3 reasons to sell your cba shares, page-240

CBA to $100...?

I doubt it (unless the AUD craters and we begin our own ZIRP).

For me there is zero doubt in my mind that the major Australian banks are overvalued and pose a real risk to the whole Australian economy (and government), but I'd be the last person to short them at this stage (don't fight the trend)...

On the flip side, investing for a small dividend or deteriorating prospects of further capital growth is a fools game of picking up pennies in front of a steam roller...

And now that CBA has just fallen through its 150 moving average anyone who isn't a true believer should probably be creeping towards the exits.

At these valuations CBA can't afford anything to go wrong in either the Australian or the global economy.

If any cracks emerge in the Australian property market or if there is a tightening of global liquidity I'll be racing to put my shorts on!

If housing prices slow or the likelihood of a recession mounts CBA will quickly become one of the best shorting opportunity in our lifetimes, but I have a feeling I might be waiting at least a few more months yet.

The bank profits were built on the back of a housing boom (and when household credit growth is constantly growing on the back of a commodity boom risks appear MUCH lower than they are), but just like the mining boom was followed by a bust, the housing boom will also have a bust at some point (via credit deflation or currency debasement).

Here's a sobering comparison:

Combined market cap of CBA, ANZ, NAB & Westpac = 142B + 93B + 88B + 109B = 432B

Combined market cap of JP Morgan, BofA, Citi, & Wells Fargo = 242B + 174B + 165B + 289B = 870B

The big four banks in Australia are 50% of the market cap of the big four banks of the US, but their banks are more global and their local economy is 12 - 15 times the size of ours!

Combined EV of CBA, ANZ, NAB & Westpac = 258B + 103B + 200B + 206B = 767B

Currently the big four bank's combine enterprise value is equivalent to 50% of the Australian GDP...!!!

CBA's enterprise value of $260B makes it a larger enterprise than global powerhouses such as BP, AT&T, Ford & Chevron!?!

If CBA's price goes past $100 and above it's EV will surpass WalMart and begin to challenge the likes of Toyota, Berkshire Hathaway and Nestle!

A generation from now finance students will do case studies on the irrationality of these sorts valuations as well as the increased financial risk that results from incentivizing credit growth into non-productive assets (like residential housing).

I'll see the permabulls at the bottom. I'll be the guy you are begging to take your CBA shares off your hands for $25...