Monday, December 22, 2008

US Stock Market...Possible Early Warning, December 22, 2008

All three US Market Indexes are showing the beginning of a possible important downturn. The graph is just starting to break below the trendlines that have been in force for the last month. This is properly an early warning. The Canadian Stock Market is not quite there yet but it could easily follow.

Monday, December 15, 2008

DJIA Index Elliott Wave Count December 15, 2008

I am posting this chart for the benefit of those who follow the EWP. If this interpretation turns out to be correct, this US Index will soon see new lows. I see similar patterns in the SP500 and Canadian TSX Composite.

Wednesday, November 26, 2008

My Portfolio..up about 2% from the June 2008 Market Peak

The other day I got into a lively discussion with someone about the stock market. I was unsuccessful in my arguments, however this person challenged me by saying what really counts is your portfolio performance not how you have done on one particular stock.

Since I had not looked at my portfolio as a whole for a few months I updated it to see where I stood.

I used the peak in the Canadian TSX Composite Index in early June 2008 (15,155 points) as a start date for my calculations. Its a date that everyone can relate to. Since that point in time my entire portfolio has increased by 2 percent.

In comparison, the stock market in Canada has dropped by 47 percent over that same time period, falling from 15,000 to 8,000.

Now to be honest, being retired I did not have a huge percentage in the market to begin with so my risk going into the Bear Market was not great compared to someone who was closer to having 100 % investment in the market.

Two percent is not a lot but considering what happened to the market during that time period my guess is that I might place relatively high on a portfolio performance comparison list for any age group.

Time will tell how I make out going forward.

Does anyone else have numbers for comparison?

Friday, November 21, 2008

Canadian Banks Getting Hammered in the Bear, Nov. 21, 2008

The Canadian Financial sector is taking a big hit during this Bear Market and it doesn't look like it is over. So far the TSX Financial Index has corrected back about the last 5 years of increases. A dividend mutual fund, one that includes Canadian Banks has only lost about 4 years of gains. Perhaps the dividends are helping to keep the value higher than the index. Definitely on sale today but my analysis suggests prices will continue lower, at least in the short term. I'm not buying any yet.

Thursday, November 20, 2008

Exchange Traded Bear Fund Update November 20, 2008

I continue to hold my shares in the stock market Bear Funds and see a high probability that they could become more profitable with a further market decline. Here are the current charts for the Canadian TSX 60 Index Bear Fund and the US SP500 Index Bear Fund.
These funds are like holding short positions without the risk of losing more than you paid for them. Also, unlike buying "Puts" they have no time limit working against you.

Saturday, November 15, 2008

Stock Market Comments for November 15, 2008

Its been two weeks since my last post. The markets have continued to churn more or less sideways for the last two weeks. Corrective waves can take a long time to finish.

SP500 and Nasdaq have made new lows in November but not by a lot. DJIA and DJTA have yet to do this. The Canadian TSX has not made new lows yet but it may be close. RIM, one of the big index influences has already done so.

The index volumes continue to remain relatively low or are still decreasing. Continued evidence that this sideways period is only a pause in a continued decent. The fast paced upward and downward moves is continued evidence of a system that continues to be unstable.

Deep Bear Markets (say negative 40 %? or more) often take in the order of 2 - 3 years to bottom so this is all within normal historical experience.

I continue to see some evidence that this Bear Market actually started in 2000 and this is just a continuation. I have stumbled across a number of stocks have already gone below their 2002 lows and some that are approaching that price level. The 2002 to 2008 Bull may have been just a large upward move within a much longer duration Bear (correction). The mainstream media has yet to see this happening.

An interesting stock is Fedex. It has a well defined almost text book set of 5 waves. It now appears to be correcting the Bull market it experienced over the last 30 years or more. It is now into what Elliott called the next higher cycle, a second wave. And, second waves, in the extreme, have the potential to retrace almost all of the first wave. A third wave, one that will go above the 2008 peak, will only occur if Fedex survives the Bear. Some stocks/companies don't.

Thursday, October 30, 2008

Stock Market Comments for October 30, 2008

October has seen higher volumes but index values have trended more or less sideways. This includes the TSX Comp, SP500, DJIA and Nasdaq indexes. The Nasdaq sticks out a little because the volume has an obvious decreasing trend.

There are several possible scenarios for what is going on, but in my experience...all of them forecast lower lows for all indexes. As always, the timing of the lower lows is uncertain and temporary increases can happen before we see the lower lows.

