At the time of writing, the Commonwealth Bank of Australia [ASX:CBA] share price is trading at $76.78, up 1.84%.
The CBA share price jumped after Commonwealth Bank Chief Executive Matt Comyn declared ‘the speed of the recovery has been faster than we anticipated’.
Is Commonwealth Bank right about the recovery?
The comment above came after Treasurer Josh Frydenberg hailed 11 straight weeks of rising consumer confidence.
In quotes carried by the Australian Financial Review, Matt Comyn said: ‘I don’t think the housing market is a risk anymore.’
Great to hear, but the property market is rising from where?
How low did consumer confidence drop?
Why is the housing market no longer at risk?
Let’s take a look…
Wage growth is at a record low of 1.4%. The unemployment rate is 6.9%.
According to the ABC, the treasury ‘expects the total level of Commonwealth debt under the Morrison Government will soon surpass $1 trillion.’
And of course, perhaps the biggest factor, an RBA interest rate at the historic low of 0.1%.
All this mixed in with the JobKeeper and JobSeeker supplement and the mortgage freeze.
This all looks troubling, but here’s the thing that should really blow your mind…
PEXA, an ‘E-conveyancing firm made up by the various privatised land registry offices’, released their transaction data recently.
Their new report is on the direction of housing prices in our two most populace states, New South Wales and Victoria.
PEXA outlined how from the start of the year until 30 September, housing prices in NSW were down 9%.
Victoria prices were down 14%.
Commercial property in NSW is also down 14% for the first nine months of the year.
For comparison, take a look at the benchmark Case-Shiller National House Price Index.
In the first nine months of the American ‘Great Recession’, prices fell by 6.6%.
The cherry on top is there are over 3.5 million workers on the JobKeeper program.
As nice as it is to hear the boss of a Big Four bank saying things will be fine, the reality may be very different.
Can the CBA share price run continue?
The bank recently announced that it will introduce a moratorium on forced home sales until September 2021. A mere 10 months away. Trouble may be on the horizon.
In the short term though, the CBA share price chart is looking bullish.
If it continues, then the levels of $76.78 and $82.60 may come into focus.
If it pulls back, it may find support at $74.37.
Being the biggest bank in the country, the Commonwealth is resilient. But even the biggest can fail as the US showed us in 2008/09.
Having recently relocated from Melbourne to Brisbane, I’ve noticed everything in Queensland is quiet.
Empty malls and shops all over Brisbane and the Gold Coast, even further up north.
Not the best sign, even if consumer confidence is supposedly improving.
Things may seem OK now, but once the government support ends, the impact of the recession will be at its greatest.
My bet is when this happens, the CBA may be singing a very different tune.
If you’ve ever wondered about whether banks are safe, Vern Gowdie has an excellent report on the topic.
His conclusions may alarm you, but as a veteran wealth manager, he is well worth listening to.
Get the full free report right here.
For The Rum Rebellion