So we got our 4 and 5 waves and the stock is now down about $25. For the moment that may be enough even though forward looking statements by CAT are hardly inspiring. After a bounce this one will probable proceed to about $55 for starters. Komatsu, the Japanese heavy equipment builder looks even sicker.
Back on July 30, 2013, when this stock was essentially at the same levels as it is today, we unequivocally opined that the drop was not over and that we should first get a 4th wave. We did even if it took longer than we would have expected. This is a large A-B-C in which the C will probable turn out to be a “diagonal”. This is normal for commodity stocks that typically have outsized 5th waves.
Potash is the product of a lot of engineering by the province to create a monopoly (or oligopoly). Not surprisingly then that the Premier got real anxious when there were threats to this business model when BHP showed an interest in expanding production and perhaps even stepping out of the cartel, this despite having advocated an open-for-business approach. Things went wrong because monopolies only work if the monopolist has the luxury to wait forever. As soon as some form of dependency is created the pull towards expanding production becomes irresistible.
You could have sold at $62 right after the bid. You have already lost half of that. If you hold and this EW interpretation turns out to be correct you will loose another 2/3 from here.
4
This is the type of aircraft I learned to fly in during my stay at the Royal Naval Academy. There is a Cessna in the background, it has a mostly horizontal attitude and weighs a lot less. The power to weight ratio is totally different. The Cessna has a Lycoming 4 or 6 cylinder boxer engine with an output of, my guess, about 240 horses. The Harvard has a radial 9 cylinder engine that is rated at 600+ horses. It sits on top of the wings rather than hanging from them making for a less stable and self-correcting handling.
When you start to fly these machines there are a lot of forces that you simple do not see, do not expect and most probable have never heard of just like in the world of business. A novice, having seen the Cessna started by hand might want to do the same with this beast, not a good idea! Some older models actually had a shotgun cartridge starting mechanism. Then once you get it running down the runway and pull up the tail you get a rather hard push to the left that is if you have a clock-wise rotating engine. This is caused, among other things, by gyroscopic precession, propwash and torque causing yaw. All require quick and hard rudder responses to keep the plane straight and stop it from ultimately going into a ground loop. It takes time to get accustomed to all these forces and how to handle them. There is room for two, in line, so the experienced pilot can train the novice. The most critical thing, just as in business, is that you do not go solo un till you know what you are doing. But some simple cannot resist .
So Volkswagen stock traded as low as Euro 102.20, coming from a high of Euro 254.99 that works out to a drop of 59.92%, very close to the 61.8% Fibonacci target. However it does not look like this is over. The bounce, so far at least, looks to be corrective. In addition the drop over the past few days is almost certainly, as we pointed out earlier, a 3d wave, implying that there must still be a 4 and 5 to come.
The company’s CEO is most likely going to lose his job. I cannot judge whether that is deserved or if he is just a scapegoat. No doubt he will be paid well if he leaves. The company has set aside something like 6 to 7 billion Euros to cover the damages. Estimates already go as high as $30 bln. but it will undoubtedly take years before the dust settles.
We show a picture of the ubiquitous and iconic bug. Just a few years ago it was still made in Mexico. A retro model is back in production. This particular model is not what the fuss is all about. It has an air-cooled petrol engine that sits in the trunk. It was developed in the pre-WW2 years by the Nazi regime as an economy or people’s car for the German roads. Together with the ten year newer (1948) Citroen Deux Chevaux (two horses) , it has been the transport of choice for the poorer classes. It has been the “brand” image of Volkswagen for almost 3/4 of a century. It is also used by others to conjure up a sense of economy. That brand is now seriously damaged and it remains to be seen how long it will take to recover.
The cheating was discovered by a small company, Curious Clean-Air Group, that found the gaming more or less by accident. This underlines once again how important sunlight is as an antidote to obfuscation in keeping us on the straight and narrow.
P.S. The CEO has resigned and reportedly had no knowledge of this matter. His pension at about US$ 32 mln. will start a little earlier and allegedly he could receive up to twice his annual salary of about US$ 16 mln. A free car is thrown in for good order. If this is your downside, risk taking does become a little easier.