Year: 2011

LTBR (on Nasdaq), Lightbribge

Hamilton

ltbr1 2011

Having spent a few years at the Royal Naval Academy trying to learn how the engine room of a war ship works, I have always retained a soft spot for matters pertaining to engineering, particularly the heavy duty stuff. More recently I was fascinated by the various ways we can utilize nuclear power to generate electricity. Obviously the situation in Japan has focused on this very subject.

Apparently there are workable power station designs that use Thorium as the main fuel. In the US they had one running for 5 years, it was abandoned in 1973 as it did not produce the stuff that goes boom. Just as sex was the father of the VCR, so was the bomb to the advancement of commercial nuclear power. Now that everyone that counts has the bomb, perhaps the world can shift back. China and India are already working on it.

This Thorium fuel has lots of advantages; there is approximately 3X as much of this stuff on earth as uranium, it “burns” more  completely and cleaner, leaves very little waste that decays much and much faster and the process is self controlling. And there is no proliferation problem ! More on this at www.energyfromthorium.com . Chernoble, 3-mile Island and now Japan would not have happened using this technology.  First technologies have a habit of suppressing better technologies that come later, this inertia could be observed clearly with TV. The European TV picture was very much superior to the American one and yet, because of the infrastructure investments already made , the switch over took years. The guys at Lightbridge are working on this and it is the only company that I could find in this space. It is tiny , 75mln cap.

Looking at the chart it is worth noting that this stock once traded at $60 (it used to be called Thorium Power). The last 4 years $5 seems to be bed-rock, the count as shown may simple be wishful thinking, below with a little more detail;

LTBR 2 2011

My guess is that we completed a 1,2 , 1,2 sequence, which , if correct , should lead to take-off soon. Needless to say, there is ,as always, no money back guarantee. You are entirely on your own but please do look into it and remember, “nothing ventured, nothing gained”..

ZEB, Bank of Montreal’s equal weighted bank ETF.

Hamilton

ZEB 2011

This is a relatively new ETF comprised of the 6 banks, equally weighted. This is just the last leg of a much longer retracement from the lows from March 2009. We have already expressed our view that both the Commerce and the Royal should drop soon and this ETF could confirm that. It is a clean 5-waves up from the low, with a very nice triangle in the 4th. As this is either a 5th or C the downturn should retrace the entire move from the lows on this chart and perhaps more.

This ETF recently got a cousin by way of ZWB . It is the same thing except a “covered call writing” programme is layered on top of this. As a consequence the return is running at about 8%, much higher than for ZEB. If I understand it correctly, an almost mechanical writing of calls allows the fund to collect the call premiums on a consistent basis. If you still believe in the efficient market theory you would know that this is not possible, after all the premium is set with regard to the risk and therefore this approach cannot be profitable. On the other hand if you assume that the managers of the ETF selectively chose the right moment to write calls, have a chat with the Mulvihill Pro-Ams guys. They tried it before without success.

AXP, American Express.

Hamilton

In the good old days owning an American Express card was like joining the financial aristocracy , never mind that you were just a nouveau riche or had robbed a bank. You sort of got the green card by invitation. It was one of the first and followed in the footsteps of the Diners Card that had an even greater snob appeal.  Today things are a little different. In Canada you can chose between at least 20 different cards. Depending on your needs, dividends, air-miles, insurance against breakage, buying at Costco there is a card for everyone and you only need a $20,000 income. The fee is $55 a year, there is no PRE SET limit and the interest rate is a mere 30% per annum?, or calculated in an opaque way using some sort of fifo system? Anyway that is still under the official usury rate.

    By the way, the usury rate in the US is under the jurisdiction of the individual states and is typically set at about 5% above the Fed funds rate. However in 1980 as a result of the inflation then,  a federal law called the “Depository Institutions Deregulation and Monetary Control Act” very conveniently exempted most financial institutions from State usury laws. In Canada the matter of usury is dealt with by the federal Criminal Code under section 347, which allows for rates of 60% (yes sixty!) per annum and for juicing them up by additional fees. Why we do not tighten these rules up a little is beyond me, I guess both here and in the US we just love our banks. Dante ,in his inferno, had a somewhat better take on the matter, putting usurers in the 7th circle of hell, out of nine ,  together with blasphemers and sodomites who, back then, were truly bad characters.

   In early 2009 this was a great stock to buy, see charts below;axpfeb10 2 axpfeb10

At the time (see my blog, tag AXP) I recommended a buy at under $10, which it actually reached. If you still own it I would suggest it is a sell now;

axp 2011 2 axp 2011

I have no idea what the correct count is. This could be a b-wave just as easily as a wave one in a new bull market. What is clear is that in both those scenarios a pretty substantial retracement would be due at this time,it was up about 75%. The stock made a high almost a year ago and just cannot work its way higher. RSI and MACD are also non confirming. In the past 30 years there were only 3 years that the stock traded higher than it is today. I would take the four bagger and run.

IBM

Hamilton

IBM mar 2011    ibm mar 2011 2

Back in the early 1990-ties , as a new stock-broker , I got a shareholders list that had a few hundred names on it. I called every single one , within a certain distance , to warn them that their stock would drop rather precipitously. Not a single one would even listen! Today, if anyone remembers, they no doubt praise themselves for being long-term investors. Then the stock did drop by about 60%.

Today, once again, we are at a similar point. I think the stock is a sell and could easily drop $100 or thereabouts. This has nothing to do with this either being a good or bad stock, it is simple the market.   The climb from about $70 to $170 is steeper even than the climb during the tech bubble years. The count itself is a little ambiguous. If you torture things a little you could squeeze in a wave 4 triangle, and start a wedge formation from there. This would allow the stock to climb higher ( to about $190) but not before first dropping to about $130., leaving you ample time to react. A better count would be along the General Electric lines, a large A-B-C wave 4 spread over about 10 years (with a failure as no new low is made) , followed by the recent up-leg as wave 5, or if you shift the tops to the left as wave B. The short term chart certainly supports the idea that this is a wave B.

In short this stock is a sell. I should mention that I never thought this one would trade above $130 so I have been wrong on this one a few times. Also the P/E at around 13 is not particular high!