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Trade Trends with Bollonger Bands and Twiggs Money Flow

Archive through June 23, 2010

Chart Forum » Hilarius' Hall Of Fame » Our Daily Bread » Archive through June 23, 2010

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jaded
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Post Number: 219
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Friday, June 18, 2010 - 02:45 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



I was coming from another angle somewhat,Ody.I was thinking of perhaps Forum Members in their 20s/30s and wanting a discussion for their benefit on the Scenario of House Prices significantly falling.

They[these youngsters] probably think Beauty I'll be able to Buy then[price fall] when actually the bot of harbour book keeper in me thinks they should take another tack,at least for their financial well being.

See I think the Real Estate Market runs on these myths/'wisdoms'.
One I particularly abhor is Rent Money is Dead Money.
This completely Ignores Interest Payments on Home Loans.
Even at 7% you'll pay back twice as much than you borrowed in Ten Years,let alone 25 or 30 year loan.

Especially if Real Estate goes into a 5/10 year Flat Line Prices or Drops 30%?Well there's no fancy figures based on being "Tax Effective" that will save you.

Ody,isn't it 'normal' for young people to be paying $1000 a Week,Housing Loan Repayments? a $300k loan repays at that rate and more,doesn't it?Surely one can Rent cheaper than those Interest Payments?

You can but,supposedly you're getting a Capital Gain on your 'leveraged asset'

BUT if house[asset] prices do not increase by more than your interest rate per annum/over say 7/10 years?Would it be such a 'good' deal?

The problem in the Australian Housing Market is partly caused by the Difficult in getting Security of Tenure in a Rental Property.Say a Ten Year Lease.

There is insufficient dedicated Rental Property Stock.All we have is Negatively Gearing Clowns buying up Residential Property in your Suburb.Shoving in any dill who'll pay rent while the Property Runs Down[Drive down a suburban street on a Sunday drive and you can easily pick-That's a Rental]

I don't know.Used to be one bought the worst house in the best street and renovated it but now you buy the worst house in ANY Street and devalue all the others down,while seeking profit/gain by playing 'pass the parcel'!!

anyhow I've a 35 year old niece,just got her divorce settlement,no kids and I'm trying to get thru to her that,well,real estate ain't d'bees knees but I gotta handle/get past 'old goat tales' like are spun by blessed Will Rodgers!!@!

I need a Drink!!


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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scarrie
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Friday, June 18, 2010 - 03:25 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi all,
Great discussion. The problem that I see with determining if a bubble exists lies in determining what property prices actually are.
In the share market, you can see, at any time of day, what your shares could be sold for if you wanted to sell right now.
Correct me if I'm wrong, but housing prices are based solely on those properties that have actually BEEN SOLD.
I'm an Adelaidean like ody. Say for example the typical house in my suburb is worth, and would be sold for, $500,000 if it were on the market today. However, the only houses that have BEEN SOLD in my suburb in the last 12 months have sold for a median price of $750,000. Maybe people with higher incomes who geared too heavily during the downturn and have been forced to sell. The median price for my suburb now is not representative of the typical house, and creates the impression that a boom is underway, because in the previous 12 months, the houses that WERE SOLD went for a median of $500,000.
More than happy to be educated if my understanding of the system is wrong.
Cheers
Dave







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eblode
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Friday, June 18, 2010 - 04:01 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Cat Lady,
Hoped you kept your eye on my old favorite DWS. Going to be Christmas all over again.

Eugenio


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ody
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Friday, June 18, 2010 - 04:33 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Real estate

Rudy: I thought I had made it quite plain that I do NOT believe in a buy and hold strategy for investors in real estate any more than I do in the case of shares! Indeed, even in the case of the "family home" I urged "rotation" if possible. In fact, there would be lengthy periods where I don't think investment, even in a family home, would do much for one, or could be positively harmful. In essence, I see the situation as not dissimilar to that of the share market. For an investor per se, buying anything else than the family home, it would only be wise to "go in" when the market is down, but beginning to go up, and one stays in only during an "up wave". No longer.

So at the moment one would not buy. As in the case of the share market, one waits until the "down wave" has come, and has bottomed, with signs that the next "up wave" is starting. One deliberately does NOT buy and hold. For the family home of course the same principles apply, though I can see why many would hold their home for decades simply to live in. To do so for investment (even if one buys without a mortgage) is far more dubious. Although I must admit that usually, over many decades, history has shown that prices tend to move up, at least by the cost of inflation, so that one is not likely to come an absolute cropper. Even so, I think that much of the price-rise in houses is inflation-related, which is one reason why I am not very keen on the asset class. In contrast to businesses, houses are not productive.

And ...

jaded: I have considerable sympathy for your case that actually for many - possibly even for most of us - renting may have distinct advantages over buying, at least as far as the "family home" is concerned. Certainly, on a long-term mortgage, one vastly overpays for the house as one has to pay for both the principal and the interest rate charged. One ends up with a PHENOMENAL sum. IF one buys a house to live in, then, in Australia, surely the mortgage is only a necessary evil, and should be paid off as quickly as possible. It is yet better if one has a principal with which to buy, so that no interest rates need to be paid. Then one can turn the "dead" money in the house into something more productive by borrowing - modestly - against the house, and investing in something else, as the cost of the debt is tax-deductible. Personally I would not in any case like to borrow more than I could VERY easily cover from cashflow. But your argument is, in any case, valid: many would be better off renting.

Eugenio: what you say is very true, I am sure, about immediate turnover where that is possible. I don't think it covers the more serious problem as to whether one should buy to keep the property for any length of time.

Scarrie: you are entirely right about prices in Adelaide. One has only the past record to go by, and that offers an insecure guide to the future.

And there are other drawbacks that I hate about real estate. Various costs such as stamp duty, commission to an agent, etc are usually ignored by the industry. Any impression of a "gain" that one might get in a suburb from one year to the next is imprecise because not the SAME houses are usually sold; the sample is often limited; and above all THE MONEY THAT GOES INTO COSTLY IMPROVEMENTS is not counted. Suppose you buy a house in a suburb for $500,000 in 2010 (you'd be lucky, in a way), and you improve it by spending $250,000 on it. You sell in 2011 for $600,000. The way the REI of SA sees it, the house has been sold for a profit, as they do not allow for the $250,000. In other words, their figures are grossly misleading, especially for suburbs where much improvement occurs but gets overlooked in calculating how real estate in that suburb performs.


