Today’s intraday high of 6389.99 is just a few hundred points shy of a perfect 61.8% retracement of the down wave with a range of 4966 to 7600. Waves C and A are almost vector equal. So the answer to the question, “are we there yet?” is a resounding maybe.
For comparison purposes we have added the S&P below;
For the big picture, see the previous blog from December 22, 2011, about a month ago. It hit the anticipated target with less than 1/2 dollar to spare and then started on it’s merry way down. These are not insignificant moves as they are in the order of 10%. The next one should be much larger. All the analysts babbling on BNN are not in the least concerned about this stock. Todays news and action was just a blip on the way to financial nirvana. The greatest accolades came from the dividend chasers who commented that the return is now better than yesterday. On that basis all things bad are good so why worry. That this stock traded once upon a time not too long at $9 after an event that was then considered a major betrayal (they cut the dividend after repeatedly promising not to) seems to be entirely forgotten. Our view; stay out!
We were a little early and tentative to start but when this stock hit $12.80 we did recognize it as a major low. As mentioned then , the stock is probable worth more than $20 even in a break-up situation and the targets of $10 or lower seemed a bit ludicrous. Had you bought at $14, you are now up 20%+. I suspect that it will go further but usually not in a straight line. At $20 (about 50% up) I would be out in any case.
Three weeks ago we suggested that this stock was a sell. No analyst agreed , of course, as is clear from the above insert. The reason was primarily economic having to do with the enormous capital investments to keep these things going. But there was also a dormant concern about the seaworthiness of these machines, this one (and two sister ships) is about twice the size of the Titanic that sank exactly 100 years ago. This time, as then, both ships met their end as a result of human error, a bit of bravado perhaps?
Concerning the stock, after the initial dip of 20% or so the stock could do just fine regardless of what has happened. The company earns 2.5 bln a year and uninsured damages from this event are not expected to be more than a few hundred million. But that is not necessarily all of it. A look at a similar event concerning the Andrea Doria suggests these events can be industry changing. In 1956 this very luxurious trans-Atlantic liner sank after a collision with the Stockholm in a fogbank of New York. That essentially ended the trans Atlantic passenger business which was ceded to the airlines. Ships like the United States, Ile de France etc. etc quickly became obsolete. Perhaps the cruise industry will survive this without any problem but we suspect that touring the islands on a 130,000 ton floating hotel that is inherently unstable is not the way of the future.