Calculator
Yhoo Combo The first two rows below define a Continuous Interest Equation for Market Price (3rd row).

This converts chart information to an equivalent bond.

Trend
, The fourth and fifth rows convert dividends to another Continuous Interest Equation.

This and re-investment come from earnings and should grow at the same rate as price.

Yield
The sixth and seventh rows give a third Continuous Interest Equation.

Earnings should grow at the same rate as price and dividends.

& P/E
Calculator:
StkCht

? The straight line converts investment into a "bond".

However, the R.O.R. is not guaranteed.

See volatility.

ROR:
%/yr.
   Calculator

? The Green line is the center of the trend.

Its price is used for P/E and Yield.

Trend:
$.
   

? ($Top-$Bott) relative to Green line.

More than double typical losses vs. cost.

Width: %
  Example; R.O.R. 5%/yr and Volatility 20% top to bottom.

Green line is 2yr of return below top and above bott.

yrs Return
      If Green line is above entry, that is an advantage (gain).

Purchasing above green line may result in a drop later.

                ...
?   This also calculates "bond" growth rate.

Its %/yr value has to be added to yield to get total return.

ROR:
%/yr.
  

?   A bond's Principal does not grow, but it yields interest.

The payout for a stock is a dividend, and its value grows too.

  Yield: %/yr.
This is the percentage of earnings for shareholder dividends.

It is also the fraction of the Earnings Yield below.

  Payout: %

? For steady P/E, this should be the same as chart %/yr above.

(For Yahoo charts; StockCharts include dividends.)

ROR:
%/yr.
   

?   If the P/E "Multiple" expands, the price might soon crash.

However, low interest rates permit expension.

P/E:
? The yield above is paid in cash to shareholders.

This reduces earnings available to grow the business.

Earnings Yield
:%/yr.

 
Vertical bars at bottom separate years of EPS, dividends or income.

Long box is a calculator for adding quarters and averaging longer term.
{ A Least squares fit through wild jumps using the Continuous Interest Equation.

This is STRICTLY LOCAL to your browser - nobody else.

Calculated
} Trend Line for Select a year, and you can enter data there or enter web data in the long box and insert "+" signs.

It will calculate a result and put it in the selected box.
Scattered Data
. Oil Patch: try future income until you get slope to zero.

That gives a sixteen-year average to budget for.
Slope is
{-60.2}%/yr: Below is the list of dividends or EPS that this button puts back. ...
..0 20..1 20..2 20..3
20..4 20..5 20..6 20..7
20..8 20..9 20..A 20..B
20..C 20..D 20..E
A calculator to compact one of the boxes above.

Enter data scraped off the Web.

Work Area
for Select one year above for calculator's results.

You can average several years and copy them into other boxes.
Fitting a Trend to
HINT: Negative numbers crash the logarithmic Continuous Interest Equation. Average together years to avoid that. Data. This button inserts a new year.

Caution: empty cells won't store properly.

...


_demo0
Click for running a line through more than two points.

They will be separated by "|" characters.

Full LSF=>
Calculator
A 4-function calculator for compacting pairs of Web data.

(Click image to left for a whole trend.)
Work Area
for Select two sets of dividends or earnings that average out well. They should be separated in time. Pairs of Dividend & HINT: Negative numbers crash this Equation. Lump together quarters to avoid that.



EPS Data
:


[result: ]  

 
 
 
 
 
 
 
 
The Basics - Doubling Time
supplies the Continuous Interest formula A = Pert. Later it will appear on charts as straight lines, but for now let's think of it as just another calculator. Plugging in You will pick this off graphs as a slope measurment.

r(ate
), t estimated years until retirement. (ime) and P For example your RRSP room on tax returns. (rincipal) below puts stocks and bonds on the same footing for when you retire:


DOUBLING-TIME EXERCISE: E.g. ten k invested in an ETF called HAC.TO and just held returning 7%/yr would grow to 20k in ten years.

  • Try rates like %/yr with

  • retirement in years after

  • setting aside $k now.

    Result A = $k.

  • The top box ETF is for overall Interest or dividend per year, plus any growth.

    Express it as % of amount invested.

    return
    of an investment. Try an Measured by this program as the %/yr slope of a StockCharts chart.

    "interest rate"
    of Bonds have zero growth rate, yielding only interest.

    Stocks' growth acts like interest, returning more than purchase price.

    10%/yr
    ; available right now from banks.

    Try an aggressive rate of 20%/yr; available for now from an ETF holding Amazon, Google etc.

    Here is the pattern you will find:
    Divide the %/yr growth rate into 70 and you get doubling time.

    Caveat: the above numbers do not take into account the effect of inflation:
    .
    Expected Central banks try for 2%/yr in consumer prices by adjusting interest rates.

    inflation
    : %/yr. Purchasing Power: $k.
     
     
     
     
     
     
     
     
    The Basics - This part of calculator converts the red dotted line below to an equivalent bond.

    The first three fill-in boxes calculate only the bond's growth rate.

    Rate of Return
    From Charts

    Row 1: ends and length of logarithmic line touching EMA twice; gives chart R.O.R.
        Show Result
    Here is the HAC.TO Chosen because it pays no dividend. The upward slope is your total return.

    chart
    , with a red dotted line drawn along the EMA200 after you hit annotate:

    The cursor has been moved to Put it on the little yellow dot.

    the left
    and we There is a little gray bar at the bottom, ending in 17.13.

    measure
    $17.13 for the price five years ago. After entering that, we moved the cursor to the The chart is five years wide. Enter that in the third box.

    Press Submit to convert the three measurements to a slope in %/yr.

    right
    and measured $24.69. The calculator returns about 7%/yr as This ETF is a parking spot for cash because its management parks its capital in bonds once the 7%/yr gain has been secured.

    expected
    .

    Removing Up and Down Price Jumps:

    The red dotted line has been moved to JUST TOUCH the red EMA200 line in two places (eliminating Until the next line - here we bridge over two wiggles to pick the slope out of it

    volatility)
    . Any straight line on the chart behaves like a bond yielding interest and the dotted line follows the price growth of the ETF, ignoring noise.


    CAVEAT:
    StockScores.Com Rate of Return has two parts; cash paid to you and growth of the ETF.

    includes
    Click on the link to the left.

    The dividend should not be entered here - it can be seen as an upward slope.

    dividends
    .
    Usually, use Yahoo Charts which Click on the link to the left.

    The Yahoo chart slopes down - dividend is not mixed in.

    exclude them.

    more detail


    Why it works: The charts we use are logarithmic. That converts an up-swooping price to a straight line. (The Y-axis values are closer together near the top). The slope of the line then translates into %/yr in the calculator.

    Secondly, the price fluctuates in what are called Elliott Waves. The EMA200 suppresses these waves if they are shorter than a year, and bridging over two of the remaining wobbles will pick off the slope over a period of about four years.

    The EMA responds well to slope measurements, but the the SMA200 that brokers commonly use tangles itself up attempting to measure %/yr. Avoid it.

     
     
     
     
     
     
     
     
    The Basics: The next three fill-in boxes collect data to locate the price of the equivalent bond.

    This also includes the information needed to judge entry times.

    Measuring Chart
    Volatility

    Row 2: Top and bottom of range at a single date:
    Show Result

    The math is obscure, but the resulting procedure is something we can easily DO. Open an independent tab with a chart and we will measure its Elliott waves.

    The same formula for Rate Of Return can give the amount of Up - And - Down variation within one year; just measure In other words define volatility as a statistical range rather than as standard deviation.

    top-to-bot
    tom at any The two measurements also give the green mid-line.

    The date allows this to give an entry criterion.

    date
    :
    At the end of Row 2, the program calculates the mid-point, along the green line, and projects it to $36.46 for the current date (trend). The volatility is shown in Row 3, first as a percentage relative to the green line and then as the number of years it takes the green line to climb from bottom to top of the trend.

    When buying, this gives us something to go on. The most one can gain by waiting is half of the volatility, or 0.9 yr.

    Why it works: Elliott Waves are a result of decisions by investors and their brokers. Decisions are guided visually, so we draw in the two blue lines visually too, defining a "statistical range" rather than something like Beta.

    Percentages are referred to something and the program assigns the Geometric Mean of top and bottom at the date of measurement to be 100%; the green line. Thus it is only weakly related to purchase price unless you buy at the green mid-line.

     
     
       
     
     
    The Basics - Notice that the purpose is to avoid paying too much, not trading.

    To do this, enter the price in the third line.

    Choosing
    an At or below the green line below.

    Entry Point

    Row 3: Type in market price and make the decision:
    ($Top-$Bott) relative to Green line.

    More than double typical losses vs. cost.

    Width: %
      Example; R.O.R. 5%/yr and Volatility 20% top to bottom.

    Green line is 2yr of return below top and above bott.

    yrs Return
       
    Show Result
    Above the middle of volatility, store new $$$ in bonds or HAC.
    Buy and Hold after corrections. (Do not trade after that.)

    Here is the chart for the Low Beta ETF, with
    Here is how to enter data for the The chart above. The user measures and enters seven things. Low Beta ETF and test for predicted entry advantage for buying below the green trend line:



    If the entry price Taken from the chart above. The blue lines show that price was too high.was higher then the green line this will be shown:







    The above "fill in the boxes" approach implements the "
    deeper dive" approach below; addressing market price. The following "basics" sections address two fundamentals; a company's earning power and the return of earnings to shareholders as dividends.





