Category Archives: Edson Gould

Dow Altimeter Review

The Dow Altimeter, as constructed by Edson Gould, is based on dividend payments made by the constituents of the Dow Jones Industrial Average (DJIA) as reported in the Barron’s section titled “Indexes PEs and Yields.”  The Dow Altimeter information provides a graphical representation of fundamental data.

On January 23, 2018, we said the following:

“While the market appears destine for higher ground, it is worth noting that the 24,223 level is the new support level for the DJIA.  If the DJIA fails the support level at 24,223 then the next stop is the 18,373 level.”

Below we have updated the Dow Altimeter and included the coincidence of buy indications based on the dividend history of the Dow.  We believe this history of dividend payments provides strong evidence of when a bear market has come to an end along with a fair estimate of when a recession should come to an end.

A recession and a bear market is coming.  We don’t know when, however, we can prepare ourselves with the necessary insight to better call the bottom (better than our July 2009 call for the stock market, our August 2009 call for the end to the recession and our December 2010 call for the bottom in real estate.

DJIA: Downside Targets

Based on the nature of the decline in the market on February 2, 2018, it is worth examining the downside targets for the Dow Jones Industrial Average (DJIA).  Below are the downside targets based on the work of Edson Gould’s Speed Resistance Lines.

Bitcoin: February 1, 2018

On December 22, 2017, we said the following of Bitcoin:

  • “We believe that there is going to be limited upside in the near term.”
  • “We think that the conservative downside target ($6,884.31) will be achieved before a new high is seen.”
  • “In all prior booms, the subsequent bust AVERAGED –70% (data found here).”

Below is the updated chart for Bitcoin along with our expected downside target.

GE Altimeter

Below is the historical range of the Altimeter for General Electric (GE) from 1962 to the present.  The green line represents the mean, which sits at the 143.5 level.  If GE were to achieve the historical high of the range then the stock would be priced at $22.44.  That would be a +37.84% increase to the all-time high of the longstanding range.  Meanwhile, the downside risk, based on the Altimeter, is $11.76 or a decline of –27.76%.  A declining stock price with a rising Altimeter is not a good sign.

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Mercury General: Targets and Perspective

On August 14, 2012, when Mercury General (MCY) was trading at a price of $37.30, we said the following:

According to Morningstar.com, MCY is considered a “buy” at $31 and at fair value at $45.  Our own model suggests that MCY is significantly undervalued at $39 and a “buy” at $45. Investment Quality Trends (www.iqtrends.com) indicates that when MCY is at a yield of 4.5% or higher, the stock should be considered for purchase.  Currently, MCY has a dividend yield of approximately 6.60%.  Keep in mind that we do not buy stocks for their dividend yield.  Instead, we use the company’s consistently increasing dividend as the only proof that the company management can:

  • increase earnings over time
  • reward current shareholders

Since that time, we’ve seen Mercury General increase from $37.30 to as high as $64.52.  Along with the increase in price, we’ve been forced to revise our perspective on the stock.  Below, we will outline the revisions to our perspective and provide target prices we think MCY should be considered for acquisition.