Tuesday, November 27, 2007

Chart Game

While surfing the net I came across a site called "Chart Game". As I understand it, the purpose of the site is to allow people...to test their ability to predict stock price direction using just the information contained in the price chart. The charts are good quality and include both price and volume. The game allows one to play with "play money".

A significant limitation to the charts is that they only go back 24 months. For my type of analysis I need to see the entire available history for the chart because what may happened in the future is governed in large measure by what has occurred for the last 10 years or more. Limiting the data to only 2 years of history... in my opinion is not a valid test.

One needs to recognize that not all stock charts are useful for "good predictions". Indexes are always good but many stock charts are terrible candidates. In addition, there are periods of time when no one can make good long-term prediction.

I like the basic premise of the game and hope the site developer will take the idea further. I firmly believe that any one who thinks they can forecast anything be able to demonstrate that ability.

Thursday, November 22, 2007

Sayward Photos

A couple of photos I took near Sayward on Vancouver Island.

Wednesday, November 21, 2007

Dow Theory Sell Signal...almost there

If you follow market news you will be seeing articles discussing if the Dow Theory has signaled a change from a long term uptrend (bull market) to a long term downtrend (bear market).

So far only the DJTransportation Average Index has developed a sell signal by declining below the August low near 4,450. The DJIndustrial Average has not yet done so and this confirmation is required before the Dow Theory sell signal is confirmed.

The DJIA must break below the August low near 12,500 points. It is not far away from doing so with a low of 12,725 today. Another ~3 % drop will take it below the 12,500 level and confirm the sell signal.

In comparison, the S&P/TSX must decline to below about 12,500 before it has developed the Dow Theory change of long term trend signal.

The S&P 500 and Nasdaq Indexes also have a way to go down before they would give a sell signal.

The fact that the DJTransportation Average Index has developed a sell signal...an early warning that a bear market trend may be underway, as opposed to just another small correction, is significant. This is consistent with the overall Dow Theory that expects the industrial slow down to show up first in the transportation industry. For example, before an industry can produce items made of raw products such as steel, these products must first be transported. If a slow down is under way it will then show up first in the transport of raw materials.

The fact that the Dow Theory sell signal seems to be within reach may have influence on some investors and lead to more selling...as people try to beat the gun to avoid getting caught in a fast moving down-draft of price decline.

The next few trading days will be interesting to follow.

Thursday, November 15, 2007

Starbucks... The Stock Not The Coffee

I see that it is time for Starbucks to take a healthy correction. Down to $24 from a recent high of $40. Even at this price the P/E is still at 29 times. Definitely some Castle Building in the Sky has been going on here. It reminds me a little of the dot.com craze.

I would not be surprised to see $15 before this correction is over.

ps...I don't like their coffee but that's just me..too strong. But--most people do.

Bank of Montreal Going Lower?

In general... I see a high probability that markets will continue downward for some time to come.

For instance, BMO is looking very weak in the short-term. After sliding down from near $73 since late May 2007 it recently made a low of $56.44. I'm expecting BMO to go below $56, perhaps within a day or so. Chart link.

Wednesday, November 7, 2007

The Retirement Time Bomb

While on our little vacation I was in Chapters and found Gordon Pape's book, "The Retirement Time Bomb". It was this book that alerted me to the impact that early retirement has on the Can Pension Plan with the zero years reducing one's pension, to a degree, if they wait beyond age 60 to take it. Something that the Fed Gov't has yet to do.

Overall I think that Gordon's book is a good one. His chapters on CPP and OAS and related clawback is well done. My copy is from the Vancouver Island library...the best price in town.

He includes a good section on how to estimate your money needs in retirement, starting with a review of your lifestyle choices. On page 61, he suggests that to just maintain one's standard of living, one will need about 80% of their pre-retirement income. He also states that 60 % will give one a very modest retirement. The text refers to after-tax income, then it says gross family income so I'm not sure what one he intended.

Like all of us he has some fears and some biases. Intended or not, his book might scare many people into continuing to work longer than they really need to. He fears that the Baby Boomer's will have to pay part of their own health care due to the demands outstripping the country's ability to cope. He thinks that early retirement is a pipe dream for most people, most having to work to age 60 or later. The reasons include health care costs and the effects of inflation.

At one point he supports reverse mortgages, as long as the money is invested, but at another point he warns against borrowing to invest in the stock market in case one does so just before the next big Bear Market. He includes some good information comparing the different options available for using the equity in one's home.

All in all...a good reference book on the subject of retirement.

Thursday, November 1, 2007

Canada Pension Plan - Be Aware of $0 Contribution Years

I just found out something new about CPP, something that is important for anyone considering retirement before age 60.

For each year one retires early, that is prior to age 60, one accumulates a $0 CPP contribution year. Your not working so you don't contribute to the CPP and you qualify for a smaller Canada Pension Plan.

Depending upon your work history this fact can have the effect of reducing the CPP that you will receive. In my case, dumb luck saved me once again, and although I retired a few years ago, at age 60 I will still qualify for just a hair under the maximum amount. However, if I delay taking it past age 60 - the $0 contribution years continue to accumulate and I start to get further away from the maximum I might otherwise have qualified for.

It occurred to me that anyone who plans on retiring really early such as at age 45 should be aware of this fact.

Mainland Trip Photos

I am posting a couple of photos from our recent trip to Vancouver and the Okanogan Valley. One is from Stanley Park in Vancouver on a rainy day...a horse drawn wagon, and the other was taken in Kelowna - showing the fall colours. As I post these photos it occurs to me that the one with the horse drawn wagon might make a great puzzle photo.