Year: 2012

RY update

Hamilton

ry dec 13 l 2012ry dec 13 m 2012

We showed the bullish count back in Oct, of this year. Here it is again, in purple. Given all the overlaps this is about the only bullish scenario possible. If it were to occur the peak should be at a little under $65, so just an additional $5 from today’s highs. There is no other bullish scenario that I can dream up (a triangle here over 6 years is just too tortured to be correct. So we continue with the bear scenario. Note that the stock tops no less than 5 times either a little above or a little below $60. That suggests that selling at $60 is not all that stupid, but then the past is no guide for the future.

We did not expect the last little leg up to happen, assuming that the stock was already on its way down in C. It took 9 months for the stock to climb from $59.13 to $59.41, all of 38 cents. It has come to within $2.12 of the high in the B-wave, almost a full retracement.  Even so , apart from taking much longer than expected the bearish count has not been negated. We expect wave 3 of C down to start now. This should take us down to below $44 fairly rapidly. With $5 up and $16 down this is absolutely a no brainer. Think about it.

ry dec 13 2012 s

As an aside , this chart shows how useful the RSI can be. Red lines are highs and green ones lows. With the exception of 4 months, June to Aug. 2011, virtually all turns correspond with turns in the stock. So sell with an RSI at or above 70 and buy with an RSI below 30. This approach is bound to leave your broker behind in the dust.

Kirkland Lake Gold

Hamilton

KGI dec 13 2012

We made a good trade with this stock more than a year ago. Then we recommended getting out conservatively at $18 (see previous blogs). The stock peaked $3 higher but for the most time has gone down nicely. The other day it lowered guidance. Also it has “cash” cost (the equivalent of variable costs, I guess), of $1253 per ounce. If other costs are included little is left at todays gold price.

Presently 2 different counts present themselves. The one in black is the simplest and would suggest the drop is complete. The purple one needs a substantial rebound before dropping lower (the lows in Nov. of 2008 were close to $1). Ergo, in both cases a nice bounce should develop  with a reasonable expectation that at the very least the gap should be closed. A buy with a stop at, say , $4.

BRK.A and the Buffett Fed.

Hamilton

brk dec 12 2012

Warren Buffett is the world’s most celebrated investor, perhaps deservedly so. Nevertheless it should be noted that in the last 10/15 years the stock of Berkshire Hathaway dropped by about 50%, more or less in line with the market itself. Yesterday it was announced that the company bought back a billion plus dollars worth of stock from some old estate. More importantly, the company also announced that from here onward (or should that be looking forward?), the company would be prepared to buy back stock at a level as high as 120% of book as opposed to 110% previously. Book is about $111,000 per share so the buy-back at about $131,000 a share was done at 1.18x book. On the news the stock rose $3169 on the day.

It is not clear how aggressive Berkshire will actually engage the market to buy back stock with the vast amounts of lose cash that they have. Nor is it clear what book value actually means, particularly not when much of what is in Berkshire’s corporate menagerie is in the insurance business that hardly has a book vale per se. In any event the message is clear, we stand ready to buy-back at about $130,000. per share if need be. We are now Omaha’s own Central Bank, just in case Bernanke’s 1 trillion/year until unemployment reaches 6 1/2 % does not do the trick.

By the way, the high in this stock was about $150,000 or so back in late 2007 (see previous blog). The low at about $80,000, so at $130,000 you are at the upper end of that range, not exactly buying low and selling high, or in this case, holding forever.