Friday, October 24, 2008

SP500 Index Bear Fund

Here's another Exchange Traded Bear Fund. This one is for the SP500 US Index. It ended today at $39 per share. The large degree of fluctuation is due in part to the times 2 leverage on the fund. If the index drops about 5 % the fund will rise about 10 %. This works both up and down. Its a very convenient way to short the market. It trades just like a stock.

I'm expecting the SP500 index to go lower, perhaps a lot lower, and if true the shares of this fund will rise above the last peak of $45.

Wednesday, October 22, 2008

Agrium Inc. (TSX): Expected to Go Lower

Once in a while I come across an interesting short term chart pattern that turns out to be a good forecast of things to come. Agrium, a Canadian stock, has been falling in price like most everything else. It now has one of those patterns. Agrium recently hit a low of $36 after peaking near $116 back in June 2008. At $36 it was down $80 from the high for a loss of 67 percent so far.

The chart is now saying to me that there is a very high probability that it will go below $36. The obvious pattern here is the decreasing volume pattern as the price moves more or less sideways near $40. One way to conceptualize what is happening here is that the number of buyers who are willing to pay this price, at this point in time, are running out. Once these "bottom guessing buyers" have their fill the price can easily resume it's downward travel.

If I was really gutsy I would short it now but I'm staying with shorting the TSX 60 Index. Its more of a sure thing.

Monday, October 20, 2008

US and Canadian Stock Market Milestones

Many of us are wondering....How deep will the Bear Market go? How bad might it get?

So far we have only seen about a 40 % loss in the major market indexes. The extreme I have seen so far is the Canadian Venture (penny stocks) Index. It was cut by about 70 percent at the low in October.

My review of a handful of Canadian Mutual Funds, mostly TD funds, indicted that fund values have been reduced by 30 % or greater more depending upon the fund. Dividend stock funds have suffered the least so far. Small Cap Funds and Energy Stock Funds reached lows near a 50 % loss in October. All funds have rebounded a little since the October lows.

I have no way to estimate the ultimate Bear Market low at this time but I can see a few scenarios. As the Bear goes deeper and deeper some of the possible "least severe" scenarios are off the possible list.

The Stock Market is governed by rules, but the rules allow it a great deal of flexibility, and at any point in time it has more than one possible future. This makes perfect sense since the people who will buy or sell next week, next month or next year have not yet made those decisions.

I follow both the US and Canadian Stock Markets. They are quite similar. I have used the Elliott Wave Principle to evaluate the markets for many years. This knowledge allows me to periodically "take the pulse" of the market to determine where it might go in the future. It has allowed me to call many important market turns, frequently on the same day they happened. Most recently, it allowed me to see "the possibility" of a big downturn in the market back in late 2007 and I sold all of my stock market related long positions well before the recent large drop in the markets.

So now, like everyone else, I look for signs of a bottom. The best I can offer at this time is a few milestone market levels. From a technical standpoint, the US Markets are ahead of Canada in their decent. They have already passed one important milestone and are approaching the next. If the DJIA breaks below the late 2002 low near 7,100 then a much deeper Bear could occur. In one scenario, it may then be in the process of correcting the entire history of that Index, back down to much lower levels.

The Canadian TSX (Toronto Stock Exchange) still has one more "less severe" option. Here, there are two milestones close to 6,000. If the TSX Comp breaks below 5,700 then it could be a much deeper Bear Market.

We can look for "bottoms" occurring above these milestones, and on occassion, just above them. Its limited information but its better than just guessing, or listening to the news media pundents who attempt to relate current events as the only factor in market moves. The truth is that the current Bear Market is a normal retracement of portions of Bull Markets that have lead up to it. The real question is... where did the Bull Market start, the one being corrected by this Bear Market?

As time goes on, if the market creates patterns I can recognize, and I'm paying close attention rather than out enjoying the outdoors somewhere, I may be able to see a possible bottom forming. Stay tuned for updates.

Wednesday, October 15, 2008

TSX Composite Index Forecast October 15, 2008: I Expect the Bear Market to Go Lower

I just finished my most recent analysis of the TSX Comp Index, as well as the charts for POT (Potash Corp) and RIM (Research in Motion). All three are telling me the same thing. The Bear Market has not ended and the next leg down could be a relatively strong one.

Forecast Details
TSX Comp Index, at 9,625 points, going below 8,851.
POT at $98, going below $85.
RIM at $69, going below $58.