    The Basics - Checking Earnings are tedious to determine for an ETF - this may have to suffice.

    Dividends are the "proof of the pudding" and this will assess them for you.

    Dividend Growth
    .

    This Calculator Treats Stocks as Bonds. Dividends are the "coupons".

    To the right, two bottom rows are added to the three ZLB.TO market price rows. From two annual reports or from websites which supply data for several years.

    Dividend
    - date pairs define a another straight line on a log plot There is no need to see it - just have the calculator solve its Continuous Interest equation.

    (invisible).


    The The yellow patch is GROWTH.

    Yield is very different!

    6.1%/yr
    slope is from the
    same equation as for prices. Note that the price entries have been re-done to exclude dividends. The growth rate (NOT dividend yeld) now matches the growth rate of price:


    CAUTION - Stockcharts vs. Yahoo Charts:

    To the right is the HPR.TO Preferred Share ETF, rendered (before inflation hit) first by the Yahoo site and then by the StockCharts site.

    The Stockcharts.com website mixes dividend yield and price growth Advantage: it shows the true R.O.R. to an investor.

    together.
    The Yahoo site provides only Market Price info, which is better for this Plugging Stockscores charts' values into the boxes mixes lines 1, 2, 3, 4 and 5.

    calculator.


    The downward slope of the Yahoo chart is about -2%/yr and the StockCharts one slopes upward at about 2%/yr. The dividend yield is about 4%/yr, but the investor only gets half because the holding is depreciating at 2%/yr, as shown by the Yahoo chart to the left.

    of that.
    Everything makes sense; providing we understand what the charts include.


    These are more than inputs; they Using standard calculator notation.

    For more than one year, see the link below.

    calculate too
    . Thus the third box above returns 21-14=7yrs.

    If dividend data is posted on web sites quarterly, with a clutter of dates, spaces etc., you can copy a year's worth and paste it into their upper right They will expand to allow editing.

    boxes
    . If you highlight the clutter and replace it with "+" characters, The minus sign works only between numbers.

    To make a number negative, subtract it from zero.

    standard calculator
    notation will convert that into a simple sum of four quarters. If you want to average two years, appending ")/2" with an opening bracket will do that.






    Understanding Dividend Growth and Yield:
    (Growth of Return is %/yr increase relative to market price assuming you sell.

    The %/yr increase in dividends paid should track that.

    Market Value
    vs. The yield is %/yr dividend relative to market price.

    However the growth rate of market value is also a return.

    Cash Payout)

    These two types of return appear above; the yellow Some bonds only pay interest on maturity. For stocks that is time of sale.

    Market Price Growth is a direct analogy

    6%/yr
    slope (top line above), and the pink Some bonds pay interest at regular intervals rather than accumulating it.

    Cash dividends are a direct analogy.

    2.8%/yr
    dividend Yield. Notice that the dividend should grow if the price increases or Yield will drop.

    Thus Dividend growth should equal Market Price growth.

    Their SUM
    is the return to the investor.

    Rows two and three define a Row three also defines variability of the yield if you buy or sell high or low.

    reference
    Market Price for the pink dividend yield in the bottom row. Note that this price is NOT the current price, but a running average along a trend line.

    In the bottom rows, two Date - Dividend pairs define a another trend line on a log plot There is no need to see it - just have the calculator solve its Continuous Interest equation.

    (invisible).
    The calculator extracts two things, the pink This cash payout goes to the owners and comes out of Earnings per Share (EPS).

    dividend yield
    in %/yr and a The above result (6%/yr each) confirms that dividend payout is tracking along with Market Price.

    second
    yellow Part of EPS is used instead to buy machinery, advertise etc. etc.

    That is what makes Market Price grow.

    growth rate
    , 6.1%/yr. (more)

    Ideally, price and dividend should track each other, as they do in this ETF. However, when markets are very volatile, "Buy and Hold" investors can judge their future return from the dividend data.





    The Basics - Checking Notice that the purpose is to avoid paying too much, not trading.

    To do this, enter the price in the third line.

    P vs. E
    Growth Rates.

    (See
    Understanding P/E Ratios below.)

    Below the Dividend section, Rows 6 and 7 provide two more date-earnings pairs, defining a third trend line using the same equation as for the dividend and Market Price calculations above. The slope of the earnings equation was measured at 6.9%/yr, which again shows this to be a trustworthy holding; P/E will stay pretty constant.

    The entries for price volatility determine $35 to be the center of the Market Price trend. The calculator divides that measurement by the equation's EPS value to give the P/E ratio of 13.5. Also shown is its inverse, 7.4%/yr, which is about double the dividend yield and thus Payout is about 50%.

    Why it works: Our trick of monitoring of dividends and making sure they grow at the same rate as price ensures that we avoid speculative "growth" stocks.

    After price wanders up too much many brokers will stop recommending it because no longer is that good. (See page.) That means that the average price (green line) is partially controlled by dividends.

    Ditto for earnings growth , because other brokers will focus on the Price/Earnings, also called a "Multiple".

    Earnings/Price is called the "Earnings Yield".

    ratio
    and stop recommending it when earnings are low (they notice P/E rise too much). That also holds the green line down.

    If the inverse of P/E is lower than the dividend yield that will also raise red flags because will be more than 100% of earnings.

    Thus if a stock has really good P/E and dividend characteristics but is above the green line, we can park our $$$ (maybe in HAC.TO) for a while and wait. (See below.)

    When it doesn't work The rise of price is actually driven by expectation of future earnings. That means there are many brokers who recommend based upon the "story" of a company rather than past performance. If R.O.R. measured for stock price is very high, we should let investors with deeper pockets have the gain and take the risk.


    A better fit for scattered data can often be obtained by collecting several points from annual reports and then adding projected EPS from analyst reports on trading websites. To accomodate that (and scattered dividends) there is a fill - in - the - blanks calculator that loads, edits and replaces data. See below.






    Understanding Price/Earnings Ratios:
    Current market price for $1 of last year's earnings.

    Advantage; this is a known quantity.

    (Trailing
    , Current market price for $1 of analysts' projected earnings.

    Advantage; the market responds to buyers' expectations.

    Forward
    and Market price for $1 of current earnings projected by this calculator.

    Advantage; this seeks to assess intrinsic value.

    Trend-based)

    The "P/E Ratio" would be around 15 if $1 buys Cents per year. P/E has oddball units.

    The inverse, E/P, would be 7%/yr Earnings Yield.

    7 cents
    of earnings. However, it Market price tends to go in waves of greed and fear.

    Greed drives P/E up and fear then causes a crash.

    goes higher
    before volatility hits the market. It also Usually meaning market price falls.

    The media will often run commentaries saying it has "crashed".

    shrinks
    when Central Banks raise To control inflation.

    Capital rotates out of stocks into bonds and we perceive it as a "loss".

    interest rates.


    "Earnings Yield" vs. P/E:

    Instead this calculator lets the user monitor these two factors by rendering Earnings/yr as percent of market price.

    N.B.: growth rate is a percentage of earnings, not price.

    %/yr earnings
    and dividends as Along three trend lines.

    E/P %/yr instead of P/E and filtered price vs. divs.

    bond yields
    Net result; "apples to apples" comparisons and suppression Trends are determined with statistical regression.

    Analyst earnings projections can be included.

    of volatility
    .

    In addition to three matching Equal price growth vs. earnings growth gives steady P/E.

    Growing dividends should also match these rates.

    growth rates
    , the Dividend yield divided by earnings yield.

    Same as dividend divided by earnings.

    payout ratio
    should compete with High interest rates will lead to investors selling stocks to buy bonds.

    Prices fall until earnings yield competes favorably with bond yield.

    bond interest
    in the market and leave some earnings This implies we invest only in established companies.

    Venture Capital would not be constrained this way.

    to invest
    in the business.





    Obtaining Intrinsic Value means the business is able to grow while paying part of earnings out as dividends.

    The "slope" is the equivalent to bond interest, but is held within the company.

    Slopes from
    Annual Reports:

    Rows 4 to 7; type in Dates, Payouts and Earnings:

    The straight line converts investment into a "bond".

    However, the R.O.R. is not guaranteed.

    See volatility.

    ROR:
    %/yr.

      It may be Okay to just type in two typical values.

    Otherwise, the trend-line below can fit many points to a line.

    2
    nd Data Pt:  
    The straight line converts investment into a "bond".

    However, the R.O.R. is not guaranteed.

    See volatility.

    Show Result
    These pairs of rows serve the same purpose as the top row; they define two points on a straight line and the number of years between them. However, the time is entered as two calendar dates. The result is the slope of the line, expressed as %/yr growth rate of dividends. (The pair of rows for earnings work the same way.)
    1. To keep it simple, the four user inputs can run the Continuous Interest Equation through only two points.
    2. Advanced users can use "|" characters to separate annual values and do a Least Squares Fit through many samples.
    These are more than inputs; they Using standard calculator notation.

    For more than one year, see the link below.

    calculate too
    . In addition there are two large work areas where one can enter data that has been copied from the web. Then by changing clutter to plus-signs etc. one can reduce it to a total or average etc. and then copy it into the boxes above.


