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The TSX has broken out of it`s trading range

gwasser

gwasser

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If you like technical investing, you must have noticed that over the last week or so, the TSX has broken out of its trading range and that the Dow is above 11,000. Considering the black mood prevailing just a few months ago - a mood that even affected me - this is just a miracle.






This chart copied from the Globe and Mail shows you how dramatic the break-out was. This is likely the signal that a double dip recession scenario is quickly becoming less likely. September and probably now also October of 2010 are likely to become the best performing months when compared to numerous past years.
 
QUOTE (gwasser @ Oct 8 2010, 01:40 PM) If you like technical investing, you must have noticed that over the last week or so, the TSX has broken out of its trading range and that the Dow is above 11,000. Considering the black mood prevailing just a few months ago - a mood that even affected me - this is just a miracle.






This chart copied from the Globe and Mail shows you how dramatic the break-out was. This is likely the signal that a double dip recession scenario is quickly becoming less likely. September and probably now also October of 2010 are likely to become the best performing months when compared to numerous past years.

Ah yes Godfried, for once a post less than 1.5 pages long...
But now this... graph.
The market is up how`s that for a summary.

Seriously I just watched 60 Minutes and the commentary was on specialized brokerage firms that use `super computers` that make trades in matters of seconds based on mathematical probability and current statiscal analysis. Do you have any idea how that can cause the market to swing?
To much momentum for my tastes, say what you like, people always need a place to live even if they can`t or won`t buy (tenants) and you will never kill the dream of home ownership.
I like Real Estate for its fundamentals and practicality, even tho its not as sexy as the stock market there`s a few people on this forum that seem to have done well with it.
 
I like stocks because our society will always have large companies for individuals to work in.

I like real estate because individuals will always need a place to live in.

I like both stocks and real estate.
 
Time to take some Profit$
 
QUOTE (wealthyboomer @ Oct 11 2010, 01:05 AM) Time to take some Profit$


One of the numerous one-liners by Charlie Munger and Warren Buffett says: "Nobody has lost money by taking profits".

Having said that, a break-out as shown on the chart is, according to technical guys the sign of more upside to come. Not that non-technical analysts have said similar things recently like I did myself on my own blog. But one of the things many investors (including Moi) are learning is that the combination of good corporate fundamentals (as they are now reported on a nearly daily basis), combined with the right market momentum (in this case a `breakout) bodes well for the stockmarket.

The bond and real estate markets tend to be trailing metrics of the economy, while the stock market is often considered to be a leading indicator - it looks forward. So this bodes well for better real estate markets to come tool. Many people look at consumer sentiment and unemployment to predict the economy. However, these are lagging or trailing metrics as well. You could nearly predict that the European crisis of the late spring would make comsumers insecure and wonder-over-wonder, consumer confidence dropped. Wow!

Regarding unemployment, this is somewhat similar. Corporations have improved their balance sheets tremendously (deleveraging and all). They have oodles of cash these days. They however will first try to meet demand by increasing the productivity of the staff they already have, including making them work overtime. Only when they still cannot meet demand (i.e. we are well into an economic recovery) do these corporation start to hire more agressively. Unemployment is a lagging indicator.

To make matters worse, the participate rate (i.e. the number of people that are able and willing to work) fluctuates and unemployment is a the number of people out-of-work for less than 6? months divided by participation. Neither does it include self-employed workers. So it is (as others on this forum also have pointed out) a very suspect number.

I have been waiting most of this year for the `break-out` and now it is here - at least for the TSX, i.e. Canada. Llet`s hope the same will happen in the U.S. then the `chicken little`s will have to eat crow and tell all of us real estate and stock market investors that we were soooo lucky to have had some money in the market. And we say.... yeah, yeah!


Sorry Ed, another long one!
 
QUOTE (gwasser @ Oct 11 2010, 02:36 PM) One of the numerous on-liners by Charlie Munger and Warren Buffett says: "Nobody has lost money by taking profits".

No offense, but I don`t think that either Buffett or Munger has ever said that. I`ve read a lot of their writings and I haven`t read anything around `taking profits`.

I could be wrong of course (I often am), but if you had a source I would be interested in reading it. Thanks in advance!

"Nobody ever lost money taking a profit." - Bernard M. Baruch
 
QUOTE (Rickson9 @ Oct 11 2010, 12:41 PM) No offense, but I don`t think that either Buffett or Munger has ever said that. I`ve read a lot of their writings and I haven`t read anything around `taking profits`.

I could be wrong of course (I often am), but if you had a source I would be interested in reading it. Thanks in advance!

