2. Australia & New Zealand Banking Group, Common Wealth Bank of Australia, National Australia Bank, and WestPac Banking have 6.4% yield

3. The Australian economy has little debt

4. Common Wealth Bank of Australia assets devalued 61% in 14 months as global deflationary pressures affected value

5. Westpac pays 85% of its earnings to shareholders and Common Wealth Bank of Australia pays 75% of its earnings to shareholders.

6. Australian household debt is 150 percent of disposable income

7. Australian bank stocks are over-priced. China’s slowing economy is linked to Australia and Canada’s economies. As China economy slows, the price of Australian bank stock must adjust downward. Since, the Australian banks are already nearing the maximum dividend payout and earnings will decrease then the price-adjust downward lacking incentive for investors to buy.

8. Given the current markets and world economy, as a whole should we assume that future risks are increasing affecting banks? Yes. The downward price correction will occur much more rapidly than the price appreciation ascension. A sharp fall-off in price occurs as the group reaches consensus that the price is overvalued. Rapid selling creates a shortage of buyers and price drops out. The negative outlook is more devastating than the positive outlook of potential profit.

9. The S&P ASX 200 Financial sector (XXJ) index peaked in 2007 (20 banking, finance and insurance stocks). The XXJ will probably look like the largest four banks in the portfolio. NAB moves in lag with the index. (http://www.asx.com.au/resources/investor-update-newsletter/201305-bank-stocks-buy-or-sell.htm)

10. The Common Wealth Bank of Australia outperforms its peers. Greg canavan calculated that if Commonwealth Bank of Australia (CBA) suffered a 5.8% fall in the value of its assets, all sharehold equity would disappear, the bank would be bankrupt.

11. Greg Canavan believes that as China’s economy slows than property prices will correct downward quickly and in a big way. “In fact, he reckons a $1.3m home in Paddington, Sydney could be worth $880,000 two years from now.” (http://www.moneymorning.com.au/20121126/will-australian-banking-scandals-rock-the-economy-in-2013.html)

12. Schroders, who manages $344 billion, thinks Australian banks are overpriced. How will the banks sustain their earnings, the $10 billion required to justify the increase in market value? Australian banks are trading a price to earning premium of 20% compared to global peers, says Paul Brunker. Fears of a commodity boom fading are present. (http://blogs.wsj.com/moneybeat/2013/04/17/are-australian-banks-overvalued-schroders-thinks-so/)

13. The LIBOR rate underpins $300 trillion of derivatives.

14. The US is importing less coal from Australia as it shifts to natural gas

15. Australia is exporting less steel to China as construction slows in China.