    Reducing Many Points to a Pair:

    One can enter X and Y points for dividends, earnings, book value etc. in a spreadsheet, prepare a Ln(Y) column, and then run a straight (logarithmic) line among the points using the SLOPE() function. Multiplying by 100% will then yield an average R.O.R. for whatever metric you obtain.

    The sample spreadsheet provided will recalculate two data pairs to enter in the boxes above. (They are on a line that is fitted through scattered data.) Be aware, though, that if X is expressed as dates, you need to divide by 365Days/Yr.

    Entering Many Points in Upper Dividend/EPS Boxes:

    The algorithm in the spreadsheet has also been applied below to Select incomes for years you expect to be similar to future ones.

    navigate a path
    through Try various scenarios to get an idea of what the future might hold.

    erratic earnings
    of someone working in Here supply and demand take nasty jumps and there may be no pension plans.

    resource industries
    . These entries may also be used instead of a spreadsheet to reduce Enter web data for several quarters in the work area.

    Over-write the clutter with plus signs etc. to calculate a year's worth to insert between "|" characters.

    dividends or earnings
    to The first and second date boxes select the values to include.

    a trend
    (separated by "|" characters) to enter in the upper Dividend/EPS box of the main calculator.


    Using The Trend Line Template:

    The boxes to the right can also be used instead of a spreadsheet, and the data will be assembled into an array with vertical bar characters separating the numbers for the various years. The bottom row to the right is the array.

    Step 1 is to press "Fetch Divs" or "...EPS" to load Line 4 or Line 6 into the boxes to the right.

    Step 2 is to enter dividend or EPS data from Annual Reports etc. into the boxes for the years they are available. Note that you can click on a year and enter an expression into the Work Area below and it will be reduced to a single number in the box.      now functions as a limit to the number of years which are included in the Least Squares Fit.

    Step 3 is to press "Put It Back", which will put the array into Line 4 or 6 and calculate R.O.R. etc. When the Engine of this calculator detects a vertical bar, it switches into a Least Squares Fit mode and runs a straight line through the data. Below the template is a second Work Area to make the Engine do other calculations.


     
     
     
     
     
     
     
     
    Dealing With Market Risk Factors:


    This calculator is for Investors are PARTNERS, who have Capital to put to work.

    Their entrepreneur partners bring Land and Labor to the mix.

    investors
    who want to select The "list of ten" should return almost 10%/yr which you will find means they almost double every seven years. proven steady returns for retirement. Specifically TRADERS. These people think more like predators than partners.

    Others
    may want to try Discount Brokerages have become popular; encouraging people to think this way.

    They trade against their clients instead of charging full commissions.

    "beating the
    market". However, "get rich fast" The reason is that you will be trading against robots, which are very successful at defeating ordinary people. fails more often than it succeeds.

    Resist the This is a human weakness, exploited by advertising - the word "trade" is in brokerage names. Urge to Keep Trading Stocks!

    On the Fear of loss is another human weakness, exploited by banks.

    They offer low - interest GICs, sending the rest of earnings to their shareholders.

    other hand
    , safe bank Savings accounts are basically for money collection, not investing.

    Banks re-invest it at higher rates.
    "savings" accounts
    don't Indolence is also a human weakness, letting $$$ sit so the bank shareholders can profit from it. keep up with Usually 2%/yr, but COVID has sent it higher and we don't know how long. inflation, and can still let you retire into poverty. Our
    list of ten ETFs is intended to find the Between the weakness for letting things sit and the weakness for trading against other people and robots. high ground between both possibilities and the calculator can extract these Rates of Return:

    There are earnings and they are growing.

    The risky period is over.

    Earnings,
    The price grows at the same rate; thus P/E stays constant.

    No surprises!

    Market
    and Earnings support both cash payout and steady growth of the dividend.

    Very good!

    Dividend

    Rate of The three yellow R.O.R.s appear in our calculator in lines one, four and six. return in %/yr arrives in two ways; The real growth is in the ability to generate earnings, not so much in Market Price. growth ( The %/yr growth rates should be roughly the same if a stock is "mature". yellow R.O.R.s) and in a cash If there is no dividend yet, a stock is too risky for starting out.

    dividend
    ().
    Row one of our calculator will merge these two types of The total %/yr R.O.R. is tricky. It is %/yr paid out plus %/yr improvement in earnings per share (EPS). return if we use Stockscores.com charts. The above middle number becomes total %/yr return.

    If a stock has settled into balanced growth of earnings, dividends and price, pays a cash dividend that is comparable to bond interest and less than earnings, that investment qualifies as "conservative". Our calculator can check that using only the Compound Interest Equation.

    This list of ten ETFs has been selected on that basis (summer of 2021):
    Cdn Financials <=Yahoo
    Cdn Grocers <= <=Yahoo
    Cdn Real Estate <=Yahoo
    Cdn Utilty Cos <=Yahoo
    Rotator (GIC-like) <=Yahoo chart
    Cdn Low Beta <=Yahoo
    US Hi-div Cov. Call <=Yahoo
    US Tech Covered Call <=Yahoo
    NASDAQ (Hedged) <=Yahoo
    Energy Exposure<=XIU.TO chart index




    This is just P/E turned upside down and expressed as a %/yr number.

    It will be split between paying back the investors and investing in the business.

    Earnings Yield,
    This is a second %/yr number, a "benchmark" for bond returns.

    Bonds compete with stocks for $$$ that could go into busineses.

    Interest Rates,
    & This forces Central Banks to reduce the money supply.

    That means increasing interest rates, which favors bonds.

    Inflation,

    The inverse of P/E is %/yr, and
    Graham's weighing machine adjusts it to about double competing return from bonds. We now As of 2024, inflation has slowed.

    Interest rates are still high, though.

    (late 2022)
    are seeing inflation, and Central Banks are increasing interest rates to suppress demand.

    With bank rate under 2%, Earnings Yield had Stock prices kept rising, so E/P fell.

    Bonds were less attractive.

    responded
    by dipping under 4%/yr. The inverse of 4% is P/E of 25, which was seen in the S&P500. Low Interest => High Prices; and the Stock prices stayed flat in 2023.

    They are slowly edging up in 2024.

    flip side
    is

    P/E (and the market) drops when inflation threatens.

    To the right, there is a Stagflation period in the center of the charts. What happened then (the 1970s) was that the price of stocks stayed flat in constant dollar terms, but the upper chart shows that their value to a retiree buying groceries with them dropped badly.

    It This has caused chatter in the media.

    In early 2024 inflation is not falling fast.

    seems reasonable
    to expect something like that In early 2024 there is still inflation.

    It is dropping but not near the target, 2%/yr.

    again,
    but rather than going to cash out of fear, we have selected ETFs that show steady growth in See Power Corp below.

    The hope is that its return exceeds inflation.

    strong dividends
    . That is "intrinsic value", which will Stocks are weak when bonds are strong.

    Underlying earnings may NOT be weak though.

    accumulate
    and experience a price jump when/if Stocks' strong earnings will get noticed.

    That will pull money out of bonds.

    inflation ends
    and interest rates drop:

    Strong earnings can battle inflation and win.


    To the left are healthy measurements for Power Corp. The yellow Logarithmic slope if plotted. Interest rate in the equation. growth rates for Dividends agree with chart , but earnings are strong enough to fund re-investment in lieu of debt.

    The shareholder Add cash dividend plus yellow growth rates. return is about 9%/yr.
    Earnings Yield (1/12.0) is high enough to beat 8% worth of inflation.

    The Earnings Yield matches return to shareholders quite well and is split about evenly between dividends (47%) and Use part of EPS rather than borrowing to buy machinery.

    Note that good growth results.

    re-investment.
    TD Bank, below, is another such example:



    Safety: Assessing P/E is your (upside down) % earnings per invested dollar.

    Yield is the % earnings allocated to "payout".

    P/E and
    Yield:

    Are We
    Getting Value for What We Are Paying?
    (Aside: the List of Ten ETFs is sorted for safety with return.)


    To the right are Rows 1 through 7 in the calculator, with the user inputs removed. TD Bank is a An average EPS growth rate for components of an ETF approximates that for the whole ETF.

    component
    of many ETFs, and these measurements let us judge whether it is Note: for ETFs, earnings data are often missing.

    Look for Dividend growth rate to agree with Yahoo charts.

    delivering value
    to its owners.

    In Not shown.

    Note that Yahoo does not include dividends.

    line 1
    , the Yahoo Charts' slope is close to earnings growth , so P/E is stable, and Dividends grow somewhat faster. See below.

    Note the symbol and the green Market Price trend line in line two. The calculator refers all percentages to this mid-line, , not purchase price. At the bottom the program draws two more lines through four user date/$$$ pairs to get two The yellow 9.6%/yr and 6.8%/yr values.

    more slopes
    .

    There is a direct payment ofof per year as cash. That cash comes out of earnings, which is found to be (Those numbers come from the three trend lines, and differ from usual quotes.) of $. (9.1 is the inverse of P/E shown and it is healthy.)

    The Dividend Row indicates that Management has recently increased the Payout but it remains about 1/2. That is also healthy; TD Bank is well managed and regulated.
    To the right is the same data for Saputo, which previously had a too-fast growth rate. Its earnings have dropped when COVID hit and only partly recovered. The market has adjusted downward too, but P/E is still high; Earnings Yield is under 4%/yr, but management has limited Payout to about 50%. Do not be surprised if the price growth rate drops further until P/E is around 15.

