BCE

BCE, GE, the blue chips

Hamilton

Both BCE in Canada and GE in the States were, once upon a time considered to be “blue chips”, which, freely translated meant that these stocks were more or less impervious to down cycles , too big to fail, and dividend paying, in short excellent investments for widows and orphans and all those other investors that did not want to play roulette. Here are the charts.

bce jan 20112 ge jan 2011

BCE dropped from $50 to $18 or , give or take, 62% and GE did an even better job by dropping from $60 to $6 or 90%. BCE was always considered a grossly mismanaged company and GE, in contrast, the learning school for the latest sophisticated techniques in advanced management. One blew up by falling asleep and the other by not sticking to its knitting, by aggressively becoming a bank. The moral to be drawn from this is that there are no blue chips, period.

  Both these stocks may have completed an entire correction lasting about 10 years, which would imply that they are now in new bull markets. This view is more compelling with GE than BCE! All the more so if one looks at what they make. One is in phone services where the costs are gravitating to zero and the other makes jet-engines, dish-washers and a million other things. I would put my money on GE.

bcejan 2011

Short – term BCE may try to get back to the $40 level (top of B of C ) where it briefly was just prior to the debacle with Teachers et al trying to take it private. I have NEVER seen a chart that is so trend persistent – for  over two years this thing has been on track without any pull-back. The RSI and MACD  are already turning and this cannot go on for ever. It is about $3/4 from its target. Get out or use a tight stop, $34 where the lower line runs or even higher. Even if this is a NEW bull market, typically first waves up are retraced by 60% or more.

BCE (but also Telus and Rogers)

Hamilton

Just this week our minister Tony Clements announced that the federal government has plans to “liberalize” the telecommunications (and broadcasting ? ) industry in order to create a little more competition. Canadian rates for cell phones and fixed lines are often twice  what they are in other civilized countries ,which difference is not entirely explained by the more challenging expanse of the Canadian territory. More probable , the 3 main companies providing these services, each with a quasi geographic monopoly, have , so far at least, managed to keep their monopoly rents at the expense of the public. Slowly this is changing and , perhaps, the rate of change will accelerate! Under such circumstances BCE would be extremely vulnerable as it is most dependent on fixed lines and is(or was), by far, one of the worst managed companies in Canada, something it could only afford thanks to those same rents. Its attempt to go private at about $41/42 a few years ago became a disaster despite the fact that the company was able to , literally “walk on water” as it negotiated some of the foreign content and other issues with the relevant authorities. Here are the charts;

BCE June 2010 bce june 2010 2

On the left is the long term picture. From an EW perspective a multiyear A-B-C is a reasonable expectation (for a good comparison look at GE , General Electric; the comparison is not that far-fetched as BCE is the widows and orphans stock par excellence , whereas GE is the only stock left standing from the original Dow Jones Index, see below for your convenience)

ge june 2010

Remember that you can enlarge these charts by clicking on them, and then you can put them side by side if you wish. The chart on the right is the short term (3 years) chart. The stock drops pretty well precisely 50% of its value ( mainly due to the failed privatization  attempt which coincided with the second coming of the great depression. Now we have regained 50%  and in the process have closed the gap. However, this being a C wave  and therefore requiring 5 waves, it is not at all clear that we have had 5 waves, in fact  one more down seems very plausible which would fit the big picture handsomely. By the way, a drop to about $15 would still keep the stock above the long-term trendline; all this would do is erase the brief madness between 99 and 01 and, paradoxically return the stock to blue-chip status. Definitely a sell, just in case!

BCE , RCI/B , T The Canadian Communicators

Hamilton

BCE May 14 2010 t 2010

rci.b 2010 

Telus was our favorite , and BCE our least liked stock. All three are in a business where the commodity of a phone call has dropped in price to near zero. Sofar by nickel and diming they have maintained a reasonable level of performance but that may start to change little by little as people realize that many of the services are available at a fraction of what these companies charge. From a chart point of view , all three are near reasonable retracement levels and should probable be sold. As always , clickon the chart to enlarge.

BCE June 12, this will make you a widow or orphan

Hamilton

bcejune12

Just an update on BCE. This is the standard A-B-C, note that often the A and C are vector equal, moreover it is not unusual to have C and A equal and both equal to B, so all three equal. BCE looks like it may just do exactly that, which would put the ultimate low in the order of $16/$17 or so, perhaps even lower. We know that Teachers recently dumped their substantial position and there may be others that are still dissapointed about the deal at $41.75 not going through. To see what it should look like one day , see below as GE has done this.

gejune12