Upfront Investor | Big Four and the Unfair Advantage….

Regulators are going to find it tough to justify continuing to permit an imbalance in our banking system, whereby the big banks still hold an unfair advantage over smaller banks and credit unions. Perhaps this is a reflection once again of how much influence the majors have over our financial system, which doesn’t sound like a ‘free market’.

Smaller banks and credit unions claim the big four have around 120 basis points or a 1.2 per cent advantage in the market place, which may not seem like much but when competing with the big brands like Commonwealth Bank and Westpac it makes a big difference. Smaller banks are required to hold around three times as much capital as the big four, which currently have around 80 per cent of the market. So how is competition in our banking system fair?

We are now around six years on from the GFC, we are told that our economy appears to be improving and at every company reporting season since our big banks have continued to announce obscene profits. This in my opinion indicates that Australia is overdue in lifting some of the restrictions on smaller banks and credit unions. Whilst appropriate lending practices need to remain in place and be monitored by APRA, all banks and credit unions need the opportunity to compete on a level playing field. At the very least, access to funding at competitive rates could be created.

So what do we expect in the market?

Investors have been watching the Australian share market inch higher over recent weeks as it attempts to recover the recent losses which occurred when the market took a dive to around 5300 points in March. That said now is not the time to pull out the special silver as a rise on the All Ordinaries Index of just a couple of weeks does not provide confirmation of a further rise to our short term target between 5600 and 5800 points. That said some stocks are creating nice opportunities and we know that while some fall, others will rise, and so this time is about being quite selective in picking trending stocks.

Right now the Australian market is trading at an important level, having recovered over 50 per cent of the prior decline, and investors are hearing mixed messages from global markets which is creating some uncertainty. One thing to remember when making investment decisions is to always put more emphasis on where the money is flowing, over news as this changes from week to week.

all ordinaries bar chart image 04-04-14

To your profitable trading,

Dale Gillham
Chief Analyst
Wealth Within

Dale Gillham, ‘one of the country’s most respected analysts’ (Wealth Creator Magazine, Nov/Dec 2004), sought after key note speaker and author of the best selling book ‘How to Beat the Managed Funds by 20%’. Dale has assisted thousands of traders and investors to learn to trade shares and become confident and profitable in their direct share investments. Tired of an industry saturated by quick fix gimmicks and expensive short-courses, Dale co-founded Wealth Within to provide ‘ real education and ongoing personalised support’, as well as independent investment adviceto traders and investors who have become disillusioned by the market for one reason or another. As testament to this, Wealth Within launched Australia’s first and only nationally accredited Diploma and Advanced Diploma of Share Trading and Investment.