BMW, Bayerische Motoren Werke AG.

November 5, 2012November 20, 2012 Hamilton

This quintessential car epitomizes the difference between a need and a want. You have not made it as long as there is not a matching his & her set of these cars sitting in your driveway. Ergo one would expect this stock to be an almost perfect barometer of of the good and the bad times, at least at those lofty levels where these things are affordable. With the rise of China, now the biggest consumer of luxury cars, there is no doubt a distortion in the stats, but the principle should nevertheless hold. Here are the charts.

The chart on the left is on a semi-log scale, the one on the right is not. The semi-log scale often “works” better when relatively large moves occur in certain timeframes. Equal distances are proportionately equal. The 10+ year A-B-C with C about equal to A is pretty clear. From $86 t0 $16 is also a respectable bear market. Our guess is that from the $16 level a new bull market started that completed a first (5-waves) up move completed at the April (or so) double top peak. We are now in the correction, a wave 2. Waves 2 often retrace almost all of wave 1 so the count is not as important as one might think. The stock is ready to fall apart to $43 as a very minimum.

Daimler (Mercedes-Benz) does not show the same kind of pattern which may indicate that this count is incorrect. On the other hand BMW is almost exclusively in the car business whereas Mercedes also makes a host of commercial vehicles and so on. In that sense they are hardly comparable. Here is Daimler AG, not at all clear;

SLF, Sunlife update

November 5, 2012November 5, 2012 Hamilton

These are the usual then and now pictures. Then was June, now is today, November the 5th. The drop through most of 2011 was such a clear 5-wave sequence that it was relatively easy to predict a rebound to about $25 when the bottom was hit. The ideal target was, of course at about $27 where the 4th of previous degree resides. It did not quite make it which was a concern as it might mean that the rebound would become more complex, it did.

We now have a very nice a-b-c for what is probable wave 4. It should not trade any higher now as overlap would occur. So sell now if you still own it. The RSI and MACD seem to support this view as well. In the big picture we now have;

an A-B-C correction from the highs of $56+. The whole thing is a zig-zag, a 5-3-5. The rebound in the middle is an exact 61%. Next we should , over time – everything seems to always take much longer than it should, a little bit like watching Gone with the Wind in slow motion – make new lows < $15.

Once upon a time we had the 5 pillars here in Canada, our equivalent to Glass-Stegall in the US. They were the banks, the trust companies, the investment dealers,the insurers and one more that I have forgotten. The dividing lines got blurred and as usual the biggest bully in the sandbox – the banks - wins all. The process is ongoing. The insurers quickly demutualized and started playing in areas they knew nothing about. Things like UL, Universal Live were introduced only to become an absolute disaster a few years later. Now we have things like Income Plus that combine life attributes with investments, never a good thing. In the Canadian psyche it is unacceptable that a quality company like SLF or, for that matter MFC, should one day trade at $5 or less. The important thing to understand is that SLF then and SLF now are completely different companies.

WFT, West Fraser Timber update

November 4, 2012 Hamilton

We thought it was game over when this stock first hit the $62.50 high, not so even though it did, initially, drop about $10. Here we are at $63.58, a year and a half later and still going strong. The p/e is now around 40 and the yield is under 1%. Here are the charts;

Identical charts except that one is a little more compressed. There are no 5 waves up structures anywhere in this chart, at least not without overlap. This is the signature of an expanding diagonal, which is a wedge that gets wider as it goes through time rather than narrower. The latest storm in the US may just have given it that extra little push and the large swings are no doubt attributable to the rapidly changing opinions with regard to the housing market and where that is in the supposed turnaround. Save for a few dollars to the upside to reach the trend line this is a sell. Of 8 analysts that follow the stock, all have buys and 2 even strong buys. Nobody else is recommending a sell.

SCCO, Southern Copper Corp. ( Formerly PCU )

November 3, 2012 Hamilton

This one also took its time to rebound, half a year more than we expected but soon, very soon the downwards move should resume.

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