These forecasts are about $10 moves for the stocks and about an 8 % downward move for the index.

As always, the market will do whatever it needs to do and nothing is guaranteed. The timing is uncertain for these events but I'm expecting sooner rather than later. It may have already started downward.

Saturday, October 11, 2008

SP500 Index

The US stock market is currently down by about 43 percent. It is approaching the lowest level of Bear Market that began in 2000. If the index breaks below that level this will be a large red flag. In comparison, the TSX Composite Index in Canada is down by about 40 percent. However, it is not yet close to breaking below low of the 2000 Bear.

Thursday, October 9, 2008

TSX Bear Fund

Not all mutual funds are dropping like stones these days. This Bear Market fund is bought and sold like a stock without any minimum holding period. It is a convenient way to short the market. It has a leverage factor of times 2 so it moves up nicely when the TSX 60 Index drops. The TSX Composite and TSX 60 are very similar charts.

This is the only investment I hold today for the stock market. I just sold the last of my long position mutual funds (TD Energy) yesterday. I took a $500 loss on this last small long position but expect to make it back later when the market is closer to the bottom of this Bear Market. Until then the rest of my investment money is safely put aside in things like money market funds and bond funds. I'm betting on a significantly deeper Bear Market. Time will tell if this is correct.

Friday, October 3, 2008

Apple Computer Forecast Oct. 3, 2008

Apple Computer is currently at $97 per share. There may well be a double top pattern completed here. This particular top pattern is a pretty good one with lower volume under the second top and strong volume on the break below the neckline located near $120. These types of patterns are often very reliable forecasting patterns. This one indicates a target price of $40. It could go lower. I know it's hard to believe being able to forecast a $50 price change. If your skeptical, try putting a note on your calendar to check on the price say 6 months or a year from now.

Wednesday, October 1, 2008

Stock Market Comments October 1, 2008

I'm expecting the TSX Index (at 11715 today) to continue lower before this Bear Market has ended. POT (at $136.5) and RIM (at $71) are two of the key stocks on the index. They both appear to be set up to go at least somewhat lower before the ultimate lows are reached. As usual the timing of the lower lows is uncertain. Wait for it.

The US bailout plan, if approved, will not prevent this. At best it can only delay the inevitable for a short period of time and perhaps not even that.

I was visiting False Creek in Vancouver by boat not long ago and took this photo of the Science Center building.

Friday, July 25, 2008

Is Blogging Writing?

This question appeared on the Retirement: A Full Time Job blog.

She had a writing course teacher question whether blogging was actually "writing".

Putting marks on paper in any fashion including a blog page, a page that one can print out on paper, qualifies as being a form of "art". Writing and drawing are also forms of art.

Perhaps the question should be... Is a blogger an artist, like a conventional writer of articles or books? I think so. The PC and Internet are just new tools for putting marks on paper. More than that they allow instant publishing in a form that is available around the world.

Perhaps blogging goes one step further than conventional writing. The reader can immediately comment on their reaction to the post, or as I just did, go to his/her own blog and continue the discussion.

Tuesday, June 3, 2008

Deer Fawn Photo

The other day I was driving home along a gravel road after a few hours of paddling a small lake in my kayak. I came across a couple of very young fawns on the road. They were so small that at first I first thought they were small dogs or something. They were the youngest I have ever seen in the wild.

Thursday, May 15, 2008

Talk To Your Enemies

The current news reports about the US Presidential Election has got me thinking about an important concept…what motivates people.

One side, the Obama group, thinks it is better to talk to your enemies. The other side, Bush supporters, believe it is better never to talk to your enemies except to try and scare them with threats. They believe that enemies can be scared into going away, or just eliminated with bombs and bullets. Perhaps there is some truth in both positions. The correct answer may be "it depends".

If you are dealing with someone who can be scared and bombed into submission, or… at least scared into leaving you alone - then the "make them afraid or dead" approach works fine. On the other hand, if you are dealing with someone who would rather die than give up…the "make them afraid or dead" approach will not work.

Suicide bombers (SB) are an extreme example. Japan tried this during the Second World War but made the mistake of organizing their SBs into a formal military. The US defeated Japan with more resources and more killing power and a strong resolve.

The more recent SBs, the ones who blend into the general population, and surprise you many times - over and over again - are quite a different problem. It requires I think…a different approach. The WW II Japan solution may not work here.

One should take this same approach in everyday one-on-one life.

