Month: February 2016

TSX and market timing.

Hamilton

TSX feb 12 2016xyz

They say you cannot time the market. “They” are your banker, investment advisor, mutual fund salesperson and so on and so forth. They passionately want you to believe that, simple because if you could, they would all become superfluous. Mostly they are but they don’t want to make it obvious.

If you think math is fun you can go for the standard deviation stuff, on some websites it is available and you can pick your preferred deviation. There are also Bollinger bands and other such stuff. The easiest way is to do it yourself.

Most charts go from the bottom left to the top right, simple because the y and x units are chosen in that way or the chart size adjusts to be filled (like fitting to the page when printing). The angle at which the line rises is a function of growth (population or wealth) and productivity. In the main it is fairly constant over large periods of time. In the TSX case the index doubles about every 15 years which corresponds to a growth rate of about 5% (rule of 72). If you want to complicate things you could use a semi-log scale. We have not here so if we wish to measure 25% above or below (the blue lines) we should get a fan. The fan expands as we use a larger deviation from the mean (in black), as for instance when using 30%.

If you do this for , say 20% you might get some thing like this;

TSX feb 12 2016 2

You would have made 6 trades (of course you can do portions rather than the whole), 3 sells and 3 buys (we do not use stops, which maybe you should!) On the first set of trades you break even, on the third trade you make 3X your money and on the 5th about 2X. Presently you are long at 9000, good for 1.3X if you were to close out. That adds up to 3x2x1.3=7.8x and since you start with 3000 you now have 23.400, that is double the present market value.

You can increase or decrease the sensitivity, that is widen or narrow the fan. A very wide fan would replicate a buy-and-hold approach, what the industry wants except when they want to earn something themselves. A very narrow fan would resemble the famous day trader.

CEF.A, Central Fund update

Hamilton

The usual, then Oct. 31 2014, and now charts;

cef.a oct 31 2014cef feb 11 2016

We just want to warn against getting carried away, regardless of what the bandwagon might be. The Central Fund warns us that the obvious may just not be that obvious. If we knew the answer we would tell you. Keep in mind that the ideal 4th wave of previous degree on gold is not at $1050 or so but more like $850 to $900! ($10 or so on this fund). We never got there which warns you that it may come yet. Above $19 this would be negated but by that time you are getting close to a 62% retracement.

FFH, Fairfax Financial.

Hamilton

We caught the $50 low back in 2003, but otherwise it was mostly hit and miss. Not the sort of thing that you want from this blog. So here then is the perfectly correct prognosis of where FFH is going.

FFH feb 11 2016

First of all, as always, we start with the big picture. Back in the nineties this stock came from nowhere and immediately rose to prominence. Wood Gundy was literally salivating at the mouth when it hit $600, expecting a few hundred more. Well, we got $150 more but it did take 18 years to do. That is a long time of explaining to do for the rookie investment advisors who bought into the hype. The stock quickly dropped to about $50, or down 92%.  It climbs back fairly linearly and oddly the 2008 great recession barely registers as by now the world knows that the top dog at this company is a short seller, making some wonder if this is an insurance company or a hedge fund.

From an EW perspective we cannot determine precisely where we are. However, roughly in the middle there is this near perfect expanding triangle a-b-c-d-e. These gems are always either a B-wave, or a wave 4. In this particular case it matters little which scenario you prefer as the outcome is the same, at least to about $325. As we get closer we will provide more detail. For the moment we can get one more minor push up and then this stock should tank. We would not wait for that. As the saying goes, low tide strands all boats, even the best.

On a completely different note, even if you are not Dutch, this is worth watching/listening to;

https://www.youtube.com/embed/66-A2MyVDbU

MFC update

Hamilton

We were amiss in showing a new blog for Sunlife and not Manulife yesterday. We were reminded of that by the annual report that came out today. So here it is;

mfc feb 11 2016

We have referred to this company as the canary in the coal mine. A better name would have been the turkey in the QE mine field. Unlike SLF this stock never really made it any higher than the point it reached less than a year after the “great recession”. Most “financials” went up quite a bit more, some went well beyond the 2007 highs.

These guys are very meticulous, just take a look at their lawn on Bloor street. They are also hugely inefficient, just look at the treasurer’s office in the relatively new building in the back. It is – or at least was – the size of a small football field, the largest I have ever seen for a Treasurer/CFO whatever.

The years results were OK were it not for that small and irritating item about energy;

  • Reported investment-related experience charges of $361 million in 4Q15 and $530 million in 2015. The investment-related experience charges were driven by fair value adjustments to our oil and gas investments, which amounted to $250 million in 4Q15 and $876 million in 2015. In addition, updates to cash flows used in actuarial modelling and future tax impacts also contributed to investment-related experience charges in 4Q15.

We are not sure how they managed to lose so much. Isn’t that what mutual funds and etf’s are for?? Your client loses but not you. These guys are big in Asia, in fact that is where most of their growth comes from. If we were anticipating some sort of black swan, we would have thought that it would be coming from that direction rather than oil. May happen yet.

The stock is down more than 11% (in US$ terms) today with a C$15 handle. For full disclosure, I once worked for this company.

 

mfc may 28 2012

From this May 28 2012 chart a different count could be inferred. That is 5 down followed by and a-b-c up, that may or may not be complete, and now another 5 down. This is highly improbable given the action in other financial stocks.