    Unlike typical dividend payout, market greed is not well managed - watch for Multiple Expansion. That occurs when the Price and Earnings growth rates ( and ) do not match, as happened to the Saputo stock in 2017:

    Early Warning: the R.O.R. of the price exceeds that of Earnings!
    The drop below to $30 after buying at $45 is a loss of one third. OWCH.

    Things take a while to get corrected when the price R.O.R. out-runs Earnings. The reason is that buyers falsely think that past growth indicates continued growth. For the chart below, this mentality has led to the price rising at 14%/yr (slope of the two parallel lines) while the earnings grow at 2/3 of that rate. Eventually enough people caught on that the growth stopped and people started dumping it.



    To the right the slope is re-calculated and compared to that of earnings and dividends. There is a third straight line to the $30 point, and its slope has dropped to 9%/yr, which is a fair match to the growth rate of earnings and dividends. This calculator specifically checks for that.

    Allowing fear and greed to contol our decisions, unfortunately, is normal behavior; stocks alternate between
    too fast and too slow. Worse yet, there are recurring sixteen-year periods when volatility gets extreme:




    This is a common synonym for the P/E Ratio.

    This calculator favors a %/yr form instead.

    Multiple
    The price tends to rise faster than earnings when optimism grips the market.

    P/E rises as a result, reducing its %/yr equivalent.

    Expansion
    and The American companies had been paying higher taxes than "offshore" ones.

    Trump et. al. reduced them, triggering a buying spree.

    Trump Bump,
    :

    The P/E "multiple" tends
    to wander near 20 (in USA; Canada 15).
    It expands and contracts during The optimism phase of an Elliott Long Wave that repeats about every 32 years.

    Secular Bulls
    The pessimism phase of the Long Wave.

    There tend to be two bad crashes and no net gain for several years.

    and Bears respectively.
    .

    To the right the most recent 30 years are broken into '90s Secular Bull market, the Y2K crash (Dot Com and Housing Bubbles) and now the beginning of a new Secular Bull, interrupted by COVID.

    Note that the blue Price line periodically rises above the orange Earnings line, indicating The earnings yield drops below 5%/yr, which may not cover re-investment in businesses.

    expansions
    .

    The 1990s ended with over-buying driving P/E up to about 30, and the two crises in the middle panel caused the P and E lines to cross wildly.

    The third panel shows the effect of the Trump Administration cutting corporate taxes on profits. The indicators Note the sharp drop in the orange earnings line at the end..

    before 2021
    were suggesting that markets were not expecting runaway inflation, but COVID has upset things. The price line jumped because people could not spend. Support payments ended up in stocks.

    ***
    .



    P/E Historically P/E has expeanded for 16 years and then gone unstable for 16 years.

    This alternation is quite reliable for defensive investing.

    Roller Coaster
    : More "
    Roaring Twenties"?
    Understanding how to use the List of Ten defensively.

    (Be in the market now: P/E is rising. Rotate a bit in 2032.)

    A Secular Bull Market is a period like the Roaring 1920s, where people just buy whatever is in fashion. Price rises faster than The slope in %/yr of price, should not run away from the value of the company, but it does.

    Net Asset
    (Book) Value rises. Price to Earnings ratio P/E High P/E ratio eventually triggers a price collapse.

    This calculator's R.O.R. indicators provide advance warning.

    climbs too
    fast during Secular Bulls, and needs to be reduced.

    A Secular Bear Market followed; the Crash of 29 reduced P/E fast and will be described in the next section. The result was the Dirty 30s, the second period to the right.

    16 Year Alternations (Phases of a "long wave" phenomenon.)

    Note the second trace; gold is a safe haven During Secular Bear periods fear of price drops causes price drops.

    Gold, bonds and dividends become a refuge.

    when P/E is high
    and When the ratio corrects, refuge - buying drives gold up.

    The orange middle trace goes the opposite direction.

    drops again
    when people believe that P/E has corrected. A post-war Secular Bull market followed the Dirty Thirties and the ratio shown rose with the DOW. People buy gold Fear of inflation and fear of market correction.

    Then greed enters and people buy gold to get rich.

    when fearful
    , which was yet to happen.

    Another Bear Market (center) followed; the stagflation period, when gold prices and the dollar inflated and forced Central Banks to let both economic activity and the stock market to stagnate. Relief and the 90s boom came eventually.

    During the third Bear Market, starting at Y2K to the right, gold rose (driving down the trace above) until the DOW had climbed above its previous two peaks. Then sentiment changed, gold price dived, and the present Secular Bull got underway around 2016.

    Typically a Secular Bear includes two Black Swans, shattering the gentler volatility that charts exhibit during Secular Bulls. Three Secular Bears appear above.



    Ordinarliy the next one would not be due until 2032.

    However uncontrolled inflation might force one on us.

    Secular Bears
    : Adjusting For Secular Bulls rise too fast, leaving earnings behind.

    Secular Bears correct P/E, often wildly.

    Substance

    The Voting and Weighing Machines: "The father of value investing, Benjamin Graham, explained this concept by saying that in the short run, the market is like a voting machine--tallying up which firms are popular and unpopular. But in the long run, the market is like a weighing machine--assessing the substance of a company. The message is clear: What matters in the long run is a company's actual underlying business performance and not the investing public's fickle opinion about its prospects in the short run."

    The Big Four forces in the market:
    1. Inflation rates are driven by If people are optimistic they buy recklessly, inflating prices.

      If they are pessimistic they don't invest or spend and prices drop.

      Mass Psychology
      , which in turn drives Their mandate is to hold CPI inflation to about 2%/yr.

      The "lever" they push to do that is mostly interest rates.

      Central Banks
      (like a dog It is a feedback loop; interest rates prod consumers and consumers prod central banks.

      Cause and effect get mixed together.

      chasing
      his tail).
    2. Interest rates are set by Central banks. High interest Consumers carry a lot of debt, and when rates rise, that is where their cash goes.

      Fewer dollars are thus available and demand falls.

      suppresses
      inflation but The Prime Rate triggers increased interest rate on all fixed income securities.

      This causes bonds to compete with stocks for buyers.

      drives down
      share prices.
    3. Money supply consists of The actual supply of non-debt dollars in the system.

      See "fractional reserve banking" in wikipeida.

      M0
      , M1, M1, M2 and so on are categories of debt.

      Banks create money in the form of promises to pay.

      etc
      . and Possibly meaning "too many dollars chase too few goods".

      Then prices will rise faster than the target of 2%/yr.

      grows
      and The 2009 Financial Crisis led to a collapse of the money supply.

      "Quantitative Easing" was invented to pump up M0 rather artificially.

      shrinks
      according to interest rates and cash The ratio between M0 and what they are allowed to lend out.

      There must be some cash on hand to prevent a "run on the bank".

      reserve
      requirements.
    4. Market sentiment (fear/greed) responds, taking us back to There is not enough fear in the economy.

      People borrow too much to buy goods and services they can't find.

      inflation
      or Meaning people have too few dollars for goods and services.

      Then suppliers drop their prices or shut down.

      deflation
      above.

    To the left is the DOW; inflation- This appears above, along with the original.

    Click on the link below to "P/E Suppression".

    adjusted
    . The first third of the chart includes two world wars and the Crash of 29. Central Banks often mis-handled the Money Supply and inflation held the DOW flat. Called Deflation, meaning the cost in dollars of goods was reduced.

    "Too few dollars chasing too many goods."

    Prices dropped
    when cash was Deflation was so strong that goods were not exchanged and jobs disappeared.

    not available
    , and they rose when goods were This period included two world wors, which dominated production of goods and services.

    not available
    . This period included a WW1 and then Roaring 20s

    Secular Bull
    and then a very painful Dirty 30s and then WW2.

    Secular Bear
    .

    Things eventually 1/3 of the way into the chart

    settled down
    and the DOW rose until In the middle of the chart inflation causes a strong drop. the 1970s, when inflation arose and forced Central Bankers to reduce the money supply to prevent inflation. The result wasn't very good - stock prices stayed flat in present dollars, as shown to the right, but the purchasing price of those dollars caused the sharp drop in the middle of the Note that this is in Constant Dollars, rather than ordinary ones.

    In actual fact the chart stayed relatively flat as shown to the right.

    chart
    to the left.

    This time people expected prices to rise later and bought now.

    "Too many dollars chasing too few goods". resulted.

    Market Sentiment
    stubbornly maintained inflation, so the Central Banks guided the economy to Things were made with out-dated equipment.

    High borrowing costs prevented fixing that to drive prices down.

    stagnate
    rather than As it had in 1929, leading to the Dirty Thirties.

    Interest rate policy preferred inflation to a collapse.

    collapsing
    as in the previous "Dirty Thirties" Secular Bear.

    Whether this will recur post-COVID is an open question.

    Stagflation eventually abated when Market Sentiment got tired of Fixed Income, and Central Banks were finally able to let producers borrow less expensive money. Supply returned to (2/3 of the way into chart) normal, and the 90s had a prolonged Bull Market. Then things fell apart again (Dot Com bubble, last quarter of the chart). Central Banks Example: Quantitative Easing was invented. handled that by injecting liquidity, and Market Sentiment Price Inflation seemed reasonable and Money Supply Inflation was ignored. responded well. There was no danger of inflation This time "injected" liquidity skewed the money supply from bank loans into cash.

