ASX bath of blood parts for bank bubble

The Aussie dollar is getting the treatment this morning:

Bonds are bid:

The ASX bath of blood is parting:

It’s not Big Iron:

It’s not Big Gas:

It’s not Big Gold:

It’s all about Big Banks:

Which are bubbling up to new, ridiculous multiples:

Why? Some hope for the property bubble, I hazard. But, mainly, it is this:

Aussie banks are tracking a global rally as markets pretend that the bond curve is about to steepen to improve earnings after the Dems sweep and the vaccine rollout. The problem is twofold.

First, as we speak, the US economy is falling into a new hole that will hit banks lowering the earnings recovery starting point. The vaccine rollout is going to be very troubled too.

Second, for local banks, there is not going to be any curve steepening here as the RBA marches out the bond curve. Rather, the Aussie curve is headed towards Japanifaction and bank earnings the same.

But that’s fakeflaltion for ya. Bidding wildly for declining earnings!

David Llewellyn-Smith
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