Monday, April 14, 2008

Pension Income Splitting...Sweet!

Every year I force myself to do my own income tax and I spend the $50 or so to buy QuickTax to try and ease the pain of it all.

This year, without pension splitting our total refund would have been ~$5,000. I know I could reduce this refund but I have my emotional/fussy logic reasons for keeping it that high. But...back to the point-- with the new Canadian 2007 pension income splitting allowance our total refund comes to about $6,000. An increase of just over $1,000.

The second point I want to make is that 2007 QuickTax doesn't optimise the transfer amount, it just inserts the maximum 50% transfer. The summary graph (a nice feature) looked lob sided to me so I used the old trial and error, bracket approach method to search for an optimum transfer amount.

I tried changing the T1032 transfer amount in increments of several thousand dollars from a low of $2,000 to the max of ~$18,000 and found that I increased our total refund from ~$800 up to just over $1,000. Our optimum transfer amount was in the vicinity of $16,000.

When I saw that there was indeed an optimum amount somewhere...that is, the total refund went up as the transfer amount increased, then it started to go down as the amount increased beyond a certain transfer amount, I went back and used smaller increments of several hundred dollars to bracket and zero in on the optimum amount. It turns out there was a range of about $1,000 that provided the same total maximum refund.

Saturday, April 12, 2008

Stock Market Status April 12, 2008

The Canadian and US stock markets have been moving sideways since January. This week may have seen an important downturn point but there is no way to know for certain. The minimum requirements appear to be in place for an important turn but as always this is only one possible future.

The US government, with the best of intentions, continues to throw "easy credit" at various firms trying to shore things up. Those actions may in part be helping to keep the markets in a sideways holding pattern for a time. Eventually even the US government may run out of cash/credit to do this type of thing.

This bear market may only be in the early stages. It takes time for all that bullish enthusiasm to get worn away. In addition, those trying to "guess the bottom" and make a quick buck also need to be taught a lesson. They will stop guessing after losing enough money.

Tuesday, April 1, 2008

TSX Composite Index Forecast April 1, 2008

Here's a short-term forecast for the TSX Comp Index. I called the last couple of turns correctly and thought I would stick my neck out a little this am to see if I can do it again. I see a possibility of the next downturn occurring at a point no higher than ~13,450. I can often call the turns correctly but the extend of the move that follows and the duration of the move are much less certain.

Monday, March 17, 2008

Canadian Banks

I took another look at a few of the Canadian Banks stocks today and it is now clear that at least some of them now have the potential to go a great deal lower. A bear low of $10 to $15 is possible for stocks like the Bank of Montreal (BMO.TO)and the Canadian Bank of Commerce (CM.TO).

Were probably only now getting to the point where many stock holders are starting to pay attention and getting worried about what other unknown things have been going on. The US government is already in the panic mode...reducing interest rates on the weekend.

Saturday, March 15, 2008

Dow Index Breaks Below 25 Year Trendline

Not a good sign.

Friday, March 14, 2008

This is why its called a Bear Market

"Triggering a sell-off throughout the financial sector, Bear shares slumped 47% to $30, their biggest one-day drop in at least two decades. "

Just another milestone on the way down.

Canadian Banks are being effected as well.

Monday, March 10, 2008

Margin Calls

First it was the subprime mortgages in the US. Now the latest news is margin calls in the US. Margin calls occur when people borrow money and put up stock as security for the loan. I could do this through my broker account but I never have to date. It sounds like the Bank of Montreal is being hit by the margin call problem. I wonder about the other Canadian Banks.

The thing is-when a margin call is made people have to come up with more cash or sell some of their holdings. This can translate into a wide stock market sell off taking the good companies down with the bad. And, I guess...if it is large enough - the sales reduce the values of the equities even more, the ones being used for collateral and this in turn can lead to additional more margin calls...and the cycle feeds on it self.

I wonder...could the reduction in equity values lead to margin calls or something equivalent for those doing the Smith Manoeuvre?

I see the sell off today has brought some Canadian Banks to the brink of making new lows...TD, RY and BNS.

Saturday, March 8, 2008

Canadian Bank Stocks...continued weakness?

Bank of Montreal stock continues to be in free fall with a decline of about $30 per share to date. This is 40% price reduction from the peak of $73 down to $43. The TD Bank, Royal Bank and Bank of Nova Scotia are all very close to breaking below previous January lows.