"Nobody ever lost money taking a profit." - Bernard M. Baruch

My Stockbroker gave me that quote (I think). If it was someone else, well he/she must be nearly as smart as Warren and Charlie
 
QUOTE (gwasser @ Oct 11 2010, 02:48 PM) My Stockbroker gave me that quote (I think). If it was someone else, well he/she must be nearly as smart as Warren and Charlie


If it was your stockbroker, you should tell him/her to give you better `quotes`
 
QUOTE (gwasser @ Oct 11 2010, 04:21 PM) He Ed, you must love this short post - a picture though is worth a 1000 words, so maybe still too long?


This is a follow-up on the posting: "The TSX has broken out of it`s trading range" of October 8, 2010.
Now the Dow is about to break-out as well. Hold on to your seat!

Dow%20Break-out.jpg
http://1.bp.blogspot.com/_nYzKeglaLNU/TLYz...w+Break-out.jpg

Not sure what is going on with dating posts. But I posted this 3 minutes ago.
 
QUOTE (wealthyboomer @ Oct 11 2010, 03:05 AM) Time to take some Profit$


Lol, sold my Sketchers stock today for 20% in one month...


Tomorrow is Corning at 10% or so

Gonna hold AMD and Impax for a little longer even though I am approaching 20% in the same month

The rest, well, not worth writing home about...

Mike
 
QUOTE (MikeMcC874 @ Oct 13 2010, 06:33 PM) Lol, sold my Sketchers stock today for 20% in one month...


Tomorrow is Corning at 10% or so

Gonna hold AMD and Impax for a little longer even though I am approaching 20% in the same month

The rest, well, not worth writing home about...

Mike

Mike,

To be honest, most of my stocks are not in `profit taking mode` yet. Many are fairly priced. I would guess we`re only at the beginning of a bull market but that does not mean there won`t be ups and downs. Likely there will be many.

I also think this bodes well for Real Estate investing. The stock market is often a leading indicator while the real estate market lags or trails the economy (same like commodities).
 
What are commodities telling us?
Oct 18th 2010,

THE statistics pages at the back of The Economist have always been a useful guide, because they provide perspective from the daily volatility of the markets. So it is particularly instructive to look this week at our own commodity price index. Higher wheat and metals price have been hitting the headlines, so it is no surprise that the all-items index is up 8.4% on the last month. It is more surprising that it has risen 28.1% over the last year. Furthermore, this is not a boom that is driven by oil. The crude price has only risen 10.2% over the last year.

Now the bullish interpretation of these numbers is that the global economy must be strengthening if demand for raw materials is so strong. But the obvious question is why these numbers are not showing up in the general level of inflation? Indeed Ben Bernanke warned last week that the level of inflation was too low for comfort. Indeed, the core rate is just 0.8%.

Why aren`t higher commodity prices showing up in the CPI? In part, this is down to lags; in part, it`s down to the relatively small weight of commodities within the index. But it may be down to methodology. John Williams at Shadow Government Statistics runs an inflation measure that ignores all the methodological changes that have been made to the CPI since 1980; this has inflation running at 8.5%. A separate measure that ignores changes since 1990 has inflation running at 4.4%.

Some of the biggest changes have resulted from the use of hedonics. This adjusts the price of goods to allow for quality improvements, such as in the power of computing. David Ranson of Wainwright Economics makes the point that, while it is possible to adjust goods prices for improved quality, the process is much harder to achieve for services. In some cases, there may have been declines in service quality (the postal service comes to mind) that are not reflected in the index. This may have imparted a downward pressure on the official indices.

My feeling is that, if inflation were as understated as the Shadow numbers suggest, it would have shown up somewhere else in the numbers (by analogy, if a company is fiddling its profits numbers, the evidence will probably show up in the cashflow figures). No-one is suggesting that the annual wage growth numbers are artificially low. So if prices have been rising much faster than wages, wouldn`t that show up in declining consumer demand?

Nevertheless, I think the developed world should be worried about the commodities surge, not least because of what happened in 2008. There can be little doubt that the surge in oil prices that summer ate into consumer budgets at a difficult time. Higher food prices now are very bad news for those on low incomes, the unemployed and for the elderly living off the meagre income from savings accounts. Essentially, this is a tax rise for the west when the economy is already weak.

Incidentally, John Williams also produces the M3 numbers that occasionally get quoted on this post (the Fed no longer publishes the data). The latest numbers show an annual contraction of 4.9% in September. For Mr Williams, this is unequivocally negative news. He writes that;
The signal for a downturn or intensified downturn is generated when annual growth in real M3 first turns negative in a given cycle; the signal is not dependent on the depth of the downturn or its duration. The current downturn signal was generated in December 2009. The broad economy tends to follow in downturn or intensification roughly six to nine months after the signal, as has appeared to happen in recent months, with what formally should be recognized as a double-dip recession.