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rdumas
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Friday, June 18, 2010 - 04:39 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Ody,

I'm not sure why you thought that I was saying that you believe in buy and hold. I have always known that you were not a buy and hold investor. That was purely a comment about the fact that one strategy can work for long periods of time but becomes suspect in new circumstances. I had no one in particular in mind when I made that comment.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Friday, June 18, 2010 - 04:56 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rudy,

There must be some misunderstanding. I refer to your prior post, in which you point out that there has, in fact, been a bull period of some 60 years in real estate. This is addressed to Eugenio and me. Later, you say to us:
---------------------------------------------------------
... your logic that these bullish conditions will last for a similar period into the future is not soundly based. If you and I are through some miracle able to live another 30 years or so we may see a complete cycle of 5 waves up and 3 waves down. It is then and only then that we would be able to be more definitive about any future move.

It is not too different from the fallacy of buy and hold strategies in the share market continuing to be as sensible over the next 30 years as it was in the last 80 years.
----------------------------------------------------------

This is what puzzled me. I would be among the very people who would be not at all confident that 60-80 year bull markets that have existed up to the present will necessarily continue into the future, either in real estate or in shares. That is one of the very reasons why I would not, in principle, be at all keen on a buy and hold policy for either asset class, and be inclined, in both cases, to think of shorter term investments only (say, normally 1-5 years, perhaps). And if I did commit myself to a house, it would be in full awareness that it is a more cumbersome investment, even for such a period, than shares. Still, just as I would be prepared to go into the share market for that kind of period if I thought the signs were good, I'd consider the possibility seriously for the property market as well, if the signs seemed to me auspicious.

Do I misunderstand you? Or you me? Or neither/both??


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rdumas
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Friday, June 18, 2010 - 05:04 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Sorry Ody,

The problem was in addressing both you and Eugenio. I really only included you because you had been discussing the real estate situation. I should have been specific when I made that statement because the point about the future not necessarily being the same as the past was directed at Eugenio who indicated that if he were younger he would be in real estate based on his past experience.

I am usually more careful than that. I have been juggling too many balls today so got a bit distracted.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Friday, June 18, 2010 - 05:11 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rudy,

Thanks. That does explain the matter fully. I had guessed that this might be the case, but dared not articulate the thought until you had expressed it yourself!


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cat_lady
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Friday, June 18, 2010 - 05:39 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eugenio

DWS

Roger Montgomery also rated this stock highly so with his recommendation - and yours - it was added to my income portfolio! the 9% dividend is none too shabby any growth is cream on the cake

cheers
cat lady


Without my morning coffee I might as well be a dog

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cat_lady
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Friday, June 18, 2010 - 05:41 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



DWS

p.s. forget christmas I've got school fees to think about

cat lady


Without my morning coffee I might as well be a dog

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peterloh
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Friday, June 18, 2010 - 06:14 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



There is a book by Robert Kiyosaki " Rich Dad, Poor Dad".
It is a good book to read and also in a way it discuss the merits of buy and hold and other strategies.

Currently I am on a buy and hold strategy. I do not review my property investment as they take some time to move but my shareholdings are being review as I hold them for both medium and long term. I do not think that I have a large portfolio.

I have just sold my top floor unit (penthouse like) with views of Brisbane Waters in the Central Coast that I bought about 8 years ago
as I did not have the luxury to go every week any more.I bought it for life style so the return was very bad, less than 2% per annum. From now on, I am free to travel to anywhere I want to more easily. Just as well I had it mortgaged so that I could have some more funds to buy more shares last year.

Like Eugenio, I no longer invest anymore in real estate
but kept what we have bought some time ago.For real estates, I look at LPTs as I have always been a contrarian investor. I think this sector is very oversold and it will have its days of sunshine soon. I believe distribution will go up first before the value catches up.

As I am an aggressive investor, I am more on growth assets. I am also a strong believer in diversification as a means of reducing risk. As I am getting on, I need to learn to take a more conservative approach for the future. In this area I will have to learn from Rudy and Ody.

I have also learned in the past, that too frequent trading, whether it is in property or shares, will not produce a better result, if we are investors rather than traders.

I feel for some newly arrived immigrants that are still trying to buy a home at a reasonable price to live in. Some have looked for houses for over a year. In certain areas in Sydney, the median house prices have gone up more quickly of late than they were last year.These people have sold their home before migrating and now need one as a replacement. The financing factor is never a problem as the LVR, the amount they are looking to borrow is less than 60%. I think the FH buyers are facing more difficulty today in buying their first home. I think those that are looking to buy now, are mainly investors and those that are looking for replacement for the home they sold.


-------------------------------------------------
Disclaimer: Please note that comments made in this column is mainly for the interpretation of charts in technical analysis. It is not made in my professional capacity and should not be taken as advice.In my professional capacity I am only allowed to give advice on certain managed funds authorised by my license dealer.Any share discuss is for general interest and should not be relied on to make an investment decision.It is likely that I may own the shares that we discussed as a trade or as an investment. Please consult your stock broker or financial adviser in regard to your personal situation.

The views expressed here contain information derived from public available sources that has not been independently verified.No representation or warranty is made as to the accuracy, completeness or reliability of the information.Any forward looking information in this representation has been prepared on the basis of a number of assumptions which may prove to be incorrect.It should not be relied upon as a recommendation or forecast by the writer.

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jaded
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Friday, June 18, 2010 - 07:10 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Who cares about my niece?So what 'jaded' wants to be Avuncular?

You have to realise that,perhaps, we are dealing with 'readers' who are trying to do the right thing by THEIR children/Fruit of their Loins[so to speak]

There's been all these posts,not just recently,but for months how Australians are TOO exposed to the Residential Housing Market.
It's historical.I would say Globally Australia has the highest rate of Home Ownership.Further I would extrapolate that Australians.over ALL Others,are filled with owning ya own home is IT.

Will Rodgers via Eugenio was LAND.Land as in every one should have/be able to FARM!!!
This is the basis of American Ownership-FARM Land.

What I'm trying to get some discussion on is-Is it really Necessary for our children,grandchildren to Own their own Home/House?

Frankly,I don't CARE if Immigrants are outta d'Housing Market in Australia because of Price.Especially if they Have To be in blessed Sydney for 'cultural' reasons.

My concern is for Young Australians.Forum Members kith and kin.
Like cat lady is 'concerned' with School Fees.Some of us are concerned with setting up the young adults of our 'aquaintance'.

