Month: April 2009

BAC April 20

Hamilton

BAC April 20

Bank of America (NT & SA, as it used to be called) now owns Merryll Lynch Pierce Fenner & Smith and Country Wide and according to Mr Lewis this financial machine has the potential of generating about $5 per share which would easily put the stock at $50 in a few years. Then there is Meridith Witney who would not buy any major bank at this time . My guess is that reality is somewhere in the middle. Looking at the chart we have to be mindful of the fact that the ups and downs are not always meaningful (this one went from $17.50 to $ 37.50, predictable by the way, or about 120% before continuing the drop). But when trying to be reasonable one must agree that going from $50 to $2 IS a serious enough drop, we do not have to go further just to get to depression levels. In fact if this correction was an A-B-C X A-B-C then maybe we have seen the lows. First indication is that the move from the low is a 5-wave move (possible the start of a bull market but at the very least a first (out of two) legs up in a corrective rally. Should we drop to about $7-$7.50 this may well be a great buy! Here is the picture in more detail. Do not try this with Citi Group

BAC April 20.png 2

P/E Ratio April 20 (Fortune 500 list)

Hamilton

The Fortune 500 list just came out for 2009 (covering 2008). No big surprises, Exxon overtook Wall-mart and so on. Of course the Fortune 500 list is not the same as the S&P500 but who cares, in broad terms they should approximate each other. Earnings dropped from $645bln to $98.9 a mere 85%. Using the usual “ceteris paribus” this implies that the P/E ratio, which , for the sake of argument , was assumed to be 16 ( I have no idea what it was) is now 107, but after the give or take 50% drop in stock prices, about 53. Cheap? Only in comparison to the 70 on the Nikkei back in 1989.

TSE April 18

Hamilton

TSE April 18

Here is the TSE again. As we have seen with RY this leg counts best as a 5-wave affaire whereas with the insurers MFC and SLF it looks more like a two wave affaire. As I am sure not too many readers are too interested in the E-wave implications of this difference, it should suffice that at least as a minimum we should retrace the entire “wedge” in the next move, that is down 1000 out of the 2000 points we have gained during the past 6 weeks.

RY April 17

Hamilton

On January 22 I made a first attempt at “calling” RY. Here is the chart and that comment.

ry jan22008

RY comment Jan 22

Ok, so we bottomed in the high $25  (we recommended buying at $26) range and now we are at $43 or so, not that far from “at least $38 “, so where are we going???

RY april 17

Should we retrace 50% of the entire drop it would bring us to just under $44, basically where we are today. Notice that the RSI, for the first time in years is above 70% and the MACD is pretty well at the ceiling.(all this after a $850 mln write-off, just goodwill so it does not count?). A little higher is possible to about $48 where 61,8% retracement resides or even $52. As I think today is a top of sorts ( see yesterday’s comments) in markets in general, I would get out immediately as the stock should trade back to about $35 even in a bull market. RY is unduly benefitting from a “home-bias” effect combined with a Canadian tradition to buy the banks when in doubt. Sell.