For GT Blog October 28, 2009

Don Vialoux has removed me from his mailing list in reaction to my CSTA rant last week. I will miss Don's analysis because I have an interest in the TSX listed Tim Hortons Inc. (THI) which would hopefully pass three of Don’s tests – seasonality – fundamentals and the technicals. I am weak on the seasonal and fundamental issues so I will give it a try – some feedback would help

Seasonality

Seasonal affective disorder (SAD) takes its toll on millions of North Americans each year, a condition that leads to depression, anxiety, and chronic fatigue as the winter months ensue. It's one reason why people migrate to sunnier quarters during winter season – or in the alternative remain in Canada and eat more donuts.

Fundamentals

A simple observation of the Hortons’ drive through any morning clearly shows that Canadians love their morning coffee and donuts. When the Hortons’ medium coffee cup is examined for volume it is clearly less than the McDonald's medium cup – at about the same price – this tells me Hortons’ make more money per serving – (personally I like the McDonald’s coffee)

The Technicals

The chart below displays a huge symmetrical triangle which tends to precede a major move – up or down. The lower study is a relative analysis test which is showing recent improvement in THI vs the TSX Composite. Hortons is also a “safe” place to hide when investors seek to leave the riskier assets – watch for the break to the upside

For GT Blog October 25, 2009

I am still done with the CSTA in spite of Don Vialoux’s opinion that my comments were “over the top and not in (my) best interests.”

The reality is the CSTA is the only professional organisation that allows industry professional members to use the resources of their organisation (the CSTA) for the purpose of soliciting, urging, requesting, enticing or otherwise promoting their services to individual investors.

I know because I attended many public CSTA promotions at various financial forums and witnessed CSTA members pimping their services to private investors who were initially curious about the benefits of membership. A classic bait and switch technique.

The foxes ambushing the chickens

Log on to www.advocis.ca - The Financial Advisors Association of Canada - a platform of knowledge, advocacy, community and protection enhancing the professionalism of financial advisors and planners in the best interest of the consumer. Only industry professionals can be members - scan the list of directors – no contact info – with the exception of name@advocis.ca

Scan the list of CSTA directors – the contact info is directed to their personal business enterprise. Some of the directors email reply names are almost egregious – not suitable for a professional organisation - some examples "Wi$eMoney.ca" and “analyzingmarkets.com” – only one director has non predatory contact information - Deborah Shaman, Ottawa Regional Director - ottawa@csta.org

The foxes ambushing the chickens

One would wonder why an industry pro who may - or may not have any accreditation or reputation of being a technical analyst would worm their way onto the list of CSTA directors. There can be only two answers – firstly it is an easy way to add some impressive stuff to their resumes – something like “Billy Bob is past President (or) former director of the Canadian Society of Technical Analysts (CSTA)”.

Secondly why would a director want to post all of their professional contact information on a busy web site?

The foxes ambushing the chickens

This predatory behaviour only adds to the public perception that technical analysis is “voodoo science” or “lunatic fringe” activity. The fact that holding a CMT does little to impress the regulators or the financial services industry as to accreditation is a serious problem for the profession. That is why some CMT’s will also acquire a CFA or CIM to ensure employment opportunity

Now before all you CMTs out there complain - go to Advocis / find an advisor http://www.advocis.ca/content/find-ad-form.aspx and look at the search - Financial designation options CFA, CFP, CH.F.C, CIM, CLU, CMP, R.F.P, REBC, RHU and TEP – no CMT found here

There is more – look at IIROC the list CE Accredited Courses for Cycle 4 (2009-2011) Professional Development - IIROC is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada - the link:
http://cecap.ca/cy4//en/index.php?pageNum_pd_c3_members=0&totalRows_pd_c3_members=66&mod=providers_pdc3&cyc=04&cat_type=PD

No mention of the CSTA here but one can get 4 credits by watching a presentation by Thomson Reuters Markets Academy

Don I know you were – and I quote - “sad about Bill’s comments for a number of reasons: The comments were not specific. More information about his concerns are needed by the CSTA board before it can respond.”

So there you go – specifically yours – Bill Carrigan

For GT Blog October 22, 2009

I am done with the CSTA

The CSTA (Canadian Society of Technical Analysts) claim their mission to be “To promote Technical Analysis at both academic and professional levels, through education and the sharing of knowledge with the community of technical analysts and the investment industry, and through the establishment and fostering of the highest standards.”

When I became a member several years ago I assumed the CSTA to be a professional organization on a par with peers such as Certified Financial Planner Board of Standards, the CFA Institute, the Financial Planners Standards Council and The Financial Advisors Association of Canada (Advocis)

Dig this mission statement from Advocis, “The Financial Advisors Association of Canada provides a platform of knowledge, advocacy, community and protection enhancing the professionalism of financial advisors and planners in the best interest of the consumer.”

The bottom line, the private investor is the direct beneficiary of these professional organizations because they know - in the long run – when investors are well served – their profession is also well served – everybody wins

I have in the past made several public presentations on behalf of the CSTA with a view to encourage industry pros and private investors to incorporate some form of technical analysis into their investment strategy. My last presentation was at the June 2009 CSTA annual meeting in Toronto.

I have always held myself out to be an educator and not salesman looking for new business - Unfortunately over the past few years the CSTA has morphed into a shill or platform for industry salesmen to fish for new clients - the board of directors is littered with salesmen who seek to use the organisation as a platform to promote their own self interests

So here is my challenge to the CSTA - a new rule

No member of the CSTA shall use the organisation to promote their own self-serving agenda - this would forbid industry professionals from using the CSTA platform for interaction with private investors and the business media to promote their own personal business enterprises

Do this and I bet one-third of the directors would resign

Do this and I would reconsider my membership

Bill Carrigan

For GT Blog October 10, 2009

More on investment myths and investment folklore

It has taken me years to discover that low investment costs such as cheap trading commissions and low management fees have little to do with successful investing – those low trading fees can encourage over-trading resulting in you “giving away” good stocks because of the removed commission barrier.

