Home
.....
Philosophy
.....
F.A.Q. Bonds.
ABC.bonds
Cv. bonds
How to buy CV.
Bonds diff.
Better way
.....
Hedge Program
.....
Bds.Wk.Update
RESEARCH
.....
Cdn$ cv
US$ cv
Gold bonds
Internet
Euro bonds
.....
Cur.Vitae
.....
Comments
Terminology
BOOK
LINKS
New Page 3

           R E S E A R C H     U P D A T E

 

  This page is dedicated to short research.

-----------------------------------------------------------------------------------------------------

 

November 14, 2000


TECHNICAL ANALYSIS OF THE DJIA.

For a change let us have a look at the technical analysis of the Dow Jones Industrial Average (DJIA) from 1920 to 2000.

I have found a very good " monthly " chart of the Dow Jones from 1920 to 2000.

Just "click" on the hot link below. 
Scroll down the page about an inch, you should come across the "said" chart.
Click on the chart to enlarge it.
Print the chart.

http://www.geocities.com/~CyclePro/Charts/SP500/Outlook.htm#now

I personnally like to have a "cold" look at a chart. 
As many people say, it will not tell you where we are going but it is a very good picture of the past. (EXCESS or lack of EXCESS)?


If you want to try to do 
" Technical Analysis " of that chart,

First, draw a line joining the low of 1932 (469) and the bottom of 1982 (985).

Second, draw a parallel line from the high of 1930 (2984) and the high of 1988 (3395).

This represent the trading range of the DJIA from 1920 to 1993.

In 1993, we broke out of the trading range and we shot up to a high of 11750.

If we had stayed within that "73 year trading range",
The trading range of the DJIA, this year ( 2000 ) should be between 1100 and 3500.


For a more recent increase of the Dow Jones Industrial Average (DJIA)

Draw a line from the low of 1982 (985) to the correction of 1984 (4000).

That line, this year (2000) should be at (5000).



" NOBODY KNOWS WHERE THE MARKET IS GOING NOWADAYS " !

The chart seems to indicate to me,

A "double left shoulder", and a "head".

Corrections (if they happen ) could be:

First: Down to the first lower right shoulder which could be at ( 9000 ).

Second: Down to the second lower right shoulder which could be 
               at ( 8000 ).

Third: Down to the "hiccup" at 5500 



LONG CYCLE ANALYSIS:


1) DOWN CYCLE: from 1930 to 1948 = 18 years

2) UP CYCLE: from 1948 to 1966 = 18 years

3) DOWN CYCLE: from 1966 to 1982 = 16 years

4) UP CYCLE: from 1982 to 2000 = 18 years

5) 2000 to ?????


The above is only a "mathematical" and technical analysis.

I do not know about you? 

Personnally, I do not know where the Market is going.
From the above mathematical analysis, 
I am in a very "cautious" mode regarding the Market. 

"QUALITY INVESTMENT " is presently 
the name of the game.


Best regards,


Yvon


=============================================

" WEEKLY AVERAGES " UPDATE

August 28, 2000

Let us try this week, to analyze the numbers in the "Weekly Averages".

As mentioned below, the Convertible bonds that are selected to be included in the averages, are trading below "par", ($1000) and below a 25% conversion premium.

I have chosen those two criteria to give us a "weekly indication" of the average price, yield and yield to maturity of "safer" Convertible bonds.

The period to be analyzed is from April 24, 2000 to August 28, 2000, a period of 116 days.

Column #1, represent the Capital gain of the Convertible bonds which increased from $846 to $890, an increase of 5.20% or 16.37% annualized.

Column #2, represent the yield of the Convertible bonds. As the price of the bonds increased, the yield must decreased. The yield decreased from 5.8% to 5.1%, a decreased of 13.73% or 43.19% annualized

Column #3, represent the yield to maturity of the Convertible bonds. The bond yield to maturity consist of 1) the Yield of the Convertible bond, plus, 2) the Capital gain to maturity. Since the price of the Convertible bonds increased, leaving less Capital gain to maturity. (At maturity, the Convertible bond is recalled at "par" ($1000), the yield to maturity decreased from 7.8% to 6.7%, a decreased of 16.42% or 51.66% annualized.

Column #4, represent the Convertible bond "Conversion premium". The lower the Conversion premium, the more equity-like, the Convertible will be trading. The Conversion premium was steady during the period, starting at 19% and ending at 19%.

