On 15 August 2025 co-maestro of "The Pod Machine", long time small cap afficionado and advocate for internet Blip-Coins @Strawman finally admitted that actually the Big 4 Banks are 'the best game in town'. Waxing lyrical on their home loan game, he points out that as a bank, relative to the tier one capital, he could lend a squillion dollars, and this is "virtually, well, no not virtually, completely 100% risk free". He further elaborates, "It's 100% risk free, because we're going to have decades of just living like kings.... and if things sort of don't go to plan we (the banks) get bailed out anyway. It's the best game in town'. Seemingly shocked by his own revelation of a 100% risk free investment that can literally 'blink money into existence' the finance Guru and head honcho of Australia's Premier Online Investment Club "Strawman.com" known in some circles as 'Rampage', goes on to say "look, I'm not suggesting, I don't know what I'm suggesting".
For more detail look for my above titled article in the Financial Review, Courier Mail, The Australian and similar publications.
As a fan of investing in Australia's big banks myself, this Strawperson is enjoying @Strawman finally coming around ;) , and hope to have the opportunity to get into the IPO of Strawbank (Rambank probably too close to RAMS?) in the not too distant future. Maybe Bitcoin reserve will provide the base 'Tier 1 Equity' providing endless growth in lending potential as it goes 'too the moon'.
Disclosure: The author is a big bank investor, and while all quotes are word for word, no inference is made as to context :D .
Ha, well just remember @tomsmithidg that it is the bank executives (as opposed to shareholders) that have risk-free upside and limited downside.
An emergency capital raise or two will ensure most common shareholders get royally shafted in the event enough loans go bad.
And you don't need negative equity or anything even close to that before things get difficult for pleb shareholders.
ANZ, WBC and NAB share prices aren't much above their 2007 peaks.. and our banks didn't suffer nearly the same pressures as their peers did in the US and Europe during the GFC.
Anyway, I'm just shouting into the wind at this point :)
So what you're saying @Strawman is there is still a lot of Capital Growth opportunity .... :)
I feel like you're channeling Scott @tomsmithidg haha
Actually, there is a load of growth *potential*. There's always lots of dancing when the music's playing (and the band can play for a long time when jacked up on stimulants)
It's more a concern as to what could happen if things slow or, heaven forbid, go backwards. Not being a doomer, but these things do happen from time to time. So not calling the end of the world, just a plea for a more antifragile and resilient financial system. Just seems prudent to me.
It would appear that with the right bait you can catch the big fish @tomsmithidg
I saw this article on the ABC last weekend but didn’t get around to posting it. I liked the great visual that the graphs provided.
I think the mentality that you hear from some investors, coupled with the sheer size of intentional losses are very concerning and don’t scream out anti-fragile.
In all seriousness @Strawman , the banks being the lynchpin of the Australian economy, in such a privileged position, government supported and as you pointed out on the pod, integrated into pretty much everything for every Australian, from insurance to Superannuation provided the basis for my intitial investment strategy when beginning as a very risk averse (fearful) investor. My very macro theory was basically, if the Australian banks crash it won't matter where you have your money, everything has gone to shit.
The obvious exception to that was Gold (or maybe *choke* bitcoin *choke*, though not back then) or in the case of complete doomsday scenario, bullets. Neither gold nor bullets were going to earn me money that I could re-invest though, so Banks it was with earnings better than bank interest, plus franking credits, and the other beneficial tax treatments such as the CGT discount. I hoped for (and fortunately received) capital gains as well and it provided a secure base for my growth and (admittedly limited) diversification into other sectors and markets.
I think the direction and momentum of our economy (population increase, property prices etc.), especially now with the advent and proliferation of ETFs (resulting in more bank shares being purchased), is now reinforcing the entrenchment of the banks advantages. I think the chance of them going to zero is miniscule and their profitibility (admittedly on shrinking margins) is just going to increase. It is a sector that should really be able to leverage AI too with all the potential that entails as well.
See those bank shares shoot up today? Word must have gotten out about @Strawman 's revelation about them being the 'Best Game in Town'. :D
Just a little follow up on this old thread, where @Strawman called the big banks the 'Best Game in Town' on the Motley Fool Money podcast, AKA The Podmachine (TM). He's been proven right again with those lucky punters that piled into banks as a result enjoying excellent returns like the 7% rise in the much maligned ANZ bank share price today. Ram's mate Scott's 'The Motley Fool' reported on ANZ today as follows:
The ANZ Group Holdings Ltd (ASX: ANZ) share price is in focus as the bank posted a first-quarter cash profit of $1.94 billion and a statutory profit of $1.87 billion. Cash profit jumped 75% compared to the second-half 2025 quarterly average, driven largely by lower expenses and stronger revenue.