Friday, March 7, 2008

Canada and US Stock Market Comparison

In case you were wondering...the Canadian stock market continues to keep pretty much in step with the US stock market.

Today the Nasdaq broke below the low made in January. This is an important technical move.

The other two US indexes, S&P 500 and the DJIA look like they will do the same in the near future. The TSX Composite index has farther to fall before this happens but it is not much of a stretch to envision it will also eventually fall below its January low.

Sunday, March 2, 2008

Extreme Bear Market Warning?

I have noticed something important in a few US Stocks.

The million dollar questions with respect to any large Bear Market is where will it end? How low will it go? Is it over yet?

Three US stocks are coming close to dropping below their lowest lows during the Bear Market that began in 2000 and ended about 5 years ago. There may be others.

Home Depot (HD) and Dell Inc. (DELL) and Citigroup (C) have all experienced large price decreases. The interesting thing at this time is that these stocks are all getting very close to breaking below their lows of 5 years ago. Citigroup is almost there....perhaps Citigroup is the canary in the coal mine.

From a technical standpoint this would be very important. If they do drop below their lows of 5 years ago (2002) this may be an early signal that the indexes will do the same.

In could be an early warning that this Bear Market has the potential to retrace all of the US index gains of the last 5 years.

Click on the links above to see the charts.

Monday, February 25, 2008

Potash Corp...$188 million dollar mistake?

I have been studying the chart for POT.TO (Potash Corp) lately looking for confirmation about what may lie ahead for the TSX Composite Index. Potash Corp is definitely one of the stocks contributing to the January rally on the TSX. The wedge shaped rally is more pronounced with POT than it is for the Comp Index.

Today was not one of the larger volume trading days, but about $188 million changed hands today for shares of this one stock. $500 million per day is closer to the longer term average daily trading.

I see a high probability that this stock is ready for a good price tumble. If true, all those buyers today will soon be surprised and disappointed.

A few facts.

$160 per share and a P/E ratio of 48. This P/E level is way too high and not sustainable.
Price has accelerated from $75 to $160 over the last 8 months (0.67 years).
A doubling of the price in 8 months. This is in excess of a 100 % increase per year.
The larger and larger price oscillations in recent months are an indication of a nervous and uncertain market. It is a sign of financial instability.
The chart looks more like a chart for a 5o cent penny gold mining stock than a blue chip stock.

It looks like a text-book example of classic irrational exuberance.

It will be interesting to follow this one.

Thursday, February 21, 2008

TSX Fooled Me Again

The rally that I suspected was over is still in play and it rose above the 13,570 mark. This has eliminated one of the possible options to solve the current puzzle.

I still see 2 or 3 scenarios for a continued bear market. One is a triangle shaped rally. So far it looks like this is a possibility. If so, this rally still has some more headroom with a couple of more small legs to go. If it turns out to be a triangle... then once the triangle is complete the drop following it will be downward and relatively fast.

Tuesday, February 19, 2008

TSX Composite Index Forecast Feb. 19, 2008

I was wrong about the TSX Composite Index rally having ended. This made me ask...What am I missing here? I took another look and noticed a detail in the chart that I had overlooked earlier. It always makes sense in hindsight and the market never breaks its own rules.

I now see another possible outcome. The ultimate limit to the current rally could be the low of 13,570 made near January 7th. As always there are other possibilities but this one appears the most likely maximum value before the index makes the next important turn and continutes its zig zag decent toward lower levels. I'm still expecting a final bear market low somewhere below 12,000.

The rally is still rising far it has hit an intraday high of 13,452. With this short-term scenario it can only rise a maximum of another 118 points (13,570-13,452).

Monday, February 18, 2008

Apple Computer still on a downhill run

I took a look at Apple Computer today. It is currently at ~$125 per share with a P/E ratio of 27. The price run up from about $10 to $212 over the last three years was an excellent example of "building castles in the air". I guess there was still some life left in the mania.

The evidence points to a high probability it will be going down to $100 or lower. It could go significantly lower than $100 before this bear has run its course.

Still waiting to see if that TSX Comp rally has finished or not. I'm guessing it has but time will tell.

Thursday, January 31, 2008

TSX Index January 31, 2008

The S&P/TSX Composite Index is still moving more or less sideways just below the peak of 13, 171 (13,158 error corrected). The Bears and Bulls are evenly matched so far and it still could go either way in the short term. Similar patterns exist for RIM and POT as well as for the US S&P 500 Index.