This is the background,Ody,I wish to have explored to your Call that the Aust Residential Market is up for a FALL.

You 'threw' it out here.You quoted all these experts for credibility/Proof.

well,a collapse of the Housing Market will do WHAT? to Bank Investments/shares?

like sorry,Ody but it seems In My Opinion you maybe a bit Smug on the ramifications of,say,a 20% House Price Fall.

I'm imagining the Average Joe Blow Reader of this Thread.

IF,what you 'advocate' ie the Aust. Housing Market is Overblown/Bubbled and the Debt so involved is becoming 'scary'?

well,Ody/rudy/ eugenio can't you see the Dilema of those beyond your own self interest?

Like what is YOUR,experienced 'advice' to the next/one b4 that,generation?

or do ya just don't wanna bother with 'em?

sincere regards.


" Hear what you Say...
But see what you Do!"

Sir Zelman Cowen c 1970.

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ody
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Friday, June 18, 2010 - 07:36 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



DWS: Eugenio, cat lady and others

My interest in doing some work on this stock was piqued by the fact that both Eugenio and Roger Montgomery like it - very different investors indeed, with Eugenio guided strongly by the question whether a stock is in uptrend, while Roger looks for value (I hope I am being fair to both in putting the matter thus succinctly).

The following remarks are not meant to suggest any firm conclusion, but mainly brought forward because I found in looking at it, too, that the stock interested me.

It is probably not, at this stage, a stock for me personally, by which I don't just mean that I am not ready to go into the market anyway, but more particularly that this would not be wholly my type of stock in a bull market either. At the same time, I can also see why others might be attracted to it.

The company has only been listed for a few years. During that time its performance for an investor would have to be described as erratic both in market terms and fundamentally. Over three years, it has produced -40% for investors. Over the last year, however, it has produced 79.22%. It has not done that in a straight line - far from it. After a significant rise it fell markedly in more recent times, only to go up again firmly during the last week, i.e. by 16.9% and - today - by 9.52%. I presume that its steep rise would have been greatly tempting to Eugenio, independently even of what one might say about the fundamentals.

Would there be - again, apart from fundamentals - any "market" reason for the rise? Well, I can think of two. One would be the fact that Roger Montgomery - who now has quite a high profile - likes it. Another one is that the stock has been keenly pursued by a New Zealand fund manager, Fisher Funds, which has twice bought a significant number of shares in the company, the second time very recently.

Fisher Funds is better than average, though that does not mean that an investor in its Australian Growth Fund would not have lost money by staying with them over the last 3 years. Even then, their loss (expressed in NZ dollars) of -4.3% contrasts with -5.5% for the market as a whole. Over 2 years the figures are 9.9% vs 0.9% and over 1 year 48.3% vs 31.1%. It is thus very possible that the share price has risen not only as a result of FF taking up a portion per se, but also because of devotees following them.

I must admit that I find a rise in the price of more than 9% in one day a bit sharp for my taste - but there may be other factors which I am not aware of. It is certainly very possible that, as the stock had fallen quite a bit, people are getting on board in the belief that it had reached a low and will now go up for what they hope will be quite a while. One must hope, for them, that it won't be by 9% per day!

Now for some fundamentals. Stock Doctor rates the stock as "strong" in health, and one can see why. Personally I feel attracted to predicted earnings of 16.43% for June 2010 and 12.77% for June 2011. Whether these earnings will be fulfilled or not, however, will depend strongly on the economic situation and DWS's handling of that. As an IT company servicing large companies and parts of government is is inevitably dependent on how its clients will fare. What concerns me possibly more, however, is that the performance of the company has not been that of a steady earner: in Dec 08 EPS growth was down by -16.92%, and in June 09 by -6.85%. Admittedly, by Dec 09 there had been a marked turnaround, with EPS up by +28.62%. However, I do wonder to what extent this surge is simply stimulus-induced, as is inevitably the case with many companies that by the end of 2009 had come to look so much better than they did during 2008 or the first half of 2009. As I personally fear that the global economy is heading for trouble during the remainder of this year I am therefore not confident that the predicted earnings for DWS will necessarily materialise.

On the other hand, the company "looks cheap", with a PEG of merely 0.35 (well below the "normal" rate of 1), and a PE of 10.10. This is below the current average for its industry group, which is 11.86%. The current dividend (after the huge surge in the share price) is 7.97% franked. That, if the company can pay it and continue to do so, is of course a very handsome amount. But that is also true of quite a few other companies, and by itself is never enough to hold up the price of a stock eventually. It just provides something like a possible buffer. We cannot know just how far the price will rise before it may fall again.

Personally I would thus be wary of the stock, as I don't normally buy stocks unless I think the market (and preferably the economy too) is on the up in a convincing way, and I would want the stock to look a lot more solid than this one. However, it is, of course, quite possible that the company is doing so well that it can justify the enthusiasm of current investors, and at the least it may well do fine in the market for some months, which would no doubt satisfy both Eugenio and cat lady enough. So I can see reasons why others would invest while I shan't do so myself.


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eblode
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Friday, June 18, 2010 - 11:41 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Ody,

Aw, c'mon in,DWS won't bite you. It's a winner and I hate to see a grown man cry when it hits 1.40 next week.

Eugenio


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market_mad
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Monday, June 21, 2010 - 09:34 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Market set to pump today - US futures up over 1% at present on the back of China announcing that they will alow their currency to appreciate

Cheers
MM


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rdumas
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Monday, June 21, 2010 - 10:23 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi MM,

That fits in with my view of ETF GOLD at present. IC readers would know that I have been saying for months now that the POG would eventually get to around the $1,325 to $1,350 level in this part of the price cycle.

Following is my EW count for the POG.



If I am correct then we are currently in an Intermediate wave 4 which if it alternates its pattern with wave 2's should not fall too much before its final wave 5 move up.

I would expect the XJO and US market to top out this week which (if it occurs) will cause the AUD to start dropping. At the same time the POG would probably start moving up. The combination of these two events would cause a rapid move in the ETF GOLD price. Anyway that's the way I hope it plays out because I am currently invested in ETF GOLD.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Monday, June 21, 2010 - 11:01 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



CURRENT XJO PRICE ACTION

For those of you who receive my market wrap you will know that we are about to reach an interim top in the XJO. The EW count as I see it is shown in the chart below.




