Three banks ? GS , DB , RY.

August 28, 2011August 28, 2011 Hamilton

Goldman Sachs, Deutsche Bank and our own Royal Bank. Of course it is debatable whether or not GS is in fact a bank or just a bank of convenience, but all three are very prominent in their respective communities and are both very visible and influential . The RY is actually the largest at a cap. of 72 bln and pays the best dividend yield at 4.41% and has a p/e of 13+. For GS the numbers are 57 bln. , 1.25% yield and a p/e of 8.5 . Deutsche is the smallest at 37 bln, pays 2.76% and trades at a p/e of 10.2. Here are the three charts.

Royal Bank Goldman Sachs Deutsche Bank

From 2002 to 2007 they all roughly triple in value. Then they all crash right back to that starting point or a little below. Then we get the rebound with RY having the most powerful advance of all , even making new highs. GS and DB start dropping immediately but the Royal actually makes a second high (does not show properly on this chart, but the second high is $0.30 or so higher). Then all three start breaking down. Together they look like this.

Santander, STD, the Spanish big boy I have left out, it gets too messy otherwise, but it fits in between Deutsche and Goldman. There are some conclusions that might be drawn from these charts. First it does not matter much what regulations were put on the books or taken off. It clearly helps to have political clout something presumable GS excels in but the others are not that far behind , I am sure. So the moral of the story is they are all going lower, given the pattern, and that suggests that RY is royally overvalued.

GMP , GMP Capital Inc.

August 28, 2011 Hamilton

This is another one of Canada’s independent investment-dealer boutiques. It has about 400 employees and a market cap. of about 1/2 bln. These companies are extremely inventive and creative but there have been times in the past that that just was not enough. Without the big bank umbrellas and their nickel and diming one’s existence can become quite binary in very short order. Here are the charts;

As always, click on the chart to enlarge. From a high around $38 in 2006 it started its fall rapidly and then moved sideways for a while only to join the rest of the world by diving to about $4, for a total of about 90%. The rebound from that point followed the , more or less, standard pattern except that GMP was significantly weaker! It did not make to the , roughly, $20/21 level that one might have hoped for. This is normally a warning that things could deteriorate faster than usual. Two EW counts are possible but both are immediately bearish. The stock has now dropped below the B level of the rise from the Dec. 2008 lows and appears to have gapped recently. If the gap is in the middle, as is often the case, $2 is not out of the question, and that would be a loss of again almost 90%.

GM

August 28, 2011 Hamilton

Ford looked like it might be a buy, so perhaps GM is as well. From the euphoria of the IPO, about $40 this stock has lost nearly 50%. More importantly it did it in a recognizable Elliott wave pattern, the ubiquitous A-B-C correction or 5-3-5 move. It did it a little faster than the arrow would suggest so there is still a serious possibility that this count is not complete and that we are only in wave 4 of C which would then target about $19 as shown by the (vector equal) red arrow. This also jives better with the market as a whole. In conclusion, this is a buy sometime in the next month between $21/$19 for a bounce of about $10 perhaps. Do use a stop!

I understand the stock is already trading at less than the cash on hand, an interesting but otherwise pretty meaningless metric.

NYA , New York SE Index.

August 26, 2011August 26, 2011 Hamilton

We have used the NY stock exchange from time to time as it seems to provide a better “picture” than either the Dow or the S&P. Back in April we got real vocal about the market as this is what it looked like at the time;

We marked the ideal target with a little green circle and “green spot”. The reason, obviously, is that the NYA appeared to be tracing out an absolutely perfect B-wave A-B-C where the A and C were going to be vector equal and the B a text-book example of an expanding triangle. Today it looks like this;

and in more detail;

This would be essentially the same for the DOW, S&P, Russell 2000 and many others, not however for the Nasdaq that made its top in July and not April. But regardless of the detailed count it is absolutely normal for the price to retrace to the level of the B-wave on the way up, in this case 6400.

For comparison purposes I have added the TSX and the DAX below. You can click on the charts to enlarge them and move them around. Notice that there is no point in diversification, if there ever was. All three, the NYA, TSX and DAX (and many others) have all done the same thing. They more or less doubled in a nice B-wave and now they will all drop back to the level of the B in that A-B-C. (The Dax has a contracting triangle instead of an expanding one, just take the lowest point).

Just as the Dax was a little ahead on the way up, it is now ahead on the way down. Remember that B-waves are corrective, that is to say they are counter-trend therefore it follows that in the not too distant future we should be trading below the March 2009 lows. The drop down shown, once complete, is just wave 1 !

Error ; in the chart r=A=B should read r=A=C

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