Column #5, represent the Convertible bond "Investment premium". The lower the Investment premium, the more debt-like, the Convertible will be trading. The Investment premium increased slightly from 19% to 20% an increased of 5.26% or 16.56% annualized.

Column #6, represent the Convertible bonds that are included in the weekly selection.

LEGEND:

Columns:     

#1=      Bond   price     ($),  
#2=      Bond   yield     (%),  
#3=      Bond   yield   to   maturity     (%),
#4=      Bond   conversion   premium     (%),   
#5=      Bond   investment   premium     (%).
#6=      Number of Convertible bonds composing the weekly average.

 

W E E K L Y    A V E R A G E S:


The numbers are a compilation of the " weekly averages " below.

 

                                  # 1           # 2          # 3         # 4         # 5      #6

                                  ------          ------         ------       ------      ------   ------

August 28, 2000     $890          5.1%      6.7%       19%      20%      18
August 21, 2000     $896          5.9%      7.9%       17%      16%      20
August 14, 2000     $881          5.5%      7.5%       17%      17%      22 
August 7, 2000       $859          5.3%      7.5%       17%      21%      15 
July 24, 2000           $871          5.4%      7.3%       16%      21%      15 
July 17, 2000           $902           4.9%     6.5%       19%      23%      18 
July 10, 2000            $885          5.4%     7.2%        18%     19%       24 
July 3,  2000             $933          4.9%      6.0%         16%     25%    16 
June 19, 2000           $887           5.0%      6.7%        15%      25%    17 
June 12, 2000           $891           5.3%      6.8%        18%      25%     23 
June 6, 2000             $869           5.9%      8.4%        15%       7%      17 
May 22, 2000            $906          5.9%      7.3%        15%      20%     19 
May 15, 2000            $899          5.7%      6.9%       17%       25%     22 
May 8, 2000              $895          5.4%      6.6%        15%      23%      20 
April 24, 2000          $846          5.8%      7.8%        19%     19%        17


====================================================

====================================================

 

ELEVEN YEAR CONVERTIBLE BOND RESEARCH.

April 26, 2000

 

I have just concluded an eleven (11) year research  on Convertible bonds.

From the results of the research of April 17, 2000, we could conclude that Convertible bonds could be bought at "prices" between $871.32 and $1000 as long as the "current yield" is around 6.26%.

 

"WHERE DO WE STAND, IN THE CONVERTIBLE BOND WORLD" ?

At this time, the average American bonds are trading below "par" ($1000) @ $887.13, with a yield of 7.33% and a "yield to maturity" of 10.20%. Remembering that convertible bonds are issued @ $1,000 and redeemed @ $1,000 at maturity, I would say that we are in a buyer’s market so far as convertible bonds are concerned.

One reason why I love convertible bonds is that we are "paid interest while waiting for the market to rise again". Wonderful, "debt" investment while waiting for the market to rise and "equity" investment while the market is rising.  Really, "THE BEST OF BOTH WORLDS".

In the ‘New York Exchange Bonds’ column of The Wall Street Journal dated April 25, 2000, I have found seventeen (17) convertible bonds listed.

The average for those seventeen (17) convertible bonds are:

COUPON = 6.45%,
MATURITY = 2005,
BOND PRICE = $887.13,
CURRENT YIELD = 7.66%.

In Canada, the National Post dated April 26, 2000 gave us a list of thirty-seven (37) convertible bonds.

The average for those thirty-seven (37) convertible bonds are:

COUPON = 6.16%,
MATURITY = 2007,
BOND PRICE = $839.77,
CURRENT YIELD = 7.33%.

As you can see, convertible bonds both in Canada and the USA, gives us about the same results.

In order to invest in a new vehicle, we must have a "yardstick" or an "average value" at which that vehicle is trading to guide us. Remember that convertible bonds are issued @ $1,000, and are redeemed @ $1,000.

In the results above, the average American convertible bonds are trading @ $887.13 or 12.72% below "par". Since the average number of years to maturity is 5 years, the average capital gain per year to maturity is 2.54% (12.72% / 5). If we add this capital gain to the current yield, the answer is the "yield to maturity" ( 7.66% + 2.54%) = 10.20%

The safety of a bond plus a "yield to maturity" of 10.20%, not bad.

Best regards,

(WR-APR,14-01-00)