The more obvious potential top levels are indicated with the dashed lines however there are a few other obvious locations for a top above those levels (eg, the gap around the 4713 is in sight).

As indicated in my market wrap addendum, this interim top could mark the beginning of a very bearish plunge down to the 3750 level to complete the corrective move from the 15th April high or if the 21st May completed the corrective move from the 15th April then the new interim top could also mark the end of the first leg up in the rally to new market highs.

We will not be sure of which it is until we see the pattern that develops in the drop from this new interim high.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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eblode
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Monday, June 21, 2010 - 02:12 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Cat Lady,

DWS has cleared 1.40 and is now heading north to 1.45, may reached 1.50 by Friday. Meanwhile I'm having the ride of my life with MMS and surprisingly AGO which I bought knowing that Rudd must back down on resources. Same for BPH.

Eugenio


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ody
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Monday, June 21, 2010 - 03:31 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eugenio, - rising resources (and other) share prices

Glad to see you doing well. I don't think it is any evidence that Rudd will buckle which is helping you in the area of resources, but the fact that the Chinese are prepared to move their currency upwards. They have for long resisted that move, and probably have changed their attitude for one thing because of political pressure from the U.S.

The consequence of this decision on their part has been that it is interpreted as a sign of Chinese strength: the reasoning is that they would not do this unless their economy is strong, and that it will mean among other things higher prices - certainly more demand - for Australian resources.

Hence metals and mining is pulling other sectors along on our market right now - but it is, itself, by far the strongest sector all the same, and thus has moved up dramatically prices for stocks like Fortescue, and hence also AGO, which you own and mention.

This optimism could well last a little while longer.

However, there is also another side to this whole matter. One reason, no doubt, why the Chinese are making their exports dearer is political, but another, equally likely, is that they want to put the brakes on an economy which is bursting at the seams with energetic activity. And, indeed, higher export prices will mean that exports will slow down, particularly if it is remembered that China exports notably to the U.S. and Europe. These are areas where higher prices will not be appreciated, and lead to fewer sales. Europe, in particular, is in a bad way, and will not be able to absorb higher Chinese prices with ease. At least 20% of Chinese exports goes to Europe - a considerable portion.

Once all this is grasped, it will also be understood that a slow-down in Chinese exports will mean - as the authorities intended it - a slowdown in the Chinese economy generally, which in turn will not help our resources exports to China, but hinder them. I am not suggesting that this is already evident, or given much thought, at present, but it IS to suggest that you are wise to exploit the present enthusiasm to the full, yet to make sure that you don't overstay. Once a more sober view prevails the current enthusiasm could quickly diminish.

Meanwhile you have picked the market correctly - not, I think, because of the Australian political situation, but because the Chinese have relaxed their severe attitude towards their currency.

Markets very often react very strongly to short-term impulses, and this is likely to be one of them. It may, of course, be a while before people think through the exact ramifications of what is happening. Meanwhile, make hay while the sun shines, as you are in effect both doing and encouraging others to do. The situation is very volatile and speculative, and can readily move in more than one direction.


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ken
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Hello everyone,

Hindenburg Omen time again.

We have so far 32 new highs and 36 new lows with 1399 stocks traded. This meets the criterion for both new highs and new lows to be greater than 2.2% of stocks traded.

These are only interim figures - if 54 more stocks are traded before the close it doesn't make the grade, but with Rudy's expection of downwards from somewhere around here it might be wise to get out to some degree.

No guarantee of it operating straight away but it can.

Ken


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eblode
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Ody,
Frankly I had not considered the Chinese currency issue to be of such strength to affect this market however you may be absolutely spot on and I will be taking precaution in this direction with close Stops. As a matter of fact the general mood of the market is turning very optimistic and may carry this sentiment for awhile but you are correct in advising caution. Being the coward that I am I shall be ready to bolt as soon as the DOW shows signs of weakness as this is the strongest influence on our market. Between yourself and Rudy I'm already a bundle of nerves. lol.

Eugenio


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magnus
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hi all,

With the ending of the peg to the us dollar. I think we'll see more inflation exported from China to the rest of the world. Whilst I think this is a good thing China is ending this practice of flooding the world with cheap imports - it will certainly hit us all with higher interest rates.

Once we reach this stage, I'm sure everyone who's up to their ears with a mortgage will bang the drums and shout louder about interest rates and may as well blame the incumbent labor government for all their troubles. And given how labor is polling at the moment, I would not be too surprised to see it become a one term government - but then again who is the lesser of the two evils KRudd or "Mad Monk" Abbott???

And what about gold? All the gold bulls will be proven right if this inflation scenario plays out according to plan - although I suspect we may see a bit of a correction before it continues its upward direction.


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market_mad
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Hi Ken,

Re Hindenburg Omen - I'm fascinated by your post and what the parameters are?

Could you explain a bit more pls or direct me to somewhere I can read up on this? Sorry if you have posted on this subject before.

Cheers
MM


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ody
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The purpose of the post below is NOT to engage in politics

But it IS intended to keep us up to date with what the actual electoral prospects at this time appear to be. For there can be no doubt whatever that whoever gets in will have a very significant effect on the morale and choices of investors. Many seem to live in the expectation that Abbott will prove "unelectable". That may be their own feeling, but it is not borne out by what appears to be happening in the crucial marginal seats which will determine the outcome (on present signs). Hence the following:
-------------------------------------------------
ALP living on false hopes

* Dennis Shanahan, Political editor
* From: The Australian
* June 22, 2010 12:00AM

IF the Rudd government builds its election strategy on the basis that Tony Abbott is unelectable and Greens preferences will save Labor, it is mistaken.

The findings from today's Newspoll survey of Labor-held marginal seats in regional Queensland and the western suburbs of Sydney demonstrate that both political hopes are forlorn.

It also demonstrates that Julia Gillard is the preferred Labor leader in western Sydney, where the party is facing massive swings of up to 12 per cent against it.

While some Labor supporters took heart from a small shift in the national two-party-preferred support for the ALP in the Newspoll last weekend, based on preference flows at the 2007 election and a Greens primary vote of 15 per cent, others remain convinced Labor is facing defeat and Kevin Rudd's prime ministership is terminal.

The Newspoll survey of the marginals will confirm those darkest fears as the Labor caucus meets this morning for possibly the last time before the election.