    Some of that ended up supporting stock prices.

    or deflation
    , and There is a chart above with Price and Earnings crossing over.

    Click on the link below to "Trump Bunp".

    contraction
    of P/E lasted until about 2016. The Secular Bear produced minimal pain this time.

    After the DotCom bubble and Financial Crisis things took off again as P/E ran up to adapt to very low Investors accepted low %/yr for shares because of poor returns from GICs etc.

    That drove up the P/E number over 25 instead of the usual under-20.

    Fixed Income
    return. Now, as a result, inflation is Investors now realize they paid too much and have swung back to GICs etc.

    That indirectly triggers a nasty drop when they see prices slip.

    re-appearing
    , but we are still in a 16yr Normally corrections are mild in the first 16 years, but this is unusual.

    It may all be priced in, or it may go deeper than usual.

    Bull Market
    .


    Hmm... Market Sentiment is not One of the characteristics of a Bear Market is a "Parabolic" just before it starts.

    The "Trump Bump" is a bit like that, but P/E did not run up beyond reason.

    panicking
    as of Nov 2022. To the right is the five-year chart for gold Normally that chart would drop away down when a Secular Bull starts.

    Instead it has stayed flat and then rose when COVID arrived.

    bullion
    , for the time period just after the chart above. Gold is reflecting the Central Investors are showing that they trust the Fed.

    The rate increases will suppress the market, though.

    Banks'
    action to stabilize things. (See below.)

    What to do? Stocks went flat in the 1970s, which Demographics have changed and there is a labor shortage, suppressing production.

    However that means less unemployment, which boosts Market Sentiment.

    might happen
    for the next few years. In any event, investing in Benjamin Graham above says to look for substance.

    Normal corrections routinely drive stocks too low.

    earning power
    could minimize the impact of inflation. Note too that present inflation rate is only about half of that of the 1970s - see historical chart to the left (click to
    expand).




    The Gold/Inflation Story: Fear will drive investors to rotate into gold producers.

    Run
    For E.G.: Gold, ZLB.TO, HAC.TO, ZWH.TO, XUT.TO & XST.TO.

    Low P/E, steady P & E growth.

    Growing dividend, strong yield.

    Safe Harbor
    ?

    "
    Barbarous Relic": To the right is the chart for gold, with another rectangle to show the Secular Bear. During that time (LHS) gold rose, which is typical for a 16 year Secular Bear. What is NOT typical, though, is the way it starts rising after 2015.

    Normally gold would continue to drop to the bottom of the formation over 16 years, but a second maximum appeared because of inflation-fear. "Quantitatitive Easing" (QE) was invented after 2008 to compensate for the collapse of debt-based bank accounts during the crisis. (Middle pink oval, indicating a crisis).

    Since gold is "money" that cannot be quantitatively eased, it acts as a refuge in uncertain times. "Gold Bugs" fear inflation and did not believe that "printing money" was safe to do. However, the QE gambit The Financial Crisis brought DEFLATION rather than inflation.

    That is also very damaging - it suppresses supply and causes shortages.

    worked well
    - injecting cash rather than debt into the economy Usually the Fed does that by reducing interest rates.

    However interest was nearly 0%/yr, so it would not work.

    stabilized
    the money suppy.

    Unfortunately the COVID crisis (right hand pink oval) soon added dramatically to the amount of injected while simultaneously disrupting the supply of goods.

    liquidity
    . That was too much to take in stride; "too many dollars chasing too few goods", as of late 2022, has forced Central Banks to shrink the money supply by boosting The overnight rate is the conventional tool to shrink the money supply.

    If debt gets expensive, it vanishes as people pay things off.

    interest
    rates.

    QUESTION: Switch to Bonds/Gold as a Response?

    Note that The two lines were measured after Quantitative Easing and then after CERB.

    Both slopes agree with historical inflation rates.

    the slope
    of non-inflating gold in inflating US dollars matches historical inflation rates. That is a trade-off, not something Possible implication; growth rates will suffer but without the nasty collapses of a Secular Bear.

    dramatic.
    The number of "gold bugs" is stable; everyone seems to be waiting things out.



    Bottom Line for Summer 2021:
    Alternatives down the road: Bond Funds and Gold.

    Defensive shares like grocers, utilities and REITs are always good.

    The Market
    is the About 2016 it recovered from the Financial Crisis and started rising.

    Typically that lasts another ten years.

    Place to Be
    , but Watch COVID has disrupted supply of goods, sending prices up.

    So far the bond market shows only mild concern about that.

    Inflation
    .

    To understand this, one should have explored the "magic of
    compounding" link and the link to using red-green-blue trend lines. If so, it is time to think about Get to understand them now but do NOT give in to alarmist media coverage.

    We have about ten years before they go unstable again.

    "Bull
    and Bear" markets.

    Our basic strategy is to get into the market and stay there, but the chart of the DOW to the right shows nasty Secular Bear periods when people stop investing in stocks. The Elliott Wave for Secular Bears contains two panic periods, which are behind us (the Internet Bubble and Financial Crisis).

    Secular Bulls and Bears typically last That usually synchronizes to four Presidential elections.

    The Y2K Bear lasted from 2000 to 2016.

    sixteen
    years each, so as of 2021 we have about one decade to Buy and Hold, before The "list of ten ETFs" is already defensive.

    It conntains grocers and HAC.TO, focuses on Canada and pays strong dividends.

    rotating
    into defensive stocks and even gold around 2030. ETFs can more than double in that time.

    OOPS! There Was a Third Panic-event, COVID-19.

    COVID temporarily jarred the Ten ETFs out of their Click on "charts" after each one.

    You will find that they are back in the trends, and sometimes above them.

    trend-lines
    . The 50% jump in the 30-year chart for the price A "fear investment" that you can diversify into when P/E corrects.

    Your stocks will drop when Buyer's money moves there during secular bears.

    of gold
    (top right) is saying that Market Sentiment and inflation again gripped those with a This all - too - common trait leads to great losses if you sell.

    Gold is ground - zero, and rises when this kind of investor takes over.

    worry-wort
    bent, after crippling fear from the The previous peak between gray bars.

    The numbers at the bottom go back to 2015, 2010, 2005 etc.
    Financial Crisis
    Had died down. (Click to expand).

    During the recent 2020 gray bar, COVID-19 has sent Governments borrowed to keep families afloat, after a period of free-spending under the Trump administration. debt up. The S&P500 (lower inflation-corrected chart) has been pushed up by the Note that gold started to rise due to Trump-era spending stoking inflation fears. Then COVID sent it even higher.

    extra liquidity
    . It is not However, the recent down-turn in Gold indicates that Market Sentiment is relaxing.

    100% clear
    how this will resolve itself when it is embedded in a Secular There is a discussion of this in the following link.

    Bull market
    . (See choosing entry point.)

    All this has driven up the CPI inflation rate away above the 2%/yr target, and Trump policies have sent Note that our ten ETFs focus on Canada, where P/E has stayed lower and %/yr growth is as good or better. NYSE P/E too high for early in a Secular Bull. Thus our list includes defensive things (And Cdn stocks in general, with Utilities, RIETS and Low Volatility ETFs.) like HAC.TO until CPI comes back down and the S&P500 also makes a Even after correcting, do not be surprised if total R.O.R. of Cdn ETFs remains higher than US ones! correction.




    The above was written 2 years ago. In this scenario:
  • The five year old Bull Market is unlikely to be quenched.
  • We will muddle through inflation due to Baby boomers are retiring, creating a labor shortage, so unemployment is not as bad as in previous inflationary periods.

    Intrinsic Value
    .
    A year later it still appears we are in a normal correction during a Bull Market.

    Since this was written
    , gold and the market have been held flat by high interest rates.



  • Elliott Waves and their Wavelets have Several slopes are calculated above the chart below. The red one is a flat spot

    There are three 12345 measurements, over 10%/yr. Average is under 4%/yr.
    %/yr RORs.

    Price Outruns Earnings Only Part of the Time.

    Idealized Elliott Waves: To the left is the classic behavior of a stock chart. The ABC phase is called a correction, and in the ZWB.TO chart below it takes the form of a Some people call these flat spots "Cyclical Bears" if they drop less than 20%.

    This one measured 15.3% relative to the middle of the blue box.

    "flat spot"
    ().

    The 12345 phase has a much higher The "ln()" equation in the diagram below is the Continuous Interest Equation.

    Three 12345 measurements are over 10%/yr and one is 0%/yr.
    %/yr rise
    , which is attractive for an investor to enter a stock, but often the result is getting caught in a correction; as happened with Saputo above.

    This pattern is "fractal", meaning wavelets which also follow the There are four measurements of %/yr slope above the chart below.

    All but one of them move upward.

    ABC12345
    pattern are The EMA200 suppresses fast wavelets, leaving those more than a year long.

    A line across EMA maxima selects the %/yr slope of a wavelet longer still.
    buried
    within waves. They arise from the The 12345 phase is greed-driven and causes P/E to inflate, driving return down.

