|
As you know I am quite happy to take questions and weave the answers into the editorial where appropriate.
James writes: ‘I’m waiting for the banks to have a rights issue. I wonder if there is an economic cycle that started in 1990 and is starting again now’.
James this is a great question and much beyond the scope of a couple of paragraphs but let me try and in any case it is useful to talk about the banks as they are the source of so much misery and conjecture of late.
I have chosen ANZ to look at as it is representative of three of the major banks – except CBA which was still a government corporation back in the 80’s and to look at the 90’s technically we need some history.
Let’s look at a chart going back to the 80’s:
click chart for more detail
But I also want to look at the chart how it looked in the 90’s and this is the beauty of ProfitSource as it allows you to step back into history:
click chart for more detail
As you can see there was a wave four happening and eventually it did recover but you can see from the next chart that ANZ moved sideways for almost 15 years:
click chart for more detail
I am not implying for one moment that the banks could range trade for the next 15 years but I do expect them to take some time to recover.
James I could not say we will see the banks do a rights issue and frankly it would have to be so well priced to win the confidence of shareholders and rights issues have their dangers too as they can force price down even further.
One thing I do note about banks is that all of the big four have had major first and second line management reshuffles – some unforeseen and the Instos are just a little wary about the banks ability to really inspire at a time when it is most needed.
Enjoy the ride
Tom Scollon
Chief Analyst
|