Unlike the national Newspoll survey, which spreads the Greens' support, the marginal polling shows that in traditional Labor seats, where the Greens' vote is smaller, Labor's lost votes are going directly to the Coalition. Howard's battlers are turning their backs on Rudd and not flirting with the Greens. Rudd's fall in satisfaction as Prime Minister is translating into support for a still unpopular Tony Abbott.

In Lindsay - which represents the kind of seat Labor must hold to retain government - the Coalition leads Labor 56 to 44 per cent on a two-party basis, and Abbott is in front of Rudd as preferred prime minister 44 to 40 per cent.

In the Queensland marginals, the Coalition leads 54 to 46 per cent, and Rudd leads Abbott by six points. In Page, where the Greens' primary vote has almost doubled to 14 per cent since the election, Labor has held its two-party-preferred position at the 2007 election but is down three points on its 2007 primary vote, and 55 per cent of the people polled are dissatisfied with Rudd.

With the Greens threatening not to support Labor with preferences, and with the ALP's primary support expected to drop back from the record high of 15-16 per cent, Labor's reliance on Greens preferences is misguided.

The fact that voters appear to be switching directly to the Coalition from the ALP without parking their votes with the Greens or others in marginal seats, as well as boosting Abbott, suggests Labor's optimistic view of the national polls is equally misguided.

On these figures, not even taking into consideration the potential for a Labor wipeout in Western Australia and the expected losses in Tasmania, Rudd would still lose the election.


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ody
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Our market likely to fall today

Both Wall Street and our own market are now "running out of good news", or beginning to understand that what seemed a sensational benefit derived from a rising yuan is nowhere near as much of a benefit as hoped and in some respects not at all a good sign of what's afoot. Thus the initial knee-jerk reaction is now being corrected.
--------------------------------------------------------
Wall St sinks despite China yuan pledge

By Ryan Vlastelica of Reuters

NEW YORK - US stocks have once again succumbed to late-day selling in light trading as hopes China's newfound dedication to yuan flexibility turned to doubts about the speed and magnitude of Beijing's intentions.

The market's overall bearish tone eroded the initial optimism around the benefits of the yuan move. Stocks pulled back as investors questioned the effectiveness of what is expected to be a gradual change.

"The announcement was considered to be constructive, but markets were unable to sustain that euphoria as they looked at the details," senior vice president at MF Global in Chicago John Brady said.

The S&P 500 briefly broke above 1,130, the midpoint between its 2010 high and low and a key technical mark but was unable to hold the level, adding to the negative sentiment. The index had risen more than 8 per cent over the past ten trading days.

While support for China's decision faded, pessimism that the plan would lead to higher costs on imports from China weighed on retailers. Dow component Wal-Mart Stores Inc fell 1 per cent to $US51.02. The S&P retail index shed 1.7 per cent.

"It seems everything in the low-cost retailers is made in China," market strategist affiliated with Financial Network Investment Corporation in El Segundo, California, Brian Gendreau said.

The Dow Jones industrial average fell 8.23 points, or 0.08 per cent, at 10,442.41. The Standard & Poor's 500 Index was down 4.30 points, or 0.38 per cent, at 1,113.21. The Nasdaq Composite Index was down 20.71 points, or 0.90 per cent, at 2,289.09.

Losses were extended on Nasdaq on weakness in large-cap tech stocks. Amazon.com Inc fell 2.6 per cent to $US122.55 after it cut the price of its Kindle e-reader product to $US189 from $US259. Google Inc lost 2.3 per cent to $US488.56 and Dow component Microsoft Corp was down 1.9 per cent to $US25.95.

Markets opened higher, with the Dow soaring 140 points, as investors said China's move could lift the profit outlook for multinationals. Freeport-McMoRan Copper & Gold Inc jumped 3.3 per cent to $US68.09. Dow component Alcoa Inc climbed 5.5 per cent to $US11.72.

"This move is going to be good for global markets in the long-term and help the bottom lines of companies with Chinese exposure," vice president of Capital Advisors in Tulsa, Oklahoma Channing Smith said.

"However, markets have had a good run and investors haven't forgotten that we face headwinds with Europe and the labour market."

In deal news, Biovail Corp agreed to buy Valeant Pharmaceuticals International in a complex deal worth roughly $US3.3 billion. Biovail gained 14 per cent to $US16.67 on the New York Stock Exchange while Valeant was up 2.3 per cent to $US46.90.

BP's US-listed shares slid 4.5 per cent to $US30.23 after an internal BP document estimated that a worst-case scenario for the Gulf of Mexico oil spill could be about 100,000 barrels per day.

About 7.98 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, well below last year's estimated daily average of 9.65 billion.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 18 to 13, while on the Nasdaq more than two stocks fell for every one that rose.


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cat_lady
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see that henry announced yesterday that a super profits tax should be applied to "all companies" in australia, but not at the 40% level as mining companies should pay.

so it appears that all companies should be treated equally, but some not so equally as others....

cat lady


Without my morning coffee I might as well be a dog

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market_mad
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Tuesday, June 22, 2010 - 09:34 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hey Rudy,

Looks like June 21st was an important timeline!! Big reversal off the Dow and S&P last night after the initial pump up at the open. With the S&P up 9% over the past 10 trading days, you'd have to expect a pullback and to me that looks like Wave 2 up terminated last night. If yesterday's high doesn't get broken then strap yourself in coz Wave 3 down looks like it could just be beginning.

Target = 3850 on the ASX200

Thoughts?

Cheers
MM


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baysider
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Adding to Ody's post on the political scene I would also say that just days before the UK election the Liberal Democrats, the third party in the UK in terms of voter support (read Greens) had around 30% support as a protest against the other two parties. When it actually came to register your vote they got only a fraction of that level of support and whilst they ended up with the balance of power I think it's interesting to note the difference between a protest to pollsters and actually voting for a 'minor' party.

What do we think of gold today chaps? Big drop, is it a good time to add a little more AND or GOLD? I've held LGL and DYE only the last few weeks and don't have a lot of appetite for risk at the moment.


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rdumas
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Hi MM,

Further to my post yesterday. So far we have traced out the following pattern this morning.



At this stage I am assuming that we are only in a 4th sub-wave of the larger 5th wave and that we may still get to the levels mentioned in my previous post (ie 4631~4650).

The other possibility is that where I have label iii it should be label 5 and that we have completed the final impulse wave up of the corrective move from the 21st May. For this latter case to be valid the index would have to drop below the termination level of wave i so we should know this sometime today.

