It's not just CBA...it's poorer cousin that also lives in Sydney, WBC, also did so :)

Passive money flows and dumb money will always pile in when the market is making new all time highs. The opposite of grocery shopping. The higher the prices, the more people want to buy. CBA is the largest listed company in Australia by a fair margin if you exclude BHP because it's a mining company and is therefore perceived to be more risky by most punters. So plenty of buying of CBA by overseas players also, and how many global ETFs would hold CBA ? - quite a few. You may not be able to swim against that tide, but you can choose not to swim in that particular ocean.

When the "correction" comes, CBA is going to go down significantly. Can't tell you when, but at some point it will happen. I'm not prepared to momentum trade it in the meantime because there's nothing holding it up here except for continued positive sentiment about the ASX continuing to rise, and it will continue to rise, until it doesn't, for a while, and the most overbought companies should fall the most, in theory. So I see CBA as far too risky to hold up here because of that.

Of course I felt that way about CBA at significantly lower prices also, so I continue to be wrong about that with the benefit of hindsight, or perhaps I've always been right about the risk, just not right about the liklihood of the timeframe of the CBA uptrend coming to an end (the risk playing out to the downside). Whatever - it's more about the process with me - I still view CBA as far too risky to invest in on valuation grounds, and while that means I have missed participating in the run that CBA has had, that same rule has kept me out of some other companies who have crashed or significantly fallen from their highs over the years, so I continue to adhere to a process that has worked for me and I remember that I don't need to be in every rising stock, I just need to be in a handful of them.

And I like that handful to be companies that don't stress me out due to elevated valuations and my perception of the risk of them falling to much lower levels without notice.

CBA for shits and Giggles, thought i would apply my charting techniques to CBA after todays comments.

see the video

Forgive me if I’m wrong here, but feels like there’s a sense of “safe” companies getting a premium at the moment - almost well above what they’ve even had for a while. When you actually consider the fundamentals, it’s not great, but when you go out and talk to the average Australian, I reckon most would consider CBA to be a “safe bet”. Wesfarmers also comes to mind (which I really wish I didn’t sell in real life) or even Woolies, if it wasn’t dealing with the “you’re to blame for the cost of living” crapola. Those kind of companies seem like good “first order thinking” sort of investments which, if you’re at least aware of your purchasing power eroding, then money might gravitate there?

Either way, I’m thinking a lot more about the old keynesian beauty contest, in that, could’ve just bought companies that the majority of people also bought into, thinking they’re good, whether or not they actually are solid. In other words, a lot of us try to think about second, third order effects, however, the majority (arguably) don’t really do this. But then again, I suppose a crowded movie theatre isn’t a great place to be when a fire breaks out…

Not sure what I’m trying to say, except that I don’t think I necessarily blame the average person (who understandably might not have the time to ponder this kind of stuff) for thinking that CBA is a good investment. However, I do worry about what might happen if the housing market takes a tumble. As someone considering taking the step to get a mortgage for the first time, relatively concerned for the next couple years, but I’m probably being naive.

08-Feb-2025: From Marcus Padley's Saturday weekly wrap email this morning:

Excerpt:

SPI Futures down 64.

Wall St wobbles a touch overnight (Dow down 444, NASDAQ down 1.37%, S&P 500 down 0.95%) on more Trump mutterings about 'reciprocal' tariffs to come, and on higher than expected average earnings numbers which caused bond yields to rise 4.8bp and 7.1bp (10Y and 2Y). Consumer confidence numbers hit a 7-month low, and within that survey, inflation expectations rose, but you wonder if that read was taken before or after the tariff delays. Amazon down 4.1% on results. Alphabet down another 3.2%. Tesla down 3.4%. We are through the US Big Tech results season. It hasn't exactly lit up the market, but it hasn't punctured it either.

Resources faded a bit after a better week – BHP and RIO down 0.7% and 0.4% on Friday in the US.

The ASX 200 is within 0.65% of its all-time high. All banks inspired. The NASDAQ is 3.4% from its high, the S&P 500 1.5%. We are floating around at the highs and about to go into the post-results season doldrums in the US. 

Results season here is about to take off. Whether the CBA results can hold the share price is the main debate this week. How a low growth stock like this could ever hit a 30x PE I don't know (I do - people are paying up for safety). In the old days the banks were a buy if the PE ever got below 10x and a sell if they ever got over 15x. Now 30x. Pressure is on.

---

Aussie Sector movements this past week - Banks underperformed:

--- end of excerpts ---

CBA are slated to report their H1 results (to December 31st 2024) on Wednesday (12 February 2025) - and they have already (last week) informed the market of some changes to their reporting - CBA-Items-impacting-CBA's-financial-reporting-(03-Feb-2025).PDF

I haven't looked into that in any detail because I don't hold CBA or any banks directly.

Even though many punters would invest in CBA ahead of BHP because of the risk with cyclical miners and the exposure to commodity prices that BHP clearly has, I imagine that if demand for our bulk commodities (iron ore, coal) and other metals and minerals declines significantly, Australia, as a commodities-based economy, would look far less attractive as an investment destination for overseas investors, and if our ASX falls on the back of commodity price declines, that will also make CBA look less attractive, because it's the largest constituent of the ASX, and a receding tide will take everything down with it, not just the miners.

I'm talking here about a deep correction to the ASX, not day to day or week to week volatility. And we know that such events do happen, and we're probably overdue for such an event to be honest. So, as I said before, the only thing propping up CBA is positive sentiment, and that can change very quickly. There are many reasons why people might be buying CBA at these very elevated levels, and also reasons why people are loathe to sell and lock in massive capital gains in many cases which they would then have to pay considerable tax on, however I don't fall into either of those categories myself, coz I'm not holding, and I'm not seeing CBA as a top investment idea with clearly more upside than downside risk.

I actually think there is far more downside risk, which is one reason I'm steering clear of them, and there are others, such as my own track record of making more money in other sectors (not financials, and especially not banks). But horses for courses, each to their own, different strokes for different folks and de gustibus non disputandum.

Disc: Nah.

Good point @Karmast -- plus there's a mountain of passive flows via super and indexing i guess too (although I still haven't worked out how one might quantify that).

Yes not easy to quantify precisely @Strawman but I have given it some thought. About 38% of the total ASX200 market cap is now owned by retail and industry super apparently. Most working adults have 10% of their wages going into super every month. And of that my guess is about half of it is allocated to the ASX200.

So even if it's not completely accurate, that is a huge tailwind for the stocks in the index, as it's pretty indiscriminate buying every week or month....

I guess it's also making things harder and harder for smaller companies outside the index to work their way in there!

All good points in this thread I agree with.

For those in love with passive index ETFs such as VAS, you get about 10% of the portfolio in this lovely cheap stock now?

And I'm one of them, the tax bill on CBA makes me cry if i sell, so i drip it out. did you listen to the reply when BJ asked about the sense of the buyback quoting J Dimon, perhaps the most respected bank CEO, classic-- uncomfortable wriggling by CBA mgt lol

My theory, apart from all the points that have been discussed and are well-known already, is that perhaps the market is also front running and pricing in the massive expected productivity gains (mostly improved profitability from cost outs in the labour force) from increasing adoption of AI in the banking sector.

I think there's just too much money with super being allocated to the ASX - look at PME/WTC etc.