VALE, Compahnia Vale do Rio Doce. TCK.B Tech Corp

July 17, 2012July 17, 2012 Hamilton

I believe this is the world’s largest miner. The pattern is perfectly clear, it is a “flat”. It targets about $8/$7 to the downside but obviously can go lower. The minute details are open to debate but the overall pattern is really is not. For comparison we add TCK.B (or A) for which there are previous blogs;

Teck has the same pattern, except that it is “irregular” (the B-wave is higher than the A wave). It targets about $13 to $15, proportionately about the same level a Vale. There are 9 different blogs going back two years anticipating these moves, perhaps they will continue along the scripted path.

The charts are deliberately with the same time-frame and size. You can click on them and move them around to make a better comparison.

TA, TransAlta Corp.

July 16, 2012July 16, 2012 Hamilton

TransAlta Corp is a utility, the largest publically owned in Canada. It operates here but also in the US. It does a little bit of every thing, coal, wind , oil, hydro, solar and geothermal. It has been around for more than 100 years. Sustainability is a primary concern. 3 days ago they announced their dividend for the most recent quarter, $0.29. or $1.16 a year (without compounding). With a share price of about $17.50 this works out to 6.3% (when properly compounded about 6.5%). The p/e is around 22, a little high.

The stock is doing a large A-B-C down from the $38 high. It has already dropped 58%. 62% would take it to $14.50. It has already dropped to the level of the 4th of previous degree even if the range for that extends to about $13.50. The C-leg is small relative to the A-leg and certainly appears to be missing its 5th wave, which could take the stock to about $ 15 if 1 and 5 were to become equal. If the C leg grew to 62% of the A leg the low would occur at about $12. Just a few weeks ago, it was trading at the same level it was trading at 18 years ago!To make a long story short, in the worst case the stock could fall another 30%(but would presumable rebound within a short period of time, say 2 years at the most). lets assume your time horizon is somewhere between 5 to 10 years. Your risk-free return would equate to the yield of Government of Canada Bond with that maturity, shown below;

The actual 10 year is at 1.6%. If you were to own the stock in a taxable account you would be able to gross-up the 6.5% yield by 1.4(assuming you are enjoying the highest marginal tax rate) to 9.1%, for a difference of 9.1 – 1.5 = 7.6%. This could be considered the risk premium that you are willing to forego financing Ottawa. For non–taxable accounts the difference is still a respectable 5%. At that rate money doubles in 14.4 years so a brief paper loss for perhaps a year or two of 30% is not that relevant.

Then there is ZUT, the BMO equal-weight utility index. It is fairly new. Here are the charts;

Notice that the ZUT kept going up while the market in general was going down. Over the past two years or so it is up about 30%. It resembles the inverse of the bonds. TransAlta has gone down about 20% over the same period. It is a component of the ZUT so its relative performance is a little worse than those numbers suggest. Barring any fundamental reasons that I am not aware of, this should be a buy.

IFN, India and CHN, China update

July 14, 2012 Hamilton

First the old blog from Febr. 10, 2011, 17 months ago;

And here today’s charts;

The little red arrows show where and when these ETFs were on Febr. 2011. Both were at about $30 at the time, so now , a year + later they are down to roughly $20 which is about 30%. Both are probable in a wave 4 of a five wave sequence for wave C. We do not now how low they will ultimately go, but they should , at least , go below the ‘09 lows. IFN comes from $70 and CHN from $55 so both are down by more than 50%. Using the FXI as an alternative ETF (iShare) for China we get pretty well the same picture;Same with Shanghai DJSH

The FXI is down about 60% from the highs. It should, as a minimum, trade below $28 after which it will probable make new post peak lows. Shanghai has done very little over the past year but the EW count is analogous to the others. If China and India are making “soft” landings, investors in these indices probably do not agree.

IVN, soon to be TRQ

July 13, 2012July 22, 2012 Hamilton

Ivanhoe shareholders approved changing the company’s name to Turquoise Hill Resources Ltd. The new name is anticipated to become effective on or about August 1, 2012. The company’s new trading symbol on the Toronto Stock Exchange, the New York Stock Exchange and the NASDAQ Stock Market will be TRQ and is anticipated to take effect on or about August 6, 2012.

Juliet:
"What’s in a name? That which we call a rose
By any other name would smell as sweet."

Romeo and Juliet (II, ii, 1-2)

How you go from a character out one of Sir Walter Scott’s romantic books to Turquoise Hill Resources is not immediately clear. What is clear, and the tragic ending of Shakespeare’s play makes that rather obvious, is that a name is everything and changing it deliberately expresses a desire to part from the past or to embark on a new future. Arthur Anderson did that when they formed Accenture, stating quite clearly that A new name, meant a new direction. Countries do it when they want to cast off the colonial past, Rhodesia, named after an English scoundrel, changed to Zimbabwe leaving my dogs in limbo. Burma and Ceylon are now Myanmar and Sri Lanka and so on. In short the name and or brand is everything, you only change it if you have to and when you do, change is in the air. We are getting close.

Do we need to wait for August 1? That is now the question.

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