SHLD, Sears Holdings

Hamilton

We had completely forgotten this stock , here are the two charts, prediction and reality;

SHLD jan 23 2012 mshld apr 2012

The prediction on Jan 23 of this year was that the stock could climb to perhaps $90 when the stock was at $53. It got to $85.90. It would do it fast. It did both for a theoretical gain of 62% and did so rather precisely as shown by the arrow. Also it announced the event well in advance even if we were late to take note. It dropped precisely to where the C=A would have suggested. From here we have no idea where it will go next preferring only to capitalize on the obvious.

Alan Greenspan, the Fed and “Irrational Exuberance”

Hamilton

Greenspan

The Maestro spoke again today, this time to let us know that stocks are dirt cheap and can only go one way given the present p/e ratio and that is up. Just for the record we thought it might be instructive to see when exactly it was that the maestro uttered his most famous words, “irrational exuberance”. It was on the 5th of December 1996, during a speech entitled “The Challenge of Central Banking in a Democratic Society”. On the chart below of the DOW there is a red arrow to show when that was;

greenspan dow

In the previous ten years the Dow had tripled in value. Since then 16 years have gone by and the Dow is at roughly 13000, implying a compound growth rate of 5.1% (which does not include dividends), which is much higher than the long-term growth rate. This begs the question why exuberance then and a buying opportunity now?

The answer, I would suggest, can be found in parts of that speech particularly when the maestro says, “We as Central Bankers need not be concerned if a collapsing financial bubble does not threaten to impair the real economy, its production, jobs and price stability”.It is almost as if these guys , like ostriches, bury their heads in the sands of the world of academia and are completely disconnected from the real world.

XNG Arca Natural Gas index and ECA Encana Corp

Hamilton

We were not aware of its existence , but there happens to be a Arca Natural Gas index, a misnomer to be sure as it does not keep track of the “stuff” and instead purports to track  18 stocks that are supposedly (primarily) in the gas business. Here is the group;

XNG subjects

One could argue that some of these are not primarily involved in gas,  or like Transcanada only involved in the transmission, but we are not looking to change the world. Our objective is to show, that on a relative basis at least, Encana is indeed a hell of a buy. Here are both charts side by side;

xng apr 29 2012eca apr 29 2012

I can only get 3 years on this chart service , but that will do. Notice that the chart on the left goes up from the lower left to the upper right, approximately doubling in the process. The chart on the right (ECA)  does pretty well the opposite losing 1/2 of it’s value. So there is an anomaly to the tune of a factor of 4. Q.E.D.

CHK, Chesapeake is , of course , far more representative of what a  pure (not quite as there are a few nefarious things going on there) play gas producers has been doing. Like ECA it has lost more than half it’s value but it too might be a buy at these levels:

chk