Over the 12 months, ANZ shares have risen 26%, outperforming the S&P/ASX 200 Index (ASX: XJO) which has risen 6% over the same period.
Hopefully these increased profits will see an increase in those sweet sweet franked dividends too.
Disc: Everyone knows I hold (shitloads in RL)
I can't remember the last time I saw the banks rise so much over 2 days following CBA's result beating market expectations.
Like most my growth portfolio has been smashed but my income portfolio consisting of the big 4 banks and others (including CAF, IGL, TCL and TLS) has helped alleviate the pain.
If you can't beat them, join them @OxyBBear.
Im also getting smacked today save a position in VAS (ASX top 300 ETF) or ( a small basket of big banks and miners).
It is like synchronised swimming to watch how CSL has swan dived while the banks have flown. Those in the big for banks should read some of the timely Lessons from CSL investors shared (@Goldfish articulating it well).
I see the banks at valuations similar to CSL in 2019/20, which at the time said to me that even if things go well, most of the next 5 years shareholder returns are booked into the price and multiple compression is a high probability while there was no chance of multiple expansion which drove a significant portion of the prior 5 year return.
If CBA gets even close to $190 again I will probably short it, not sure currently on a target for the other 3 but I see them all as very over valued.
Just my view on them now – I have in the past done very well out of the banks (mostly CBA).
@Tom73 I agree with your assessment of the banks and lessons learned from CSL so have already lightened my CBA exposure, granted today is the second day of a substantial rally in CBA.
Usually results that are above market expectations (and I would argue the latest bank results from CBA and ANZ have been a big surprise) result in the share price rallying into a second day if not more so I am hoping for another up day in NAB/ANZ to lighten my holdings. Having said that I've always primarily seen the big 4 banks as income stocks so the urgency to lighten is not the same for me as for growth stocks.
The opposite can be said for results that don't meet expectations, hence why I have not purchased PME yet (or CSL yesterday) as I believe share price weakness will plague them short term wise as those who have not yet had the chance to react to the results do so over the next few days. If I was to purchase today I would definitely buy in multiple tranches which I'm sure a lot of SM memebers are planning to do anyway.
Definitely agree @Tom73 , if you are a capital growth play as opposed to an income play. For me ANZ is an income play, at my average purchase price and recent dividend levels it pays me around 6.7% per annum dividend before franking credits. The big banks are also super liquid so I also trade them, on a day like today I might sell a small tranche, and then buy them back when they drop a couple of percent. The beauty is that the value of the shares can plummet and I still sleep soundly and collect my dividends and accumulate.
The other difference regarding the banks as I've discussed in a thread here somewhere, is that unlike a purely consumer free market stock like CSL, the Big Four have the benefit of an entire market that is designed around and ensures their success. With the exception of some groundbreaking, wholesale shake up of the Australian market and legislative change (have you seen our politicians) our big banks are basically underwritten by us the taxpayer. I have always contended that if the the Big Four fail it won't matter where you've got your money, the whole Australian market will have collapsed. That would indicate much bigger issues where the only things of value are likely to be livestock, gold, bunkers and bullets.
That said, I'm certainly not buying at these prices, but I'm really happy that someone is.
Just on the income stock points @OxyBBear & @tomsmithidg , I think an income stock is effectively no longer income stocks if it’s price gets too high. At the point where the yield is only marginally above government bond rates (or good term deposit rates) and the company is getting next to no growth it becomes a poor investment. Even if you factor in the “to big to fail” low risk you have a better risk reward in fixed interest, why suffer the volatility of the market to get at best the same return.
It gets tricky if you have a large capital gain should you sell, in which case I would calculate the yield based on the after tax value of the holding if you sold. I wouldn’t refer back to the original purchase price – that is no longer relevant, you have a current investment of the current value and you want to get the best return on that value, not some previous value it was.
In the end it is a personal preference, but if I am trying to anticipate how the market over all will price stocks, then I expect over the longer term that low yield “income stocks” that are not growing will ultimately have their yield corrected by a lower price and become true income stocks again. I wouldn’t be planning to flip in and out of them every time I think they are a little over valued, only when they reach extreme points of over valued such as where CSL was at and where I think the banks are currently at do I think it’s worth cashing in your chips and waiting or even better finding something else with better yield.
