates below - you can't have both sides of the argument) so EXISTING borrowing stays high.

quote:
- competition for mortgages in a slow market means lower margins ...

Have heard this theory before but have also seen some evidence of the opposite, i.e. bank increase their loans rates much more readily on loans than deposit accounts so what they lose on loans they gain on deposits.

quote:
- retail super fund management fees being dropped in order to compete with industry funds ...

Only minimal evidence of this to date though it has been suggested. However against this you need to weigh the massive advantage of super under new super laws. I think fund inflows and growth of funds under management will easily outweigh any loss of revene due to marginal fee cuts.

PS for all those TA people I think you'll find CBA looks a lot better on TA grounds than just 2 weeks ago

[Phaedrus]

Bambi, I usually step incrementally into and out of trades, buying/selling as each of my chosen indicators are triggered.

My primary preferred trend indicator is a trendline. The idea is to adjust the sensitivity of supplimentary indicators such that they have a level of activity roughly equivalent to that of the trendline. That way, they can be used to confirm (or otherwise) signals derived from the trendline breaks. This is easily done by setting indicator periods such that they are nearly (but not quite) triggered by the lows used to draw the trendline. In this case, I had it all set up by the end of 2004, using the low of 14/12/04. Sometimes these initial settings require a bit of fine tuning as the uptrend progresses, but in this case, later lows nicely confirmed the original settings. Take a look at the low of October 2005 for example. See how it re-confirmed that all these different indicators were accurately tuned to the on-going uptrend. The same approach is used to set Trailing Stop levels. Start off with a fairly loose Trailing Stop and tighten it as the trend progresses. The idea is to end up with a Trailing Stop that just skims under all previous lows. That way you can quickly and easily detect when the uptrend weakens. The 7% Trailing Stop featured here was set using the low of March 2005 and was nicely confirmed by the low of August 2005. Ditto for setting the moving average period. This was initially set to skim under the low of Dec 04 and confirmed when it skimmed under the lows of Aug and Oct 05. The type of moving average used is not critical. Everyone has their own favourites and of course each different type will require a different period. If you are in doubt, use the one that gives the closest fit to the price action.

Just ask again if I haven't explained any of this clearly enough for you to understand.

[Lawso]

I've owned Westpac for several years and have done well out of them, though they're not so attractive taxwise since they closed off the NZ-based stock. The sh'ouses now take 30% RWT off my dividends

Anyway, I'm thinking of buying more WBC, or maybe another Aussie bank, but am surprised at the current weakness in the sector. Yesterday all but NAB were down again quite sharply.

To my simple mind, the banks are a fair barometer of the state of the economy and there's no reason to think Oz won't continue to power ahead. So I'd be interested to get some views on this odd situation. I've read most of the above posts with interest but I can't say it's any clearer to me.

[Halebop]

quote:Originally posted by Lawso

To my simple mind, the banks are a fair barometer of the state of the economy and there's no reason to think Oz won't continue to power ahead.

They are a barometer of the state of the economy but most particularly they are a litmus of the housing and business sectors.

Housing does not look so strong in NSW, VIC and (dare I suggest) NZ. WA will be dependant upon the commodities sector and as such growth there is viewed as cyclical. QLD has retirement and "sunbelt" demographics on its side and my money would be on relative outperformance there over the next 10+ years.

But QLD doesn't drive the bank lending market to the same degree. True retirees won't be borrowing the same amounts and boomers moving from Sydney to Brisbane are probably trading down to a degree in any case.

This is why banks have been talking up their business lending over the last few months because there isn't so much growth (vs historical) in residential - a lot of expensive churn instead. Business growth prospects look best in the same markets that are currently frothy on the residential property front. Balance sheets of SMEs are historically strong although some of the stuff I've seen shows liquidity is a bit tight in manufactoring and retail amongst others. This plus job and sharemarket data all reads like end of boom cycle stuff to me. The good news here at least is the Boomers are at the sweetest of the sweet spot in terms of earnings, consumption and investment so the end of the boom might merely be a soft or tired patch rather than recession. The wild card for me is still oil. Asia's growth and boomer resilience is a potent combination awaiting some "shock" news.

[Lawso]

Thanks for your thoughts, Halebop. Good stuff. I guess you wouldn't disagree that the Oz banking sector is a good place to be for a moderately active but essentially long-term investor like dear old me.

[Halebop]

quote:Originally posted by Lawso

I guess you wouldn't disagree that the Oz banking sector is a good place to be for a moderately active but essentially long-term investor like dear old me.

Banking isn't an especially defensive industry to my mind but when your product is cash you have to do something pretty stupid to run into cash flow problems. I guess this is why bank shares are often attributed as defensive? Just don't forget how close Citicorp and Westpac came to imploding in the early 90s.

I don't have a strong view on the sector although valuation multiples have expanded a lot over the last 15 years. I think they will continue to provide adequate returns but are unlikely to provide the same Low risk / High return / High dividend combo that people have come to expect. They do at least tend to have set and forget qualities if that is a primary goal.

[tricha]

Banking isn't an especially defensive industry to my mind but when your product is cash you have to do something pretty stupid to run into cash flow problems. I guess this is why bank shares are often attributed as defensive? Just don't forget how close Citicorp and Westpac came to imploding in the early 90s.

I don't have a strong view on the sector although valuation multiples have expanded a lot over the last 15 years. I think they will continue to provide adequate returns but are unlikely to provide the same Low risk / High return / High dividend combo that people have come to expect. They do at least tend to have set and forget qualities if that is a primary goal.

Read last night where ASB had 60% of their loans in the housing sector, hmm.
Hmm I wonder where CBA stands and and 6 monthes a go these deadhead brokers were spouting defensive, as Halebop states, hmm.

[Jay]

Had a call from Equity (whom i don't really deal with now) asking if I still had any CBA shares and if do I should sell - I do (a few) and I am not .

Well they rang home and asked for me and my wife answered, the fact that I was not there did not seem to worry him, he just kept talking, he could have been talking to the maid!
Not very professional!

[macduffy]

Thanks for that.

I'll tell the maid not to speak to Equity, should they call.

[macduffy]

Thanks for that.

I'll tell the maid not to speak to Equity, should they call.

But seriously, I think the call may have had something to do with the fact that the CBA has a $10,000 Share Purchase Plan at present. Closes tomorrow but I think the take up price is $26. Current SP allows a nice arbitrage, selling at $28 odd.