For The Average Joe – How The CBA Made Record Profits!

We should be thankful in this country that we have such a robust banking system as the Commonwealth Bank last week made record profits again. But for the average Joe on the street you have to wonder how they do it and how they make such profits?

  • The prices of iron ore and coal, the commodities that have provided Australia’s main national income in the last decade or more, are plunging, on the back of which the mining centres of Western Australia and central Queensland have been hit with massive job losses and business closures.
  • Australian manufacturing is in sharp decline: major aluminium smelters and oil refineries have shut down, and car parts suppliers are closing shop ahead of next year’s final shutdown of the car industry, the backbone of Australian manufacturing for many decades.
  • Official unemployment is rising, up from 6 per cent in June to 6.3 per cent in July; aggregate hours worked by Australians in that month decreased by 3.4 million. Actual unemployment, including underemployment, is many percentage points higher than the official figures. Anecdotal reports indicate major unemployment in Western Australia, South Australia and Queensland caused by the mining and manufacturing crashes that isn’t reflected in the official figures, one reason being that as most miners are employed as contractors with their own ABN, it is difficult for them to be able to register as unemployed when they lose their jobs.

That’s just a snap shot. Each Australian will have their own experiences that are symptoms of a rapidly worsening real economy. Yet the Big Four banks, with CBA in the lead, are on a run of record profits. How can this be?
Only two economic/financial indicators match the banks’ profit growth: the housing markets in Sydney and Melbourne.

The two are interconnected: the housing markets in Sydney and Melbourne are so disconnected from reality, including the harsh reality that the plunging markets in places such as Perth are now experiencing, that the banks’ lending into the Sydney and Melbourne markets could be looked at asthe equivalent of gambling.

The market is now poised like the snowcap on a mountain, waiting for rising unemployment or a rise in interest rates to set off an avalanche. However with clearance rates still so strong it is hard to see the avalanche in the major capital cities coming any time soon.

Lastweek, Google announced that it was reorganizing and changing the name of its company from Google to Alphabet. On the surface, this is a puzzling move. Why would the company embrace a new, unknown name instead of Google, a brand with remarkable awareness and presence?

A deeper analysis, however, reveals that this is a smart, strategic branding strategy for Google.

By embracing the name Alphabet, Google is becoming a pure house of brands. The parent brand, Alphabet, will own a number of different brands, including Google, Android and You Tube. Alphabet apparently won’t be a consumer-facing brand; it will be the corporate parent. CEO Larry Page said in the announcement that “Alphabet is mostly a collection of companies.” This is true, but it might be more important to note that Alphabet is also a collection of great brands

Finance Heads Up Of The Month:
Medibankshareholders!!!!!If you or a family member were a shareholder as of the27thof July 2015 andthe share registry did not have your banking details recorded thenyou will need to provide themat details need to be recorded by the 1stof September 2015 as Medibank are not wanting to pay cheques to shareholders! if you have any questions please call us or email us at[email protected]or speak to Ajla, Leah or Scott on 1300-1234-36.

Remember to hear my finance updates on Tom Elliott’s Driveevery Thursday from 3.30pm where I take your calls on anything finance! If you missed the latest showsclick here to listento the highlights.