As outlined in my market wrap addendum however, a south bound move would not necessarily mean that EWI's Intermediate wave 3 was underway. My bearish scenario would have a drop down to the 3750 level and would look much like EWI's scenario until that level.

My bullish scenario's would not drop down below the low established on the 21st May. There is still a lot of water to pass under the bridge before we can draw any definite conclusions.

I have attached my market wrap addendum in case there are readers who are interested.

application/pdf
180610 market wrap addendum.pdf (302.3 k)



I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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gdd3
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Hi MM...

Re: Hindenburg question...simply use the 'Search Forum' facility at the top of any Topic Thread page...and type in "Hindenburg". You will see there is an excellent coverage, thanks primarily/intially to Ken, starting way back in 2005.

Cheers
Dolphin

P.S. IC's "Search Forum" engine will provide answers, or at least direct you to, a lot of yours and others questions here and elsewhere.


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rdumas
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Tuesday, June 22, 2010 - 12:08 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



POG Price Action - CAUTION

Yesterday I posted the chart below of the POG with a proposed EW count.




Please be warned that last night when the POG price dipped down to $1230.77, the above wave count was invalidated because the price dropped into the price range of wave 1.

I will revise that wave count when I have some time. In the mean time the POG does still appear to be in a strong trend as can be seen by the longer term chart below.





I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Great Dolphin - thanks for your help with that - much appreciated

Cheers
MM


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ken
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Tuesday, June 22, 2010 - 01:37 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



MM,

Try this thread.

https://forum.incrediblecharts.com/messages/9/613928.html

Ken


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market_mad
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Eugenio,

Re DWS - looks like it's run into pretty strong resistance at that $1.45 level. I'd be looking to buy on a breakout above that line...

Cheers
MM


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market_mad
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Rudy,

RE POG - EW had this to say this morning...

Gold]'s big downward reversal today is the first strong sign that the rally is complete. Today's $35 intraday high-to-low range is the second largest since wave (5) started back at the February 5 low of $1043.80. The only larger down day was in the middle of wave (4), on May 19. Prices turned down today from a high of $1265.60 basis spot, which was at the midline of the channel formed by the rally from October 2008 ($680), and $5 shy of where wave (5) is .618 times wave (1). The fifth wave remains weaker in terms of gold's disparity with its 200-day moving average and the Daily Sentiment Index (trade-futures.com) pushed to 93% bulls, as of Friday's close. Equally important, the host of non-confirmations that we've discussed in these pages remain intact. Silver remains beneath its May 13 high as well as its March 2008 high, while gold and silver stocks (XAU) remain beneath their May 12 high as well as the December 2009 high and the March 2008 peak. A close under the lower channel line at $1151 (rising about $1 per day) should confirm a top and indicate that a multi-week to multi-month decline is underway. A rise above today's high indicates that the rally is not quite complete.

Cheers
MM


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rdumas
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Hi MM,

Thanks for sharing that EWI stuff with us. Prechter has been negative about gold for quite some time now so it does not surprise me that he believes that gold has now formed a top. Unfortunately I don't agree with him as I still have a top of $1,325~$1,350 for gold in the medium term future and I see nothing in the technicals to change my mind about those targets. Note that we have already seen $1,265.05 so the $1,325 level is only a breath away. It would surprise me if this level was not reached sometime in the next month.

I have revised my wave count in the chart below. This is a slightly longer term chart and obviously looking at a higher level wave degree.




I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Tuesday, June 22, 2010 - 03:51 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi rudy,

Re your earlier post - what level did you have the termination point of Wave i at?

Cheers
MM


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rdumas
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Hi MM,

i terminated at 4556. The price action went down to 4558 and then turned around.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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market_mad
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Hi Rudy,

Closed at 4558.3 - how close is that!


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market_mad
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Hi Rudy,

Closed at 4558.3 - how close is that!


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rdumas
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Hi MM,

It's just the market toying with both bulls and bears. It's a bit irrelevant anyway because even if we did happen to complete the 5th wave tomorrow it would be flat out getting beyond 4650 and then it would head south anyway.

Remember though it depends what sort of a pattern we get on the way down whether it becomes my bearish scenario or one of my two bullish scenarios.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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eblode
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MM,
Hope you got into DWS early as it finished 1.495. Should see 1.55 by Friday at this rate. Should help Cat Lady with her alterations.
Found an old portfolio of shares dated 5th October 2007 and was shocked to see that out of 23 shares only 4 had gained in value. Most of these shares ARE on the XJO 100. See and compare: AIX 3.32, BHP 44.10, BKN 11.20, COH 73.31, CPB 29.55,CSL 103.86,CTN 2.10,DOM 4.16, FLT 20.65, JBH 15.01,LEI 55.65, MCC 6.19, OKN 6.65, OST 6.87, RIO 107.65,SEK 8.72, SGM 30.70, SMX 6.93, SRL 5.10, STO 15.26, UXC 2.30, WOR 42.99, WPL 51.78.

Had I held these shares until now I would of lost a packet. The lesson is that you have to know when to hold them and when to fold them.

Eugenio


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ody
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Tuesday, June 22, 2010 - 06:41 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Eugenio - shares losing since October 2007

I actually sold out completely on 14 December 2007, 2% below the top of 1 November. (I had actually sold other shares already BEFORE reaching that level.)

On 17 January 2008 I "bought", metaphorically, the top 30 stocks on the ASX, and argued here on ODB and elsewhere that they were not a good buy at that time - had fallen already and would fall further: and the fall during the period after 17/1/08 until March 2009 did, of course, vindicate that stance.

At the time of the "purchase", some people took me to task for my "experiment", arguing that in effect noone would actually buy the top 30 companies - to which one can only reply that the vast bulk of professional portfolio managers, e.g. those holding Australian equities in super funds, would invest precisely in such stocks, indeed usually most of them, or all.

Anyway, it is now 22 June 2010. In fact, 2.1/2 years later already. We have seen a tremendous bear rally starting in March 2009. But this is now the value (the price, more accurately) of the stocks that remain of those 30 "bought" on 17/1/2008:

AMP -35.95%; ANZ -12.15%; AXA -9.41%; BHP (THE ONE AND ONLY WINNER!) +8.27%; BXB -46.69%; CBA -.019% (would have been marginally OK because of dividends); CSL -2.35%; FGL -3.57%; FMG -30.77%; LEI -34.83%; MQG -34.06; NAB -29.17%; NCM -5.06%; ORI -9.53%; QAN -48.94%; QBE -36.21%; RIO -40.31%; SGP -46.36%; SUN -45.54; TLS -27.88%; WBC -9.44%; WDC -30.55%; WES -22.30%; WOR -46.38%, WOW -.13.94%; WPL -.6.73%.

