Buckets of Data

January 18, 2007

1985 Prechter

Filed under: Uncategorized — bucketsdata @ 8:40 pm

Copyright 1985 Toronto Star Newspapers, Ltd.
The Toronto Star
October 13, 1985, Sunday, SUN
SECTION: BUSINESS TODAY; Pg. B3

LENGTH: 716 words

HEADLINE: Technicians see rally in wings

BYLINE: By Patrick Fellows Toronto Star

BODY:

Raised hemlines are said to go with higher stock markets. Someone who watches these things noted the European fashion-setters bared a bit more leg in 1984 and that there’s no immediate itch to reverse the trend. If that’s true it’s a bullish sign for the markets.

But there are many other up-and-down and to-and-fro indicators that some analysts perceive to have a significant message for market watchers.

What they all add up to is a measurement of public moods, according to Robert Prechter, one of the leading exponents of the Elliott Wave theory. The Elliott pattern is a long uptrend consisting of five upward waves and three downward ones. The end of the line is higher than the beginning because human affairs improve with the passage of time. That at least is what the chartists say.

The factors that influence people to buy or sell stocks are the same that determine tastes in fashions, music, entertainment, literature, cars, politics and archictecture, Prechter said in a recent article in Barron’s, a U.S. business magazine.

Mood measurement is easy in the stock market because of the wealth of statistics available. It’s not so easy in other areas because the changes occur more gradually and no one actually counts the numbers day by day. But if you look at history, you can discern swings in public moods that range from the sombre to the silly.

Stocks are down, ’tis said, when music is mournful, clothing is drab and horror movies dominate the screen. When markets are high, lightheartedness dominates the various modes of expresssion.

But to cut a long story short, Prechter detects a bit of a struggle going on today, reflecting the uncertain investment atmosphere. Fashion designers keep trying to reintroduce the miniskirt, but there’s been no rush to buy, he says.

And while some fashion designers are using “daring” colors, “reactionaries” are trying to bring back the maxiskirt.

Prechter takes the view that bright colors and short hemlines will win out, which would conform to the readings that Elliott Wave adherents are drawing from the charts.

Broker Ken Garfinkel of McLeod Young Weir is an Elliott Wave follower (this breed doesn’t stop at skirt lengths; it’s into such esoteric things as primary waves, Hadady-type cycles and Fibonacci ratios) and he’s high-hemline happy that a “major rally is not only possible within six to eight weeks, but also is very likely.”

New York’s Dow Jones industrial average, he says, could rise to record levels between 1450 and 1700, but there is a possibility that the Dow could first drop to 1275 and a “very low probability” of it falling into the 1100 area.

On the fashions and fads front, incidentally, Barron’s wondered what the market is to make of Bruce Springsteen. Conclusion: He is in concert with the uncertain mood of the times, but the “increasingly upbeat” note to his songs augurs well for Wall Street.

* * *

Chartered bank shares in Canada are widely held. To a lesser extent, so are those of trust companies (there are many clusters of corporate ownership in this business). But there are fewer investment opportunities in one wealth-laden segment of the financial industry – life insurance.

A recent addition to the Toronto Stock Exchange list is Lonvest Corp., whose principal asset is a 97.6 per cent interest in London Life, Canada’s sixth largest life insurance company. Lonvest is 65 per cent owned by Trilon Financial Corp., which itself is about 40 per cent held by Brascan Ltd. and Olympia and York Holdings Corp.

Because they are rich in financial assets, life insurance companies are winners in an environment of stable to lower interest and inflation rates, says analyst Terry Shaunessy of Merrill Lynch Canada.

He credits London Life’s record of high profitability (five-year average return on equity: 16.93 per cent) to capable management and a large marketing force. A $225 million sale of treasury shares last June, he says, gives the company the chance to make an acquisition that could have an early and favorable impact on earnings.

Lonvest has the option to buy Wellington Insurance until March 31, 1987. Wellington’s recent results have been so-so but it’s felt the company could be upgraded to “add an interesting dimension” to Lonvest.

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