{"id":35459,"date":"2013-01-16T21:38:04","date_gmt":"2013-01-17T02:38:04","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=35459"},"modified":"2013-01-16T21:38:04","modified_gmt":"2013-01-17T02:38:04","slug":"cba-shares-priced-for-perfection-sell-now","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/01\/16\/cba-shares-priced-for-perfection-sell-now\/","title":{"rendered":"CBA Shares \u2018Priced for Perfection\u2019: Sell Now"},"content":{"rendered":"

By MoneyMorning.com.au<\/u><\/a> <\/p>\n

Investing<\/strong> is supposed to be risky. It\u2019s the risk that enables the returns.<\/p>\n

If you wait until an investment<\/a> has no perceived risk, then you\u2019re buying the investment at a premium\u2026the investment is \u2018priced for perfection\u2019.<\/p>\n

Trouble is (and this is the paradox of investing) when an investment reaches this point, where it appears nothing can possibly go wrong, that\u2019s when things can go wrong. And when that happens, because it\u2019s so unexpected, it can result in big price moves\u2026<\/p>\n

Why CBA Shareholders Should Heed This Lesson<\/h2>\n

That\u2019s why we offer caution to investors in Commonwealth Bank [ASX: CBA]<\/strong>. Two weeks ago the newspapers went bonkers at the news CBA was now valued at $100 billion.<\/p>\n

As the Sydney Morning Herald<\/em> reported:<\/p>\n

\u2018The bank\u2019s shares rose to its highest-ever value <\/em>\u2014 $63.24 <\/em>\u2014 at the close of trading on Thursday, as the ASX200 reached a 19-month high and the market continued to rally following the US Congress\u2019 temporary aversion of the \u201cfiscal cliff\u201d crisis.<\/em>\u2019<\/p>\n

That\u2019s got to be good news. As the report continued:<\/p>\n

\u2018\u201cPeople are comfortable with the fact that these are safe haven banks,\u201d Bell Potter Securities banking analyst TS Lim said.<\/em><\/p>\n

\u2018You get consistent cash flows coming out and very good risk-adjusted returns. You\u2019ve seen a lot of banks blow up overseas but over here, it\u2019s been well run and well-regulated\u2026<\/em><\/p>\n

\u2018\u201cCBA has always had a positive trajectory. If you look at CBA\u2019s earnings in the last 10 years, it\u2019s been going up, compared to the other local and international banks that have dips here and there,\u201d he said.<\/em>\u2019<\/p>\n

What phrase springs to mind? That\u2019s right, \u2018priced for perfection\u2019.<\/p>\n

When an asset is priced for perfection, you know what happens. Just look back at the stock market<\/a> in 1999 and 2000. Back then, financial analyst Martin Sass told the Independent, \u2018There won\u2019t be a cataclysmic decline but the market is priced for perfection.<\/em>\u2019<\/p>\n

Sass said that in May 1999. At that point the Dow Jones Industrial Average was at 11,000. That was close to the top. Four years later the market had fallen below 8,000 points.<\/p>\n

Even Gold Can\u2019t Avoid This Phenomenon<\/h2>\n

When something is priced for perfection, it comes as a big shock after it\u2019s shown things weren\u2019t perfect. Two recent examples of pricing for perfection and the fascination with the market reaching specific are the US Gold ETF [NYSE: GLD]<\/strong> and Apple [NASDAQ: AAPL]<\/strong>.<\/p>\n

In August 2011, the Wall Street Journal<\/em> reported:<\/p>\n

\u2018GLD, the SPDR Gold Trust ETF, is now bigger in terms of assets than SPY, the SPDR S&P 500 ETF. GLD has $77 billion in assets, compared with $75 billion for SPDR\u2026<\/em>\u2019<\/p>\n

The GLD ETF hit USD$183 in September 2011. By the end of the year it was down to USD$151. In September 2011, gold was priced for perfection. Investors were betting on the collapse of the fiat monetary system and the prospect of a US debt default. So far, that hasn\u2019t happened.<\/p>\n

Apple Shares Were Priced for Perfection<\/h2>\n

Another example. In August last year, the Sydney Morning Herald<\/em> reported:<\/p>\n

\u2018Apple became the most valuable public company of all time after its market value climbed beyond $US620 billion to surpass a milestone set by Microsoft more than a decade ago.<\/em><\/p>\n

\u2018Its shares were up 2.3 per cent at $US662.73 in overnight trade, after having gained more than 8 per cent this month as Wall Street bets on the September 12 rollout of the latest version of the iPhone, the device that revolutionised the mobile industry.<\/em>\u2019<\/p>\n

Apple was priced for perfection. Its shares hit USD$705 in September. Today the shares are USD$506.09, and the market cap has slipped to USD$476 billion.<\/p>\n

What happened to the market in 2000 and 2007, and what happened to the Gold ETF and Apple is what eventually happens to all stocks<\/a>. They go up and up and up, until they\u2019re priced for perfection and no-one can see how the stock price can possibly fall\u2026but then the stock price falls.<\/p>\n

Traders like Murray Dawes<\/a> thrive from finding stocks that are priced for perfection. Those are stocks that are usually trading at the top of what Murray calls the \u2018distribution\u2019.<\/p>\n

Right now, today\u202617 January 2012, it looks to us that Commonwealth Bank [ASX: CBA]<\/strong> is priced for perfection. So if there\u2019s a stock on the Aussie market ripe for traders to short-sell, CBA seems to fit the bill.<\/p>\n

That\u2019s got to be a real risk for CBA shareholders.<\/p>\n

Cheers,
\nKris<\/strong><\/p>\n

From the Port Phillip Publishing Library<\/em><\/strong><\/strong><\/p>\n

Special Report: The Big Money Secret of Ironstone Mountain<\/a><\/p>\n

Daily Reckoning:<\/em> A North Korean Investment Opportunity<\/a><\/strong><\/p>\n

Money Morning:<\/em> <\/strong>How Central Banks Are Letting Inflation Get Out of Control<\/a><\/p>\n

Pursuit of Happiness:<\/em> <\/strong>Are You Brave Enough to Break From Technology?<\/a><\/p>\n

Australian Small-Cap Investigator:<\/em>
\nWhy Speculating On Small-Cap Stocks is Your Best Bet in a Rigged Market<\/a><\/p>\n

\n<\/img><\/a> <\/img><\/a> <\/img><\/a>\n<\/div>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

By MoneyMorning.com.au Investing is supposed to be risky. It\u2019s the risk that enables the returns. If you wait until an investment has no perceived risk, then you\u2019re buying the investment at a premium\u2026the investment is \u2018priced for perfection\u2019. Trouble is (and this is the paradox of investing) when an investment reaches this point, where it … <\/p>\n

Continue reading “CBA Shares \u2018Priced for Perfection\u2019: Sell Now”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-35459","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/35459","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/comments?post=35459"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/posts\/35459\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/media?parent=35459"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/categories?post=35459"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex-news\/wp-json\/wp\/v2\/tags?post=35459"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}