I must admit that, while I had expected a GENERAL picture like this, some shares have certainly fared worse than COMPARATIVELY even I would have expected them to, namely QBE at -36.21% and WOR at -46.38%, as these were among companies which I admired. The figures for AMP, BXB, FMG, MQG, and QAN are fairly much what in a bear market I would expect them to be, but LEI is worse, as is (to an extent) NAB, and certainly SGP, SUN, and WDC. On the other hand, TLS does not surprise me.

Could I have selected the "best" of these to go through the 2.1/2% years with? Not really, though - if compelled - I would certainly have chosen ANZ, CBA, CSL, FGL, WBC, and WOW, as likely to be amongst the most defensive ones. Trouble is that I would probably have bought others as well - e.g. LEI and certainly QBE, maybe also WDC.

Anyway, I am glad that I didn't have to make that kind of choice. And we must remember that at present the market is MUCH higher than it was in March 2009!

However, BHP has surprised me on the upside, although RIO, down more than 40%, is more in tune with what I had expected. (I would have thought of BHP as comparatively down about half of that, so around 20%.)


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ody
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Tuesday, June 22, 2010 - 11:29 pm:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



US moving more clearly towards disappointment now

Karen Maley is to my mind on the ball again and again, and what she reports about developments in the US unfortunately sounds all too convincing. At the same time, and doing his own analysis of the US economy, Steve Keen has also predicted further disappointment there. The "recovery", it appears, is nothing like what Bernanke etc want us to believe. Both pieces (I am not quoting Keen's) are to be found at Business Spectator.

To my mind Rosenberg, below, has some very good things to say. I have no particular low in mind, either for the US economy or Wall Street, but I do feel very strongly that there, as well as in Europe, and inevitably to an extent in Asia and here as well, the insustainability of such factors as heavy debt, low or zero interest rates, stimulus packages and money printing, will manifest itself in unequivocal and inescapable fashion. All the signs of this very distressing period having in fact already started are coalescing.
-------------------------------------------------------

Karen Maley

America's economic cliff-hanger

Wall Street put on a classic nail-biter performance last night [this comes to you on ODB around 10.45 pm Tuesday, Adelaide time], soaring at the outset over China’s move to free up its currency, only to plummet as fears over European debt resurfaced, before reaching unsatisfying denouement at the close.

But while we’ve now come to expect hugely volatile trading sessions where strong reversals can happen in a matter of hours, some analysts argue that these wild gyrations are pointing to the huge uncertainty clouding our economic future.

John Hussman of Hussman Funds says that the US economy is in a real “cliff-hanger” situation. In fact, if this were an action novel, we’d be at the point where our hero – the US economy – was hanging over a steep precipice, clutching onto a rock of uncertain strength. We readers would be hoping that things would turn out well for our hero, but we’d be fearing the worst.

As Hussman notes, “it's possible that things will resolve sufficiently well, but we have to consider the possibility that they will not”.

Hussman says the latest reading from the Economic Cycle Research Institute (ECRI) reinforces this uncertainty.

The ECRI weekly leading index – which points to where the economy is heading – fell last week to a -5.7 per cent annual growth rate. The decline in the ECRI index is worrying, because it suggests the economy is rolling over. But, at the same time, it’s too early to start predicting a recession, because the decline in the index hasn’t lasted long enough.

Hussman also believes that the US sharemarket market is at a crucial inflection point, now that it has rebounded from its recent oversold condition.

He sees two possible outcomes. The first, relatively benign development is that “a further recovery in market action would most likely create modest further demand from already well-invested speculators and trend followers, and modest offsetting supply from already defensive value-oriented investors, allowing a dull but moderate continuation of upside progress.”

But there’s another, more worrying possibility – “a deterioration in market action would likely trigger a substantial amount of liquidation by speculators, into a market where fundamentally-oriented investors would require large price adjustments in order to absorb it. “

But David Rosenberg, chief economist at Gluskin Sheff, is more confident in predicting how the story is going to end.

He argues that there’s only been one previous occasion when a fall in the ECRI to -5.7 per cent failed to signal a recession. And that was back in 1987, when the US Federal Reserve was still in a position where it could cut interest rates to stimulate economic activity.

What’s more, Rosenberg notes that “a -5.7 per cent print accurately signalled a recession in the lead-up to all of the past seven downturns”.

In any case, Rosenberg points out that the steep drop in the ECRI is likely to mean that US economic growth will be much slower than most economists are forecasting in the second half of this year.

At present, the consensus forecast is for 3 per cent real GDP growth in the second half of the year. But Rosenberg notes that whenever the ECRI dips to between -5 and -10, the average growth rate in the next six months is 0.8 per cent.

Rosenberg points out that in early 2002, the consensus forecast was for 3 per cent growth in the second half of the year, and instead economic growth came in close to zero.

“So right now the choice is really either a 2002-style growth relapse or an outright double-dip recession – pick your poison. “

He adds the uncomfortable reminder that back in 2002, disappointment over economic growth undermined the US sharemarket.

“If memory serves us correctly, the S&P500 went on to do the inexplicable and make new lows before the year was out.“


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ody
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Wednesday, June 23, 2010 - 08:07 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Perhaps the beginning of the fall Wall Street OUGHT to experience?
---------------------------------------------
Stocks slump in volatile trading
By Alexandra Twin, senior writer
June 22, 2010: 4:19 PM ET


NEW YORK (CNNMoney.com) -- Stocks slipped Tuesday, giving up earlier gains in a very choppy session, amid a worse-than-expected existing home sales report and the latest on the European debt crisis.

The Dow Jones industrial average (INDU) fell 149 points, or 1.4%. The S&P 500 index (SPX) lost 18 points, or 1.6%. The tech-fueled Nasdaq composite (COMP) lost 27 points, or 1.2%.

Trading was volatile throughout Tuesday's session, with an early advance petering out after the release of the housing market report and amid the ongoing debt crisis. But the tone turned decidedly negative in the last hour.

Oil company shares tumbled in the afternoon amid the continued fallout from the BP oil spill. A judge ruled to lift the six-month ban on deep water drilling instigated in the wake of the spill, but the Obama administration has vowed to appeal the lifting of the ban.