    In the ABC phase a price drop triggers fear and P/E drops back down.

    greed-fear
    cycle of human nature and they are only partially predictable - buyers and sellers try to defeat Worse yet, computer robot traders defeat human traders.

    each other
    .

    The EMA Changes The EMA suppresses wavelets shorter than 1/2 year.

    During Secular Bears that is not enough to help.

    Elliot Waves
    Into Line Unlike in the diagram above, EMA corners are below the wave.

    Advangage: they plug into the Continuous Interest Equation.

    Segments
    :

    Entering after an Meaning the %/yr rise of price matches that of earnings (P/E is constant).

    Payout should also be reasonable.

    equilibrium
    stock drops below the EMA200 helps The EMA is delayed 187 days and stays below a rising stock.

    That prevents "buyer's remorse".

    avoid
    a lot of buying and selling. The EMA200 limits the wavelets within waves to a 4-year time horizon and its slope is MUCH more reliable than the SMA200. In the example below we used points on the EMA to With an ordinary Scientific Calculator using the formula shown in the charts.

    calculate
    slopes:
    This typically is seen in Secular Bull Markets like post-2013.

    Such periods correspond to the 12345 phase below.

    Low-volatility
    There are also corrections within the Secular Bulls.

    We use them only to choose our entry points.

    Flat Spots
    The image shows four approximate straight-line segments, with arrows pointing to the The segments are numberd #1,2 #3,4 etc.

    There are four segments, five corners.

    "corners"
    showing up after a run-up in the Price Chart starts The end is usually triggered by Price outrunning Earnings. Beware.

    or ends.


    The slopes of the straight line segments alternate between about zero and about 12%/yr so their This would be the slope of a line touching corners #2 and #4.

    Slope ln(1660/1395)/ (2017.4 - 2014.9) = 6.9%/yr.

    overall slope
    should It will be like SAP.TO above; price shoots up and then dawdles to correct P/E.

    average
    around 6%/yr. Note too that the volatility is In other words price wanders 6% above and below the EMA200.

    double that
    in the blue box, and measurements of volatility for ZLB.TO give triple the Low volatility stocks tend to bounce three times the annual %/yr growth.

    Measured visually between blue lines as shown above.

    annual growth
    . Thus it pays to wait until there is a pull-back of some kind.

    CAVEAT: The EMA trick only works for low volatility Examples: ZLB.TO, HAC.TO, ZWH.TO, XUT.TO and XST.TO.

    situations
    and for good equilibrium between The yellow patches on the calculator.

    growth rates
    of market price, earnings and CAUTION: The yellow patch, not the Yield.

    dividends.
    The reason; the EMA time horizon is about four years. Secular Bear markets don't qualify - they have about a 16 year time horizon, and they exhibit savage That means the warning above to not buy and sell is invalid.

    Rotating out of stocks with large volatility measuremenst (2nd row) will be wise.

    volatility
    :


    These are the ABC phase of an Elliott Long Wave and the last one was 13yr long.

    Within these nasty flat spots there are usually two drops of 50% or more.

    Secular Bears
    : High-volatility Elliott Wave Flat Spots
    (These Also Result From Price
    Outrunning Earnings.)
    Above is the S&P500 index since 1944, with The latest one was only 13 years long, starting year 2000.

    It seems to have been shortened by Quantitative Easing.

    16 year
    rectangles for the Notice that they have two dips because they are an abc phase.

    They also coincide with a new generation of investors who pull down high P/Es.

    Secular Bears
    and ovals for These are the 12345 phase, which has shallower corrections and track the EMA200 well.

    They are driven by an optimistic generation of investors, who run P/E up too high.

    Bulls
    . This can be viewed as an Elliott "long wave", and the Secular Bears Unlike the chart above, there will be a LOT of volatility.

    The EMA200 won't follow it.

    synchronise
    inflated price to earnings that have The yellow R.O.R. patches on the calculator will show this.

    The difference in rates may only be a % or two, though.

    moved slower
    .

    Let us turn our attention to the right hand two periods; a Secular Bear with two The Internet Bubble of Y2K and the Financial Crisis of 2009.

    market crashes
    , followed by the first half of a Secular Bull, interrupted by the Government bailouts have led to inflation and rates are rising.

    That suggests some defensiveness even in a Secular Bull.

    COVID crisis.
    The market peaked at 2600 coming out of the '90s Bull and "crashed" to 1400 when the Internet Bubble burst. (more)

    Plugging those numbers into the Continuous Interest Equation With 1 year duration to generate a Logarithmic Mean reference.

    The percentage drop referred to the peak is 46%.

    the drop
    is 62%, and the second Financial Crisis drop is 73%. WOW!

    The Preferred Strategy: Buy and Hold
    (
    Hiding Out In Another example is ZLB.TO, which held RY.TO.

    It rotates into low volatility stocks.

    Low Volatility
    Shelters).

    Here are those two periods for the Heavy on financials (see "hiding out" above) and energy.

    Less awareness decreases bidding, lowering prices.

    Canadian TSE
    which also dropped sharply; 50% and 59% respectively. To the left are the 2000 to 2024 measurements, indicating that XIU.TO did rather well. It continued to grow throughout the However, the volatility would hide that fact.

    Investors with low risk tolerance might sell at a loss.

    Secular Bear
    , but it was a wild ride!





    Now What? - January 2024

    The See "image". The line touches the peaks and its slope is %/yr growth.

    The P/E at the left was very high after the 1990s Secular Bull.

    Trend Line
    for the S&P500 from Investors had over bought internet stocks, which then crashed near the LHS.

    Then they switched to running up Banks and a second bubble burst.

    Y2K
    to 2024
    (Image) along the The LHS Secular Bear corrected the previous high P/E .

    Six more years in this RHS Secular Bull should run it back up.

    EMA200
    gives this The time period spans a full Secular Bull and unfinished Bear.

    The P/E starts low, and is currently rising.

    slope:
    ... and along the The end of Stagflation in the 1970's to the end of the Financial Crisis after 2010.

    The chart is much wider than the first one above.

    last 32
    -year The bottom trend line in the chart.

    P/E ratio went very high in the middle and dropped back down during the bumpy sideways period.

    Bull-Bear pair
    (Image) we get 2%/yr higher than recently (to the left).

    This could be due to the current run-up being six years shorter than usual.

    this slope:
        ERGO: Still Rebounding.
    $15,000 increases the slope to match the previous Bull-Bear pair.

    This assumes Earnings Growth stays at 7%/yr.

    Raising/
    extending the top line
    (image) to The numbers in the boxes were adjusted to give 7%/yr.

    Note that the market climbs faster than the trend lines.

    32 years
    , we Resembling the "Internet Bubble" of the 1990's.

    Investor greed would cause price to curve upward again.

    project


    POTENTIAL: From $5k To $15k. Thus it is possible that the S&P 500 The earnings have not been suppressed much by COVID and inflation.

    The result could be "a parabolic", which curves upward.

    could triple
    by 2032; the theoretical end of the current (Recently interrupted by COVID and then by inflation and high interest rates.)

    That could suppress "the parabolic" by scaring investors.

    Bull Market.
    It is also possible that it could less than double if the actual growth rate has Or if investors do not jump back into stocks.

    That would permit some growth during a Secular Bear.

    slowed to 5%/yr
    .

    Now let's see how fast earning power has grown:

    This huge basket has been growing at the same rate as the DOW and S&P.

    There are also good analyst projections for future EPS growth.

    Berkshire Hathaway
    is projected The S&P data was backward-looking and tilted upward.

    This is for the period that includes COVID and two future years, so the effect on slope is somewhat compensated.

    by analysts
    to grow at . The S&P data, on the other hand, was distorted by the US corporate taxes had been high, but were cut.

    A surge at the end of the period distorted the EPS slope.

    "Trump Bump"
    so 16%/yr is not representative. The CDN markets have been out of the limelight and show the expected 7%/yr.
    Check - The top number is dividend growth for the ETF.

    This is likely suppressed by inflation.

    S&P growth:
    and Historically both earnings growth rates have been 7%/yr.

    Secular Bull markets grow at 15%/yr and Secular Bears at zero.

    TSX growth:
    .

    The fundamentals above grew as The five growth rates above are for complanies' "substance".

    Markets surge in Secular Bull periods, outrunning EPS and dividends.

    usual
    ; 5 to 7%/yr. The price grew as The market has been surging upward since the Financial Crisis.

    The scenarios below predict ways the upward surge could end.

    usual
    ; for a Secular Bull period:

    (Slope is measured along the bottom trend line this time.) As usual in a Secular Bull, price outruns earnings. However, COVID, war Fixed Income returns have become attractive, taking money away from stocks.

    There is also angst over Trump and the cost of war.

    and inflation
    have moderated the amount of " See the chart above near 1960 for a parallel.

    After 2009 the TSE's low P/E also led to growth through two crises.

    multiple expansion
    ".

    The OECD Projection to the right indicates that for the remaining six years inflation should stay near the 2%/yr target.

    That and a strong EPS rebound after COVID argues for a rotation back into stocks, making a A run-up to the top of the trend; $15k.

    That "parabolic" would justify defensive action.

    tripling
    (image) and strong pull-back The impact of COVID and war would have to subside.

    Also, Baby Boomers are no longer driving things up.

    conceivable
    .

    On the other hand, the Management has shown restraint when raising dividends.