Source: Buttonwood - The Economist
 
QUOTE (wealthyboomer @ Oct 20 2010, 11:58 PM) What are commodities telling us?
Oct 18th 2010,

THE statistics pages at the back of The Economist have always been a useful guide, because they provide perspective from the daily volatility of the markets. So it is particularly instructive to look this week at our own commodity price index. Higher wheat and metals price have been hitting the headlines, so it is no
Source: Buttonwood - The Economist

Not quite sure what you wrote and what part is from the economist. But a very good post indeed. There are lots of fundamentals and economic measurements such as M3 that show lots of problems in the world economy and in the U.S. As Don says this is a big `W`.

As an investor you do not know the future not even the Economist does. Thinking of prestigeous magazines, Time Magazine seems to have a track record of declaring an investment class dead just before its turn-around.

The commodities market, in particular gold and silver are in a clear bullmarket and reaching a speculative top. I bought gold - some coins as far back as 1992 for $298 per oz. I still have to sell those. I also bought gold ETFs in modest amounts between $600 and $900) but now that everyone shouts buy gold and sell the U.S. dollar I sold last week the last bit. When it gets the feel that it is expensive (who knows what gold is really worth? There is no cash flow) and when every taxi driver and magazine cover talks about the profits in gold it is time to take your profits and let others skim off the high risk top.

Obviously the U.S. dollar doesn`t look very attractive and yet everybody seems to invest in another bubble waiting to burtst namely the U.S. treasury bills or U.S. denominated bond market. Visionary investors like W. Buffett warn about it, but just like in the high tech bubble nobody listens.

Apart from these obvious bubblicious markets, the rest is very confusing. The earlier posted stock market graphs show that six months or so there maybe better times ahead. I don`t profess to know the future, but I do know that the stock market tends to be a leading indicator.

It is just like drilling an oil well. One can come up with hundreds of reasons why not to drill. But that doesn`t find you oil. If you have a couple of good reasons to drill, just go ahead and you will ultimately find oil (probably for an entirely different reason than the one you started out with). It is like Don`s 5 traffic lights analogy - if you wait for all lights to be green you`re to late (in fact you`re probably near a market top).

So you invest when there are indicators of improvements and you invest in fundamentally good investments. Solid money making corporations like Royal Bank, Microsoft, Johnson and Johnson, Brookfield, CNRL. Or in solid real estate that gives you positive cash flow now and a great ROI for years to come. Of course, you never forget the risks - but you weigh the risks against the potential benefits.

I always keep multiple scenarios for the economic outlook and so your forecast of a double dip recession is one of my scenarios. Another is a slow recovery (most likely) and another is Jeremey Siegel`s longterm stock return of 11% (unleveraged). I don`t count on booms. Booms are in fact something that is maybe not as likely as the end of the world, but it is pretty rare as well.

So thanks for the posting, but I keep on aiming for a better economy by mid 2011. Most fortunes are made during recessions and lost after the boom.
 
QUOTE (gwasser @ Oct 21 2010, 10:43 AM) Most fortunes are made during recessions and lost after the boom.

This is a very wise piece of advice. It`s hard to start making a fortune during a boom, because its hard to do the "buy-low" half of the old adage. Its very much like Don`s "real estate seasons" advice from his book. There is a time to buy and a time to sell. Gold has probably reached its time to sell, but its probably a good time to buy for stocks/real estate (not as good as spring `09 maybe, but still good).

Michael
 
While we`re at it:

Here are a summary of TODAY`s economic measurements taken from Colin Cieszynski at GlobeInvestor:

Major companies that beat the street include: Caterpillar (CAT), McDonalds (MCD), Nokia (NOK), eBay (EBAY), Union Pacific (UNP), UPS (UPS) and Ryder Â.

Economic News

U.S. jobless claims were 452K, slightly better than the 455K expected.

Canada’s leading indicator fell by 0.1%, worse than the 0.2% increase expected.

China made a number of economic announcements last night. Highlights include:

Q3 GDP 9.6% vs street 9.5%

Retail sales 18.8% over year vs street 18.5%

Consumer prices 3.6% over year in line

Industrial production 13.3% over year vs street 14.0%

German preliminary PMI data beat expectations.

Manufacturing 56.1 vs street 54.6

Services 56.6 vs street 54.9

UK retail sales fell by 0.2% last month, a 0.3% increase had been expected.

The Loonie This Morning

USDCAD continues to steadily trend lower thso morning, trading down toward $1.0175 support before bouncing back above $1.0200. A break through $1.0260 appears necessary to clear the previous high and break the current downtrend.

adDisplay();Colin Cieszynski, CFA, CMT, Market Analyst, CMC Markets CanadaAaahhh the economy is soooo baaaad!!!
 
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