The Thrill of the Trade: Big Banks Aren’t in the Clear

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The Purge of ASX Bank Stocks - Aussie Big Four Banks

I miss Felix Dennis and I didn’t even know him.

Don’t know the name? It wouldn’t surprise me.

Felix Dennis was a seriously rich publisher in the UK. I’m talking worth hundreds of millions.

But he wasn’t some boring stiff in a suit.

He was a drug taking, womanising, chain-smoking and wildly free spending entrepreneur that also wrote poetry and a great book called How to Get Rich.

He died in 2014.

Every now and then I thumb through my copy of his book. It’s such a great read.

There’s one passage that I just love. It’s Dennis describing that feeling he would get when he knew he might be on to his next killer idea.

Let me share it…

The “feeling” is when the hair rises slightly on the back of your arms and neck and you know you’re on the scent of something…

Watching an experienced entrepreneur come into contact with a potential pot of money is like watching a prone lioness raise her nose and sniff. She cuffs her cub away.

‘Then she sniffs some more. Then she rises and pads away to hunt. Alone. She can’t see it. She can’t hear it. 

But she can scent it. She knows prey is close. It means food. Prey is her business. It’s mine too.’

He was a fantastic and engaging writer. Compare that to the average yawnfest business book.

Why am I bringing this up?

This is the type of feeling you can get when you line up a trade with high potential to make a big move.

I mentioned one of the current trades came out with a ‘market sensitive’ announcement recently.

It wasn’t the ‘big one’ I’m hunting. But it confirms again the potential for it to happen. The scent is strong on this one.

I can tell you…when you enter a trade and see it release a big announcement; you’re going to feel a rush just like Felix Dennis subscribes.

Let me put my hand up at this point. Not all trades work. Of course they come with risks.

And occasionally trading makes you want to strangle the cat as well.

But if you’re looking to add a bit of spice to your investment strategy, sign up for my free event now. You’ll walk away with the trade I just mentioned — with my compliments.

Now, on to some market insight…

The big banks: boom or blues?

Today our eyes turn to the big banks. I saw a good interview on this. I suggest you watch it here.

The analyst cited is an experienced banking man.

He’s clearly warning Aussie shareholders that the big banks aren’t in the clear.

I agree. All the reasons he cites are exactly those that I have mentioned in these pages before.

Those are:

  • Low credit growth
  • Weak net interest margins
  • Rising bad debts
  • High overheads

The analyst also clearly infers he thinks that retail investors have led the rally in bank stocks since June.

Feel free to drop me a line at letters@profitwatch.com.au with your thoughts. It’s an important sector.

This problem in the banks is a big reason why I don’t think passively investing in an ETF on the ASX 200 is going to take you anywhere.

The big banks are 20% of the index. If they are weak, it’s a massive drag.

And if they decline from here the outlook is even worse.

This is not an easy market to make money, passively. You need to be active — but with very good risk management.

It’s all very well for the Robinhoodies to throw some money in stocks they like.

But sustained success over time does require a bit more than having a punt in a bullish period.

I saw one woman cited in the press the other day that has four young kids and has been making winning trades on the market.

One quote jumped out at me. She confessed to not even knowing why her positions were profitable.

If that doesn’t scream something is amiss, nothing will.

At some point one would think these kinds of traders would get shaken out. Then we’ll see how durable this bull market actually is.

For now, my approach is to find very select and strategic trades. But if they don’t look like working, I’ll be out quick smart on the assumption this music can’t keep playing forever.

Make sure you sign up here to my special event to road test this strategy for yourself.

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch

PS: Profit Watch is a fantastic place to start your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here.