    This may also apply to buyers; shaken up by COVID and inflation.

    dividend data
    (top row above) suggests that prices will Potentially holding the P/E ratio under 25.

    That could result in continued price growth during the expected Secular Bear.

    less than double
    before entering the next Secular Bear phase. The Berkshire data suggests $11000; This could raise the P/E ratio up only marginally.

    Thus the 2030's could see both volatility and price growth.

    a doubling.


    THREE SCENARIOS, and Three Guesses:

    The above suggests one more surge as interest rates drop and money comes out of Fixed Income into stocks. Let's say 85% confidence level.
  • That leaves 15% for flat or dropping markets; possibly Two wars are raging at present, and could escalate.

    The resulting inflation could also persist into the 2030's.

    event-driven.

  • The other extreme (15%) would be for A "parabolic"; showing investor over-confidence.

    In the '90s this led to the internet bubble.

    a tripling
    and then a sharp pullback into a volatile but flat Secular Bear market.
  • The Of "Bayesian Probability" or degree of belief.

    This would argue for reduced fear/greed after COVID et. al.

    middle 70%
    would be for the S&P to do a TSE-style muddle-through; a This term is used for price surges less than 16 years long.

    It would be a response to fear subsiding.

    Cyclical Bull
    that has been moderated by the Fear and greed normally alternate causing Bulls/Bears.

    The recent memory of COVID could suppress the greed effect.

    pandemic
    & inflation and then a If P/E is quite low, investors will remain confident.

    The market will continue to grow somewhat as earnings grow.

    weak rise
    during a Secular Bear market In this and the first scenarios, just hold the "list of ten".

    Only investor over - confidence would justify rotating holdings.

    after 2030
    .







  • One Underlying Equation
    (The Calculator Looks After the Following Detail:)


    A Deeper Dive: actually uses the approximate formula A = P(1 + r/n)nt that is often used instead of the continous (exponential) formula above. The symbols mean

    Top Box; (This box will more often be set to "rate".)

    That translates into extracting %yr Rate of growth of charts, dividends or earnings.

    Answer
    A (selected first box; displayed at bottom) is given by

    your original P=$10k (second box) invested at

    interest rate of r=7.3%/yr(third box)

    compounded n times per year ( "Continuous" means time between calculations goes to zero.

    Effectively, that eliminates the variable n completely.

    fourth box
    )

    and sitting there for t=10 years (fifth box):

    Notice that setting n=a zillion (continuous) eliminates it and changes the formula to A = Pert=$20751k. This formula is used by banks to calculate interest.

    To do that it has to be changed to r=Ln(A/P)/t.

    Notice that it is not yield.

    That happens to be
    the formula for the ert swoops upward on a normal plot.

    A "log plot" makes it into a straight line by compressing the upper part of the Y-axis.
    "log plots" that
    market websites show us.


    This same calculator can be reversed, to extract the Growth Rate from pairs of dollar values, growing or shrinking over a time in years. That is the mode in which we use the equation to manage Dividend and Earnings Growth rates, throughout the calculator above. It can also be extracted from scattered data above.
    Why it works: This equation's growth rate r applies to every $$$ that is in an account at a particular instant (by averaging the whole account or ETF basket). That includes all accumulated previous growth (or decay in the case of inflation). That is also A dollar of "retained earnings" finances machinery etc.

    If not needed for growth, it becomes a dividend.

    true of a business
    if its earnings track its total investment and/or if its share of the market is expanding or the company is E.G. Philip Morris' stock price grows at 6.7%/yr while the tobacco market shrinks. buying back shares.

    Now comes a trick. Human perception also works this way; we focus on percentage change rather than QUESTION: can you feel the tops of your socks right now?

    value
    of things. Brokers look at charts to make recommendations whether to invest new money in stocks or bonds, and their thinking works on percentage change too. That makes their decisions follow this Continuous Interest Equation, and we can predict their behavior with simple straight lines!

    Average Inflation From DOW History:
    (Subtract from R.O.R. for purchasing power of investments.)

    The chart to the right shows 100 years of management of sometimes - nasty inflation problems by the US Central Bankers. There has been a trend toward doing it successfully, and the 2022 timeframe will be a test of how well they have learned. (The price of gold is dropping, suggesting the "herd" thinks they will succeed.)


    Try various inflation scenarios in the above calculator for doubling time and observe their impact.


    This link shows the difference in measured slopes before and after inflation to be 3%/yr over 100 years.

    Inflation averages
    about 3%/yr, and Central Banks try to maintain a steady 2%/yr inflation rate. In the middle is the Stagflation period in the 1970s when they lost control and inflation rose strongly. As shown elsewhere, purchasing power of the dollar dropped while the DOW stayed relatively flat.



    Drawing and Measuring %/yr Trends:
    (Using the CalculatorSoup Website)

    A StockCharts.com chart appears to the right; set up with the red A sluggish mathematical filter whose value is about where the Green line was 180 days ago. EMA200 line. (Do not use The problem with SMA is that its %/yr measurement is affected by 200 - day - old events. SMA.) Press "Annotate" to draw lines etc.

    A straight red line on a logarithmic chart traces out the Continuous Interest This trick lets you think of stocks simply as competing with bonds.

    (Better returns, more jumping around.)

    equation
    that banks use for "daily interest".

    It touches We will focus on average slope, which changes due to remaining Elliott Waves.

    Thus we bridge over two of them.

    the EMA
    twice which, using Calculus, gives a slope that becomes %/yr rate of return of an equivalent "bond".

    Three lines have been drawn parallel to it with the same slope (R.O.R.) The blue lines have been pulled up and down to mark out a There is a second volatility, used for Covered Call.

    This one is the difference between highest and lowest samples.

    statistical
    range the price moves in and the green line has been pulled to the This line represents the "equivalent bond" of the Continuous Interest Equation.

    BOOBY TRAP: don't dream of harnessing volatility!

    middle
    of the range to identify when to Note the "Loss 0.2yr" below.

    That is saying that the market is 1/5 year's growth above the Green Line.

    enter
    the market.

    Note the measurements below the chart, which you can make by moving the cursor to the locations indicated. Then plug the following into the CalculatorSoup calculator:
    Top box; Rate(R) 2nd Box: RHS: $24.80 3rd Box: LHS: $17.77
    4th Box: Continuous 5th Box: Time 5yr Press Calculate
    and you will see the answer 6.67% below.

    Measuring Volatility requires a trick: enter top and bottom assuming one year:
    Top box; Rate(R) 2nd Box: Top: $22.92 3rd Box: Bottom: $21.30
    4th Box: Continuous 5th Box: Time 1yr Press Calculate
    and you will see the answer 7.33% below.

    Then it is possible to plug in the rate calculated in the top table, plug in a mean of the upper and lower blue lines, plug in time between their measurement and the present and come up with the green trend line as of now.
    Those maniupulation details have been programmed into the
    website's calculator to the right.

    Conclusion: the equivalent "bond" has a pretty good return; growing at 7%/yr and fluctuating about 3.7% above and below the green line. It would be a couple of months before the green line rises to the present market price.




    Reason for Starting With HAC in the Frame Above:

    The HAC.TO ETF does not pay a dividend. The Stockcharts.com website mixes dividend yield and price growth together, which is good because that shows the true R.O.R. to an investor. To the right is a Preferred Share ETF, rendered (before inflation hit) first by the Yahoo site and then by the StockCharts site.

    The downward slope of the Yahoo chart is about -2%/yr and the StockCharts one slopes upward at about 2%/yr. The dividend yield is about 4%/yr, which the investor does not get because the value of his/her holding is depreciating, as shown by the Yahoo chart to the left. Everything makes sense; providing we understand what the charts include.

    The other side of the coin is that summing returns for the investor blocks what this calculator specializes in; separating them out to detect market inefficiency. For Stockscores charts, drawing the above lines and plugging values into boxes gives a mixture.

    Reason #1 for starting with HAC: chart slope measurements cannot mix growth with dividends because there are none.

    Reason #2 is that the measured volatility of under 8% is very low, while for the Banks ETF the range is 19% (and can be 9% above the Green Line). Thus HAC.TO is a good "parking place" for cash when higher-yielding things like the Bank ETF are priced above their Green Lines.



    ZEB.TO: A Pure-Bank ETF
    (Using the CalculatorSoup Website)


    Untangling Dividend Growth and Yield Measurements.

    We will open up two links in new tabs:
    a Yahoo chart and a calculator, which can give growth rates (left hand side here) for dividends and market price.

    The ends of the green line measured
  • Date 2021 Aug 18 $33.33
  • Date 2011 Aug 13 $17.59 (10 yr.)
    Market Growth Rate = 6.4%/yr from the calculator.
  • 2021 dividends = $1.20
    Market price was $37 (above the green line), giving Yield 1.2/37 = 3.3%/yr.
    • Aha - that is it. The StockCharts plot includes dividends, increasing the apparent slope of the plot. Total of the Yahoo Chart slope plus yield of 3.3%/yr is a good match; 9.7%/yr.
  • 2016 dividends = $0.81 (5 years)
    Entering that as P and $1.2 as A in the calculator, r = 7.9%/yr.
    • This should match the Yahoo Chart slope, and it is not bad but higher. The predicted total return is around 11%/yr. Maybe management is increasing dividends too fast???