Friday, January 25, 2008

TSX Going Lower now?

I'm seeing a number of signs that the market rally that started on Tuesday near 12,000 may have run its course. This is a very short-term prediction.

The TSX Comp index hit a high this am of 13,171. Now its always possible that a lot of new money may enter the market and keep this rally going for a while yet. The market always has incredible flexibility.

If this was the complete end of the relatively small bear rally and not just the first leg of a longer term rally...then the market is free to resume its fall below the low of 12,000. So far - this rally has taken on the shape of an upward pointing wedge. This shape is a common pattern that forms during bear markets. This pattern is more pronounced in RIM where the required decreasing volume pattern matches very well.

To put all of this in perspective...I firmly believe that the TSX Index will eventually bottom and then recover all of the lost ground, eventually making new all time highs.

Thursday, January 24, 2008

Early Warning Signs

Anyone who follows the stock markets is currently wondering... What will the stock market do over the next few months or years? Fortunately, there is a relatively simple way to get a feel for what is likely to come next. This method does not require one to guess anything about profits, dividends, interest rates, government intervention and so on.

Here's how it works.

Over long periods of time stock markets move in trends. After a number of years the long-term trend changes. A simple way to detect if the trend may be changing is to use a simple trend line. For a Bull Market the trend line moves upward. It is a line connecting all of the major low points. For a Bear Market the trend line moves downward. For the Bear Market it is a line connecting all the highs. The trend line works for market indexes and for many stocks.

We can think of the trend line and the market action relative to the line as a "trip wire" or early warning system. The market cannot change from one long-term trend to the opposite long-term trend without breaking through the trend line that has been "in force" for a number of years. This is a simple undeniable fact. This analysis is scientific because it can be repeated and verified by others. For longer time periods there is always only one long-term trend line. Any market history chart will show this to be true.

At this point in time we wonder.. Are the stock markets just in a relatively short-lived and shallow correction, or have the stock markets begun a much deeper longer-term Bear Market? Before the next large Bear Market can begin, the Bull Market trend must be penetrated on the downside. The long-term trend must start to change.

These two graphs show that the US and Canadian Stock Markets have both broken below the long-term Bull Market trend lines. These trend lines have not been violated for the last 5 years. In general, longer time period trend lines are more important that shorter time period trend lines.

At the very least, the recent breaks through the 5 year Bull Market trend lines should be viewed as an early warning of a larger (deeper) Bear Market starting. If so, it is only in the early stages.

Wednesday, January 23, 2008

Chasing The Bear

I've decided to put a little more money behind my forecasts for a deeper Bear.

I have sold out the balance of my mutual funds that are stock market based. I'm completely out of the TSX Comp Index Fund and the Royal Bank Dividend Fund. I can't recall for sure why I kept the remaining units of these funds this long. It was probably part oversight and part concern for selling mutual funds within the 3 month minimum holding period. I took a loss of a few thousand but if I'm right I will easily make this back later when I buy back in at significantly lower levels. A good trader has to be cold-blooded about these things.

I am also going one step further. I have also placed an order for some Horizons BetaPro Bear Fund (HXD) that shorts the TSX 60 Index. I'm currently trying to guess the extent of the current short-term bear rally so I can get it at a little better price. Its at $23.50 and I'm offering $22.85. I know I'm unlikely to call the exact bottom but its fun to try. Its a little confusing with the index going up and HXD going down.

HXD trades just like a stock and its great being able to short the TSX market with such convenience. I think the last time I went short was when the airlines were in a nosedive after 9/11 and I made a little money on Air Canada's tailspin.

I can never predict whether the TSX's next move will be due to energy, mining or financials or some other stocks. By focusing on the entire market I don't have to try and guess the details. The truth is I don't care. I view the market as just a possible way of making a profit.

Changing the topic a little...I took this picture of a Buffalo/Bison bull yesterday. It was a nice change of pace. I have to say that I refrained from touching him. He must have weighed 2000 pounds.

Monday, January 21, 2008

Bear Market Protection

I have been searching for a Bear Market Mutual Fund. One of interest is the S&P/TSX 60 market inverse fund sold by Horizons BetaPro Funds. It appears to ba available as a normal mutual fund with a $5,000 minimum purchase and also as an Exchange Traded Fund with no minimum limit. The graph is for the ETF version.
It is a relatively new fund that appears to be equivalent to shorting the entire index. It moves opposite to the index. It is a means of offsetting the Bear Market. It has two times leverage so a little goes a long way. $5,000 in this fund will offset $10,000 of long positions in stocks or mutual funds exposed to a down-trending market.
Caution...the leverage works both ways. Call the direction wrong and you lose twice as much.

