General Electric's price has penetrated its long-term downtrend line

                                        

This is very likely caused by the anticipation of its final spinoff, GE Vernova, to be finalized in April '24. I had made the classic 'catching the falling knife' mistake on Oct 31 '17, buying the pre-consolidated GE shares @ $20.57, only to have to endure their drop to $6+ in the next few years.

Fortunately, its previous spinoff, GE Healthcare, was sold by me near the top of its previous run from IPO debut, on Apr 22nd, 2023 at between $85.25 & $86.28, netting M$1,393.17 worth of US$, on top of a $50 'gift' of WABTech shares sold in '21(the equivalent of M$201.28) & miniscule dividends in '17 & '18. After adjusting for the reverse stock-split, it needs to rise to $162.30, or 6% higher from the 23rd Feb close, for me to not break my rule of only considering a stock profitable if it yields a capital gain on top of dividends. However, if I need the funds desperately, even at the latest close, my M$ loss is less than a hundred(cf ~$116) considering that the US$/M$ rate has risen from 4.23 when the shares were paid for over 6 years prior, to 4.78 presently. 

With the current bull market showing few signs of topping soon, I anticipate GE shares rising to between $180 & $200 in advance of the Vernova spinoff two months from now and I am likely to sell my 76-78-month General Electric holding on the eve of the spinoff ex-date!

And so it has come to pass...Nikkei 39,000 for the first time ever!

 It took 34 years & nearly 2 months to re-approach the 39,000 level which it came so close to touching(42.56 points away to be exact, or 0.11%) on Dec 29th 1989. The only slightly unsettling point is that the intraday high's digits add up to forty, which is exactly the sum of the previous intraday high that fateful December day long ago: 3+8+9+5+7+4+4 =40.

Thus, a prediction I made over 8 months ago finally gets fulfilled and now 40,000 becomes the next target!

My 'terrible investment' in General Electric & fruitful odyssey in Japan!

Never catch a falling knife! And yet I did, in hindsight, on the last day of October 2017, buying a hundred shares at just over $20.50 and they unexpectedly proceeded to drop precipitously to $6+ in the next several years.  My bigger error was not reading more deeply into the problems of the company back then, growing a little lazy as I was buoyed by my spectacular success accumulating half a million shares in Sino Hua-An by Aug 28th '17( itself a falling knife-catching error if brutally assessed) & seeing them rocket three-fold on a single day when the predicted profit turnaround manifested.

For the next 8 months, the latter became a cash-generating machine & enabled my deeper diversification into Japanese stocks, which I discovered were eminently Grahamian in many instances, & which I bought increasingly into, 2 years before the Oracle of Omaha. GE has since rebounded, spinning off WABTech & GE Healthcare, which were disposed to net the equivalent of 18% of my investment & GE itself is now 6% away from a likely capital gain. And the Nikkei index, which I forecast 8 months ago would revisit its '89 peak, has definitively fulfilled by forecast by ending @ 39,098.68 on Friday!   

Has Nippon Felt seen a cycle bottom in '22 ?

My bet is for the price to rise to an initial target of  ¥580-600 within 3 months, assuming the Nikkei holds up for my measured move target of 45,000 points at least until June. Previous cycle lows were  ¥135 in '82 [ignoring the rebound from ¥1,240-2,650 in '90-'91 & ¥530-1,000 in '92 ], ¥55 in '71, ¥54 in '62 & ¥84 in '52.  TD count is 8/9.

At one point this morning, the Nikkei came within a mere 100 POINTS of its legendary peak of nearly two generations ago...

 

...97.87 points to be exact!

 Due to widespread indigenous belief that the stock index is out of touch with economic reality, scraping that level may be a major selling signal for many Japanese investors, I suspect!  As a point of coincidence, it's now neck-and-neck with the Dow Industrial Average, the only other times in history being late 1953, mid-1958(when it was still called the Nikkei-Dow Index), late-2001, late-2003, late-2008 till late-2009 & mid-2013, early-2016 & for a brief period in 2Q 2020 in the aftermath of the CoronaCrash.

Some points of comparison between the market now & during that fabled period:

Kosé 's sharp falls & rebounds in '16, '20 & last year

 Resistance-turned-likely-support is way down @ ¥4963. Prediction is for a big rebound between +20% to +50% after a probable test of ¥7700, the low in 2016.

Will the 17-year & 3-year cycles doom the Nikkei in 2024?

 

The Nikkei comes within 946.75 points of its Dec 29 '89 intra-day record high of 38,957.44 points!!!

 

The Japanese stock index inches to within 1,670.18 points of its 1989 record!

 

My personal prediction is that the China factor, namely Chinese equity funds escaping the tanking China & Hong Kong stockmarkets to nearby Japanese equities will fuel the Nikkei's push to its old record, lying at the upper edge of the trend channel :

The '82 bullish pennant/reverse H&S formation in Nomura Securities ( 野村 證券)

 The stock would go on to advance more than ten-fold within 5 years, hitting a ¥5990 zenith that has never even been approached within three country miles from the 1990s till now.

Yesterday, the stock was partially SOLD in my portfolio for  ¥813.9 which is a far cry from those heady levels at the apex of the bubble era in Japan, but still higher than the 1998 low of  ¥805 when that country was in the throes of a major banking crisis.

Japan's BoJ head got it right about Japan's 'lost decades' when he wrote this at the dawn of the millenium as an academic

 

'Help! Help! The sky is falling!' : Aozora Bank's (あおぞら銀行) previous crashes in 2016 & 2020 + the PBR / EPS upside in the Tokyo bourse

 

This implies it could find a bottom anywhere between ¥1,893 & ¥ 2,065 in the current shock result-induced crash.

The price book ratio(PBR) of the stock index found its peak in a triple top in '13/'14/'15  though the Nikkei index only topped out in earnest in Jun '15. After this years scintillating rally, it recently poked its nose above 1.4 x & if it were to peak again in this cycle at around 1.5x, that would imply a medium term target of anywhere between 38,300-38,700 before alarm bells need to go off. 

In relation to the TOPIX index EPS, that measure peaked several months before the earnings peak in 2015, 2018 & 2021 and has not much predictive value apart from a possible 3-year cycle peak since stock prices would already have begun to decline by the time EPS peaks. However at around 14-15x now, it's significantly lower than the 2018 P/E & slightly lower than the 2021 P/E ratio at the time of those peaks. Compared to the US P/E ratios & those of the last decade, the current ratio is still in middling range and has room to rise.