CBA TA update, page-61

Ironic that someone reignited a shorting thread from 2010 (post GFC rally - hope Dreamcatcher closed out his short). It might ironically be time to short CBA. I've had good gains on the banks from buying post COVID lows (CBA $60 to $80), but the US monetary bubble is at least about to slow if the Fed minutes overnight are to be believed. Get ready for a possible US correction and the biggest Aussie bank will unfortunately be in the cross-hairs of arbitrage and systematic selling, no matter how good its local metrics....

Normally a rising interest rate environment is of course a good thing for banks, but with QE and massive debt exposure, if rates go up on anything but transitory inflation in the US, CBA will be a victim of financial conditions far beyond its excellent business standing in the Australian economy. Very surprised by today's bank rally and took the opportunity to short at these levels (against the vast majority of the Australian population!!).

Hats off to the brave who held through COVID-19 and to here, but that CBA is on all-time highs at what was clearly the final peak of monetary easing since the GFC is a little bemusing to me. I've held off against temptation, but had to short today. Monetary lag may also delay the correction, but Powell showed his ignorance of it in 2018 and is doing so again calling US inflation transitory. Ultimately it likely will be, but anyone who remembers inflation (ask your parents about the late 70's) knows it can also easily become self-fulfilling and the Fed backing off 5% from full throttle is going to be muted, when the lag on inflation in the US feeds through properly and becomes a self-fulfilling prophecy for any extended period. High unemployment does not equal loose labour markets, but rather disorganization and poor measurement - even McDonalds is struggling to find employees in the US and raising wages. Just because we've not seen inflationary pressures since 2009, does not mean they cannot emerge. In the same era interest rates have universally fallen to prop up ailing economies. They are at the bottom as the Netherlands and Swiss negative rate failures showed. This time its a little different....

An inflation forced unwinding of QE and zero rates may kill global equity markets fed by and addicted to the cheap Central Bank steroids. Though what do I know...