POW, Power Corporation of Canada.

It is amazing that this company has not been featured in this blog earlier. It is a very “classy” conglomerate or oligarchy created by the Desmarais family, more specifically by the pater familias, the late Paul Desmarais. He was always very well connected in political circles and was highly regarded by everyone.

     The chart is a textbook model of an EW pattern or cycle that is as yet not complete ;

pow sept 23 2016

The main assets are Great West Life and the Investors Group. Life insurance and wealth management. Both are under siege by the relentless determination of the Fed. to continue with a misplaced policy of ultra low interest rates. Life insurance because it has become next to impossible to invest policy premiums at rates that compensate for the risks taken, and wealth management because we are living in a world where everything is “macro” driven and binary. Given that fundamental backdrop it should not surprise anyone that this stock has been and will remain under pressure for the foreseeable future.

     In EW terms we are no doubt looking at a large A-B-C correction that will erase a good part of the ten or so fabulous years going into 2007. The B wave is exceptionally clear having two equal components a and c and travelling right into the level of a previous b wave within wave A. Wave C started more than a year ago and wave 2 of C is already most likely complete. That means that we are starting wave 3 of C now. It targets about $10 in another year or two which, coincidentally, corresponds quite well with the wave 4 of previous degree ( or alternatively wave 4 of 3 on the way up).

     Large chunks of stock have been sold over the past ten years or so, some of it for estate planning purposes whatever that means. We hope the family continues to do well.  Having said that we also have it from good authority that generally speaking about 70% of the wealth is gone by the time the second generation “handles” it and an even larger 90% once the third generation gets a turn at managing it.

MFC, Manulife

These fellows had read that their were no 10-year periods this century that the markets were actually down (or something like that) so they did what they normally do and that is write insurance only to very quickly find out that death is a highly predictable thing but stock markets are not. This made the company a natural bear product as in when the stock market goes down, they go down even faster courtesy of the relatively large amount of insured variable annuities they took on through their very popular Income Plus product. Not surprisingly (see previous blogs) the stock dropped from $42 to just under $10, or 76% in a relatively short period of time. Since then it regained about 1/2 of that drop to around $26 only to lose about 60% of that gain, despite the fact that the market overall did nothing comparable! So what could be next? Here is the chart;

mfc june 2010

The initial drop from $42 to $9+ is not a single 5-wave move (in the chart only the C-wave is shown) but more likely an A-B-C. Ergo it is possible that the entire correction is over and that we are now in the next bull leg, having completed a first wave up and the correction of that wave. Even in the event that that is incorrect , we could still be in a much larger counter-trend that still requires a C wave up (in pink). It is difficult to count the action since last August as anything but corrective, nor is it at all clear why the stock is down 60% (since August last) whereas the market overall is is down less than 5% today and up about 10% since August. Perhaps the stock is telling us that the second leg down in the stock market is still a ways in the future. A quick look at POW (Power Corp) a different but similar type of company lends credibility to this possibility.

POW june 2010 

Note that this stock has more or less followed the same pattern as Goldman Sachs (GS), Morgan Stanley and a few others.