During the 2007-2008 financial melt-down those low MER exchange traded funds collapsed at the same rate as their more expensive mutual fund peers – does saving the extra 1.5% fee make you feel better when your down 35%?

The reality is most of your investment returns are determined by bull & bear markets, proper sector selection and the current dominant theme

The dominant theme will lead a secular up-trend which is a long-term trend that can persist for several years. These long trends are interrupted by the shorter, four-year bull and bear cycle, hence the term “secular trend.’

The first modern secular uptrend was the post-World War II boom of 1949 through 1966. It ended when the Nifty Fifty buy-and-hold asset bubble popped in response to rising oil prices. This introduced the first modern secular downtrend that persisted though the 1970s. The crisis was the 1973 Arab Oil Embargo.

In the early 1980s, the new-economy companies took flight and the great 1982-2000 second modern secular uptrend was on. All investors had to do was buy and hold. Today, the tech-laden Nasdaq composite at the 2,000 level is still ten times the 1982 level of under 200 on the index.

In the late 1990’s savvy investors enjoyed the energy theme which ended with the great crude spike of 2008 - a ten-year run that drove the TSX Energy index from a 1998 low of 50 to a 2008 peak of 470 – up over 800% for a 10-year annualized return of over 25%

Clearly we need a new dominant theme

I will be a presenter at the World MoneyShow Toronto - Metro Toronto Convention Centre Thursday October 22, 2009 from 4:15 pm to 5 pm. I will explain secular trends and seek out the new dominant investment theme.

I invite you to join me - follow this link for more information http://www.moneyshow.com/toms/wBios.asp?id=1155FT1

For GT Blog October 14, 2009

Rickyisms is the term devised by the fans of Trailer Park Boys for Ricky's malapropisms. They are often used due to poor education, extensive drug and alcohol use, and situations where he may not be thinking clearly

Example; "Get two birds stoned at the same time" instead of "kill two birds with the same stone"

I have recently picked up on Dennis Gartman and his Gartmanisms.

Dig these classics, "In bull markets we can only be long or neutral, and in bear markets we can only be short or neutral. That may seem self-evident; it is not, and it is a lesson learned too late by far too many" - so we can be neutral all the time?

"All rules are meant to be broken: The trick is knowing when... and how infrequently this rule may be invoked!" - say what?

"I am currently short the U.S. dollar and long the Canadian dollar" - a double short?

"I am long gold but I do not like gold, sorry gold bugs" - either way he wins.

Gartman also thinks the rising Canadian loonie is great for Canadians - I wonder which Canadians that could be - certainly not Alberta's energy industry and not Ontario's gutted manufactures - sorry I forgot there are some benefits to a strong loonie - vacations to Barbados and the big Chinese importers like Canadian Tire.

For GT Blog October 10, 2009

I often laugh-out-loud (LOL) when a “portfolio manager” is a guest on a business TV show – be it CNBC, BNN or CBC – they talk fundamental stuff like ROE, the balance sheet, the earnings outlook, the dividend coverage, the book value all “going forward” of course. Then they slip and make a technical comment – “there is support at” or “just over the 50-day” they snap out of it and quickly get back to gross margins.

The only reason I got my CIM designation was because I need to know how these guys think. Basically they all get sucked in by the compelling storeys served to them by the companies they “investigate”. It is not about lying – it is about misinformation or the lack of truth. Do the analysts and the auditors ever really know what those assets are worth? I recall Allen-Vanguard Corp at $10 (now worth nothing) being very focused on Iraq and roadside bombs.- winning contracts and there was great optimism that big sales will continue and big earnings to come. Don’t get me started on Timminco Ltd

As a technician I believe the worst – the companies misinform the auditors, the auditors misinform the banks, the banks pass the misinformation to their analysts who misinform the portfolio managers who get on TV and misinform the viewers.

The bottom line is the smart money always wins – the smart money gets in first and gets out first – you and I will never be the first to know – our only defence to follow the money and ignore those compelling stories

I bought some COM DEV (TSX-CDV) last week because of the soaring money flow numbers – CON DEV is manufacturer and distributor of space communications and space science products – I have no idea of the outlook for the company - only the insiders know that - I am just following the money honey

For GT Blog October 5, 2009

In the early 1960's I was an engineering student at Ryerson University in Toronto and I had aspirations of being an acoustical engineer. A local company was introducing a radical new bass enclosure they referred to as an Acoustic Filter

When I asked the designer for the design theory he replied "why would I spend ten minutes to give away ten years of experiments?"

A few years ago the Canadian Society of Technical Analysts asked me to present the theory behind my sector rotation models. When I declined a wise old gentleman took me aside and said, "not to worry - you could explain the secret of eternal life to 1000 attendees and only one would listen!"

I gave the presentation - and the old man was right, my revelations had no cosmic effect

So with that in mind I now share another little secret of market timing using technical analysis: - the small caps lead the large caps. That is why I include the iShares CDN Small Cap ETF (XCS) in my weekly sector rotation tables. When the small caps are higher ranked than the broader iShares CDN S&P/TSX60 ETF (XIU) I get bullish and when the smaller caps rank under the large caps - I get bearish

Our chart below displays the TSX Small Caps over the TSX Large Caps - the bottom indicator is the relative perform which clearly sets out the leadership of the smaller companies - note also the higher March 2009 lows of the smaller caps

The economy sensitive smaller companies lead the way - up and down