Bear Market Fear

The TSX Composite Index broke below the 12, 500 level today to a low near 12,120. I was expecting this break below the 12,500 level. It is just more data to support my forecast. Down about 17 % from the last high near 14,647.

A quote from this am..."Tebbutt said the recent market reaction is composed of "irrational" behaviour motivated by fear and uncertainty."

Is it really irrational to sell at this time? I disagree. Even a person with the foggiest notion of how the markets work will likely realize that many people will rush to the exits under the current conditions. Even the US government is "afraid" and "uncertain".

I sold out in November and I’m perfectly comfortable but I have the advantage of being able to see these things coming. When I sold it was a rational decision. I was not afraid. I plan to buy back in closer to the bottom.

I continue to think this Bear Market has a long way to go before it ends.

I see that TD Bank has broken below the $64 level. That was a significant technical sign of continued weakness.

A couple of other high flyers to watch... RIM and POT These two Canadian stocks look like they have entered a downhill snowboard race event. RIM is leading now but that can change overnight.

Monday, January 14, 2008

US Stock Market Looking Very Weak

If you have been following this blog you are already aware that I follow the market and periodically make forecasts.

Well...the US stock market in general is looking very weak from a technical perspective. I won't bore you with the details but the entire US Stock Market looks like it could drop, at least another 20 % or more. The Dow Jones Transportation Average is leading the pack downward at this time. I expect to see a further decline in the DJIA, DJTA, SP500 and Nasdaq.

I'm not sure how much of the US drop will spill over into Canada but the risk is very high that it could. My best guess is that the TSX Composite will also go significantly lower. After the TSX Composite run up from about 6,000 to 14,000 since 2002, a retracement in the order of 50 %, back to ~10,000 would not be unusual. It would be well within normal market action.

Wednesday, January 9, 2008

2007 Cash Flow

Well the numbers are in for 2007. We have a lot of sub categories so I will only note the larger ones.

Our total spending for the year was about $31,000. This includes all expenses except those that were scheduled to be paid from earmarked pre-retirement savings. Savings paid about $18,000 for a newer used car and $3,000 on boating.

Income Tax ~$2,600
Municipal Property Tax ~$1,800
Groceries ~$7,000
Restaurants ~ $2,900
Entertainment ~ $2,300 including car trip expenses
Home Maintenance ~$2,000
Auto Gas ~$1,500
BC Medical $1,152
Auto Insurance $1,300
Clothing/Hair $1,200
Savings for our next car replacement $2,000 (pay cash every 5-10 years)
BC Hydro ~$900

We own our home and we don't have a lot of vacation expenses other than boating. The total for the year is well within my pre-retirement estimates.

Tuesday, January 8, 2008

TD Bank follow-up January 8, 2008

TD bank stock is close to an interesting milestone. If it breaks below the $64 dollar level this makes a much lower price drop more likely (not guaranteed).

I have been following Canadian Banks for some time. Bank of Commerce and Bank of Montreal have both seen a large price drop so far. My best guess is that we will see similar drops in all Canadian Banks. They have all had an excellent Bull Market run for many years and a large price drop (Bear) would still qualify as normal market action.

Today's news includes a "rumour" that TD may be exposed to the US Subprime Real Estate problem. This would not surprise me as TD has been working on getting a foothold in the US Banking industry. This rumour could lead to a break below the $64 level which in turn could lead to much lower prices to come.

Friday, January 4, 2008

Net Worth Debate....include the house?

I noticed some blog posts lately about net worth and retirement. Its also that time of year when we receive our property assessment notices. It can lead to questioning if a home went up $30,000 this year should that increase be included in a net worth statement?

The short answer is yes.

If push comes to shove "you can always eat your house". By that I mean you can always sell your house and rent a place to live. This will provide excess cash to live on if you need it.

On the other hand...if you stay in your house when retired and don't take out a mortgage on it to get access to some cash won't provide any income. But home ownership means you won't have to pay rent each month and this will reduce the need for retirement income.

I know some people who have sold more expensive homes in Vancouver, bought less expensive newer ones on Vancouber Island. They use the extra cash for other things in retirement like boating.

Owning a home gives one more options when retirement comes around.