Would love to know who is bidding the price up & for what reasons. Ive heard all sorts s of theories. Ranging from the reasonable - benefitting from passive investing as it collects 10 cents for every net index dollar invested into a passive fund tracking the ASX based on its market eight. To the ridiculous theories, such as CBA being a 'safe haven' in the Australian market during a time of economic uncertainty in China - which will only heighten given Trumps tariffs threat. A safe haven is the 1 or 2 year government bonds paying 4.15% interest rate, not CBA with its 3.16% dividend yield trading at an extreme multiple.
I know the US banks jumped big time following Trumps victory on the basis of financial deregulation, but CBA does not operate in the American financial system. JP Morgan jumped 12% in a days trading yesterday, yet its PE ratio is still only 13.5. CBA is 26 times earnings. How insane is that. The American financial system is about to be juiced, yet American banks are priced at 40-50% discounts to CBA when evaluating on an earnings multiple.
Its actually a terrible deal to buy at these prices. Yet no one seems to mind. Although manic bubbles and euphoric belief in stocks being infallible is a theme among market history. Thats how you have Pets.com and WeWork, or closer to home, the stupid rally of Slater and Gordon, or the time Dominoes Pizza went to $161 a share on a earnings multiple of 100 - the same stock can be yours tomorrow for around $30 a share.
CBA Price at posting:
$147.26 Sentiment: Sell Disclosure: Not Held
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