For ultra passive investors that look at their investments once a year, holding very over valued income stocks through such periods is part of the ride, so I don’t have anything bad to say for those who do that. What they loose from underperforming in these periods they gain by not selling in periods of panic. Long may they calculate the yield based on their initial purchase price if it makes them happy.
Each to their own.
@Tom73 I don't disagree with you if I look at the current yield in isolation but as you rightly point out CGT has a big deal to do with it.
The way I see it if you say purchased 1,000 CBA shares at $20 at a cost of $20k and now it is worth $180k then your capital gain is $160k. Depending on under what type of entity you purchased the stock will play a big part in your decision to sell. As I purchased CBA under a corporate entity my tax rate is 30% so my CGT bill would be $48k.
If I sold my CBA shares I would have $180k less $48k = $132k to reinvest. So from my POV that means any future compouding returns will be based on $132k instead of potentially $180k after donating $48k to the ATO (which is why I understand you would calculate the yield based on the after tax value of your holding).
Furthermore even though my investment in the banks is mainly for income, there is still the potential for some capital growth which we have witnessed over the past year. But as you rightfully said, each to their own.
@Tom73 , you're correct if you're buying them at the higher prices, but not if you're holding them from the lower prices. The same CGT implications happen for non-dividend paying shares as well, the difference being (depending on how long you've held them) that the dividends from the shares (like mine) have already repaid the entire investment amount plus some (paid themselves off like a house). In addition they have already paid tax on my behalf, in the case of @OxyBBear in a corporate structure all the tax is already paid, in the case of individual marginal tax rates it could be all paid, partially paid or paid higher earning you a franking credit refund at tax time. Cash accounts don't do that, you get taxed at the marginal rate after your interest earnings. Also, if you can point me to the term deposit rate getting me over 9% to account for the tax I'd appreciate it. That's double most high interest accounts at the moment. Obviously all stocks get the 50% CGT discount once you've held for 12 months (until Labor cans it).
The calculation on yield is not just on the purchase price, it's purchase price, repayment of the purchase price, tax credits for the twice yearly cash earnings, the ability to reallocate capital from those twice yearly earnings to other value stocks without having to sell any of the original holding (avoiding needless CGT implications), AND capital growth. Growth only stocks only have one mechanism to realise value, growth and subsequent sale. I agree though, each to their own and let the portfolio performance tell the story.
@OxyBBear , you forgot your 50% CGT discount for holding longer than 12 months. You only pay 30% on $80k of the capital gain.
@tomsmithidg I don't believe a company gets the 50% CGT discount. If it does then I need to sack my accountant.
That is correct - individuals and super funds run by individuals qualify for the 50% CGT discount for assets held for longer than 12 months, but companies do not, so anyone investing via a company structure does not qualify.
Oh yeah, sorry @OxyBBear , I've got a Trust Structure that gets the 50% CGT discount too, so I mistook that, mixed it up with the bucket company attached to the trust.
This is why everyone has to look at their own personal circumstances when making investment decisions as has been illustrated by how long you have held, what investment structure you use and ultimately what you want, not just yeilds. To clarify a couple of points I made and terms I used:
So, in the example @OxyBBear gives for long held CBA shares it is hard to find an alternative. In some ways long term holders of CBA and similar income stocks become trapped over time by this dilemma. This is when it becomes a super hard problem of having to guess how many years of capital growth you will forgo at current prices by holding.
For many investors, holding CBA at current and even higher prices is probably the best decision. But for new investors I see it as total madness…
Looks like we have a trifecta as it appears WBC has beaten expectations as well with their 1Q FY26 update below courtesy of Market Index. Like me, many would have expected this following the CBA/ANZ results which is why I held off lightening my ANZ/NAB/WBC exposure hoping for some more positive follow through price action but I think the action on Wall St overnight might scuttle my plans.
Westpac 1Q26 tops expectations
Westpac reported a robust start to FY26, underpinned by lending expansion, strong capital, and ongoing digital and productivity initiatives.
@OxyBBear , not good enough to turn WBC green against today's Friday 13th avalanche of red though. ANZ managed a little more gain though.
Early strength in the big 4 was gradually overwhelmed by the negative sentiment on our bourse plus profit taking after 2 days of substantial gains. ANZ did finish green though reaching an intraday record high of $41.00 which allowed me to sell some. Let's see if NAB can make it a Quadrella next week.