BP (BP), Transocean (RIG), Anadarko Petroleum (APC, Fortune 500), Hallliburton (HAL, Fortune 500) and Schlumberger (SLB) were among the big decliners.

*How to ride an up-and-down market*

Worries that the economy could be heading into a so-called double-dip recession pummeled stocks for six weeks through early June, with the major indexes all losing close to 14%.

Since then, stocks have bounced back about 6% but trading volume has been weak, reflecting both light summer activity and the lack of conviction on the part of buyers.

Stocks initially rose Monday after China said it would let its currency rise versus the dollar, a move that could boost U.S. exports and manufacturing. But the market slipped by the close as the recent trend of last-hour volatility returned.


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ody
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Wednesday, June 23, 2010 - 08:25 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



External, expert and non-mining judgement - from a competing nation! - that Henry got it greatly wrong, as did, of course, the ignorant PM and Treasurer who slavishly accepted what he proposed.

And the simple WAY in which Henry got it wrong is simply breath-taking ...
-----------------------------------------------------

Ken Henry challenged on RSPT impact

* David Uren and Paige Taylor
* From: The Australian
* June 23, 2010 12:00AM

KEN Henry's claims that the resource super-profits tax will not affect investment ignored the combined effect of the new tax and company tax.

Canada's leading tax authority Jack Mintz told an Australian School of Taxation conference yesterday that the Henry tax review "failed to recognise how its recommendation could discourage investment in mining much more than for other industries".

His comments came as Kevin Rudd sought to distance the government from comments made by the Treasury secretary to the same conference on Monday, urging consideration of a similar super-profits tax for all companies.

"The government will not be adopting that model in Australia," the Prime Minister told parliament.

Professor Mintz said the Henry report had considered resource taxation and company taxation in different chapters and, as a result, had overlooked the effect of the increased combined tax burden on investment.

Professor Mintz, who has modelled the effect of a similar resource tax in the Canadian province of Alberta, said that new investment in the Australian industry would face a marginal tax rate of 46.1 per cent under the new tax, before considering deductions for exploration, compared with 31.8 per cent under the existing combination of royalties and company tax.

He said that in the absence of company tax, Dr Henry would be right in asserting that the new resources tax, which he said was well designed, would have no influence on investment.

Professor Mintz also cast doubt on the form of super-profits tax which Dr Henry favours for the rest of corporate Australia. He said multinational companies would rort it by financing Australian operations with debt, while the growing number of local companies paying no tax at all would be politically contentious.

Mr Rudd noted that the Business Council of Australia had urged the Henry review to consider a super-profits tax as a possible model for all companies. However, he said the government was only considering it for the resource industry.

West Australian Premier Colin Barnett, who this week secured a deal with BHP and Rio Tinto to remove concessional iron ore royalty rates, said Wayne Swan had "made a mess of his so-called resource super-profits tax".

He has repeatedly rejected the Treasurer's claim that it was hypocritical of the Barnett government to oppose the proposed tax while negotiating to raise the royalty rate for the two companies, a deal worth more than $1 billion over four years.

Royalties were not a tax, but the price at which West Australians sold the ore they owned.


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rdumas
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Wednesday, June 23, 2010 - 08:40 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi MM,

I have no doubt that Prechter will be tickled pink with the move down. I wouldn't get too excited about it yet though because the S&P500 had wave equality on the way down last night so I think that a bounce is soon to follow.




I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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ody
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Wednesday, June 23, 2010 - 09:01 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Rudy, - You may well be right, but I think sentiment is turning markedly for the worse at present, with a new number of pointers that the US is not receovering, and Europe continuing to be in great trouble. And see Rosenberg in my post 5160:
--------------------------------------------------
David Rosenberg, chief economist at Gluskin Sheff, is more confident in predicting how the story is going to end.

He argues that there’s only been one previous occasion when a fall in the ECRI to -5.7 per cent failed to signal a recession. And that was back in 1987, when the US Federal Reserve was still in a position where it could cut interest rates to stimulate economic activity.

What’s more, Rosenberg notes that “a -5.7 per cent print accurately signalled a recession in the lead-up to all of the past seven downturns”.

In any case, Rosenberg points out that the steep drop in the ECRI is likely to mean that US economic growth will be much slower than most economists are forecasting in the second half of this year.

At present, the consensus forecast is for 3 per cent real GDP growth in the second half of the year. But Rosenberg notes that whenever the ECRI dips to between -5 and -10, the average growth rate in the next six months is 0.8 per cent.
------------------------------------------------
I am not necessarily concurring with Prechter - he is usually too extreme. But I do think it will at present prove hard for Wall Street to struggle upward with any conviction. And volumes have been thin. It seems to me that now we may actually be coming to the end of the very long and exuberant rally that started last March.

My point is not necessarily either that people will listen to Rosenberg: rather, I think that he is confirming what the current change in sentiment seems to have a premonition about.


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rdumas
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Wednesday, June 23, 2010 - 09:15 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi MM,

Further to that last post. I should provide more detail on my current thinking. It is impossible to determine any difference between the first 3 waves of an impulse wave and a completed Zigzag because they have exactly the same wave pattern. As you are aware I don't agree with Prechter's scenario of this being the beginnings of primary wave 3 down so for the time being I have drawn the move down as a Zigzag. It could either be a completed correction to the previous rally from the 21st May or it could be just the first wave A down in a larger ABC wave corrective move.

If this is an impulse wave down then the bounce that follows will be of similar level to that which occurred in the preceding bounce. If the bounce is of a higher order (eg. goes higher than 1108) then we either have an extending impulse wave or we have a higher order wave B before the next corrective move down in a higher order wave C.

Whether we have a Prechter scenario or a higher order ABC corrective wave it does mean that we have further downside to go. If on the other hand the current corrective move is complete then we will recommence the previous rally. At this stage I don't think it is the latter case.







I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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rdumas
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Wednesday, June 23, 2010 - 09:16 am:Edit Post Delete Post Print Post    View Post/Check IP (Moderator/Admin only) Ban Poster IP (Moderator/Admin only) Move Post (Moderator/Admin Only)



Hi Ody,

Looks like you posted whilst I was in the midst of putting together my last post. As you can see, I agree with your negative stance.


I've given you my view based on what I know now. In another 5 minutes that view might change because of additional information. It's the best I can do - Rudy

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