    Combined Return:
    (Using Stockcharts.com)

    To the right are the colored trend lines for ZEB.TO. The dividend plus chart growth rate is normally determined by making the red line just trouch the EMA200 in two places. However, COVID has spoiled that so we aligned the top Blue line with the peaks.

    Blue lines mark the volatility (statistical range of 20%) and the Green Line shows the middle of the trend. Market Price is above the Green line right now, indicating that it is a poor time to enter (loss of 0.9yrs growth).

    The gray patches below the chart are measurements that were made and entered in the calculator. Volatility is (Top-Bott)/Green line at any date and tends to be around three years worth of growth.

    In general, using the StockCharts this way gives a very good measure of overall R.O.R. including yield. Then one should subtract quoted dividend yield and compare that to the growth rate (not yield)
    of dividends and the growth rate of earnings. The three growth rates should approximately match.




  • The first chart below typically is seen in Secular Bull Markets like post-2013.

    We use the EMA200 to avoid over - paying.

    Navigating
    There are also corrections within the Secular Bulls.

    We use them only to choose our entry points.

    Flat Spots
    The market moves in waves and our way of using the the EMA200
  • limits them to a 4-year time horizon and
  • includes them in Volatility measurements.
    Enter wisely, but do not trade.

  • Buy At the EMA Trick: The image to the right shows four approximate straight-line segments, with arrows pointing to the The segments are numberd #1,2 #3,4 etc.

    There are four segments, five corners.

    "corners"
    showing up after a run-up in the Price Chart starts The end is usually triggered by Price outrunning Earnings. Beware.

    or ends.


    The straight line segments are described above where the This would be the slope of a line touching corners #2 and #4.

    Slope ln(1660/1395)/ (2017.4 - 2014.9) = 6.9%/yr.

    EMA200
    was measured and plugged into the Continuous Interest Equation using a calculator rather than the Calculator Soup site.

    During Secular Bulls, Buy and Hold Stocks.
    Collect cash and await a dip to the EMA200.

    The EMA200 (Exponential Moving Average) is delayed by 187 days, and in the process strongly filters out volatility. Thus it The slope of the trend is that of a line that just touches two bumps.

    In the chart above corners 2 and 4 give 6.8%/yr.

    locates
    a trend, and if the price is rising, it will lie below the current price (green line) most of the time. ASIDE: most "chartists" and brokers use the SMA200- avoid doing that too because the EMA gives better R.O.R. measurements.

    The EMA trick only works for low volatility Examples: ZLB.TO, HAC.TO, ZWH.TO, XUT.TO and XST.TO.

    situations
    such as ...and good equilibrium between price, earnings and dividends.

    Secular Bulls
    as shown above. Secular Bear markets don't qualify - they have about a 16 year time horizon, and stocks exhibit savage That means the warning above to not buy and sell is invalid.

    Rotating out of stocks with large volatility measurements (2nd row) will be wise.

    volatility
    unless they are "safe harbor" things like ...or Canadian stocks which have low P/E ratio.

    That may not repeat next time - proceed case by case.

    grocers or gold
    :

    These are the ABC phase of an Elliott Long Wave and the last one was 13yr long.

    Within these nasty flat spots there are usually two drops of 50% or more.

    Secular Bears
    : Scary With No Gain
    (These Also Result From Price Outrunning Earnings.)


    To the right is the S&P500 index since 1944, with The latest one was only 13 years long, starting year 2000.

    It seems to have been shortened by Quantitative Easing.

    flat spots
    (Secular Bears) marked by Notice that they have two dips because they are an abc phase.

    They also coincide with a new generation of investors who pull down high P/Es.

    rectangles
    and with ovals for These are the 12345 phase, which has shallower corrections and track the EMA200 well.

    They are driven by an optimistic generation of investors, who run P/E up too high.

    Bulls
    . This can be viewed as an Elliott "long wave", and the Secular Bears Unlike the chart above, there will be a LOT of volatility.

    The EMA200 won't follow it.

    synchronise
    inflated price to earnings that have The yellow R.O.R. patches on the calculator will show this.

    The difference in rates may only be a % or two, though.

    moved slower
    .

    The right hand two periods are a Secular Bear with two The Internet Bubble of Y2K and the Financial Crisis of 2009.

    market crashes
    , followed by the first half of a Secular Bull, interrupted by the Government bailouts have led to inflation and rates are rising.

    That suggests some defensiveness even in a Secular Bull.

    COVID crisis.
    That Elliott Wave ABC phase is NOT amenable to EMA200 methods - the drops are too fast and last too long; and the 12345 sequence gets quenched.



    A drop of more than 50% is typical in the rectangles, due to P/E having been driven too high.

    The term "Secular Bear" is sometimes used for these crashes instead of the entire Bear.

    Quenching
    Events: The failed wave is the 12345 sequence of the previous Secular Bull.

    There have been two collapses per Bear - it's an ABC phase.

    Failed
    Predictability of Bulls and Bears is due to a long Elliott wave.

    One could buy and hold the 12345 phase and rotate to e.g. gold for ABC.

    Elliott Waves?

    To the right is an expanded view of the right-hand third of the S&P500 chart above. The flat spot contains two drops from about A drop to one half of the peak; far worse than during Secular Bulls.

    Generally caused by collapse of unrealistic P/E ratios.

    $148 to $70
    ; Two such convulsions, marked by pink ovals, are typical during Secular Bears. To the right is a third one, caused by COVID, which occurred within the current Secular Bull. It Also, it only dropped to about 3/4 of the peak, due to continued good P/E ratios.

    Secular Bulls are generally like that.

    quickly re-joined
    the uptrend.

    Events These are often called Black Swans, meaning they are unexpected.

    However, Secular Bears are predictable and high P/E is a warning.

    like that
    quench The internet bubble from the 1990s Bull Market and the housing bubble were false narratives.

    The COVID crisis is real.

    False Narratives.

    The middle chart is for the Canadian financial sector. All three events appear in it, but it continues to rise during the Secular Bear. That is a Also, during Secular Bull periods one should diversify across many sectors.

    general principle
    ; when a Secular Bear market is due, one should get out of sectors that are overheated and into sectors that have Also, sectors like Utilities and Groceries exhibit only normal volatilty.

    been ignored.


    For example the Dot Com Bubble during the Just before the beginning of these charts.

    1990s
    pulled money away from the banks etc. "Hot" internet ventures exhibited P/E ratios that were either very high or negative. When the bubble burst, people turned to the strong dividends of banks and insurance companies. Their Dividends have also outrun price; 8.2 vs, 6.5%/yr recently.

    earnings
    had grown faster than their stock price and P/E had Be alert to this indication of a bubble at ANY time.

    Investors tend to travel in herds - they follow others and then panic.

    become low.
    Thus the price of Canadian banks tracked earnings growth, ignoring the Secular Bear.

    There had also been a bubble in energy companies (chart below financials), and it also Delayed by about five years.

    collapsed.
    Then energy share prices dropped for more than a decade. The COVID crisis (third oval) introduced a very steep drop, and recently it has broken out of the This crisis quenched the downward part of an Elliott Wave.

    It was ready to happen anyway, but was triggered early.

    downtrend
    , because earning power of oil companies had recovered.

    Inflation - Response To Previous Interventions.

    In the 2009 Crisis the Canadian Financials took a beating, but their ETF soon benefited in two ways: the banks bought up "fire sale" US assets and their P/E ratios became more realistic due to generalized panic.

    There was another phenomenon; strong government intervention to stimulate the economy and avoid stagnation in the subsequent COVID panic. The buzzwords were "quantitative easing" and, after 2019, "CERB" in Canada. In both cases government injections found their way into the bank's Goverments also funded dividends, to the chagrin of Fiscal conservatives.

    balance sheets
    and too many dollars are chasing too few goods and services.

    Quenching Events Trigger Sector Rotation.

    The Cdn energy industry and financials make up the bulk of TSE stocks. At the beginning of the latest The first quenching event also causes rotation into gold.

    Gold producers become lucrative every 32 years.

    Secular Bear
    the low P/E ratios of Canadian banks and insurance companies attracted brokers' attention. (Here the The growth rate measurements on the calculator.

    yellow patches
    were out of equilibrium; earnings and dividends had been out-running price.) Here is the outcome for the XIU.TO ETF; when excess growth rate got quenched, money headed into these lagging sectors:



    Inflation Conflation - Mushing Price and Money Supply Together.

    There are two kinds of inflation, and they are different in kind. Most people assume that "inflation" means increase in the money supply. With their audience in mind, writers They also make it sound scary - people like catastrophising.

    predict
    the future in terms of "printing presses".

    Central Banks, however, view "inflation" as increase in $$$ paid to get goods/services vs. $$$ invested to produce them. Fortunately for them, the supply of labor has very low elasticity now, because of More people are retiring than entering the work force.

    Supply is limited by labor rather than by capital

    demographics
    .

    In other words the production of goods and services does not change much when prices rise. Demand, however, is much more elastic if disposable income is not available, prices drop accordingly. A small increase in interest rates will pull a LOT of money out of disposable income into servicing debt. Thus disposable income responds very strongly to rising interest rates.

    In "Stagflation" times it was just the opposite - high interest rates suppressed supply of goods/services too much. Now it drives people work more to pay off their debts. That means investment in production is not as important as it was in the 1970s.