They commentary is not too technical and very easy to follow, showing projections after the 1903, 1907, 1920, 1932, 1938, 1974 and 2002 bear markets.

Click here for the GANN alaysis.

Enjoy!

As usual, we have used the iPath Crude Oil ETF( OIL) as a proxy- for those of you that are not familiar with it:

• The investment is linked to the performance of the Goldman Sachs Crude Oil Return Index and reflects the returns that are potentially available through an unleveraged investment in the futures contacts comprising the index plus the Treasury Bill rate of interest that could be earned on funds committed to the trading of the underlying contracts. The index is derived from the West Texas Intermediate (WTI) crude oil futures contract traded on the New York Mercantile Exchange. The fund is nondiversified.

Here is the first chart that shows the 1 year performance:

No surprise here but it is still interesting too see how OIL moved to +60% and then dropped like a rock to -60%… talk about wealth creationg and destruction!

However, the 2 year performance shows a very different picture, with both Oil and the S&P ending up together:

Remember that time horizons are of critical importance when constructing your investment strategy and projecting expected returns… a lot of things can happen in the short term but if you are a long-term investor, you should try and tune out all the noise.

The actual graph is quite scary and what is surprising most of us is the speed at which this is happening – hereafter the latest 1 month EUR.USD chart :

It is currently on the way to breaking the 200 day moving average of 1,4712 and most commentators believe it will shortly return to the levels we saw this summer: 1,60 range.

What does this mean for the markets? Well, this is quite alarming as it would probably lead to a grid-lock situation and probably bring the 650 level back into play for the S&P – or at least, sub 700 area.

As our regular readers know, we are value investors and not market timers or commodity or forex specialists but the current climate feels very fragile and we would advise caution before entering the market. We would tend to adopt a wait and see strategy or place BUY LIMIT orders at the 52-Week-Low level until we have a better view of the current economic climate, issues & scandals.

Most probably, what is happening is also that with so much uncertainty, this trade is the safest bet! What does this mean for Value investors? Well, it means that we are experiencing a very volatile market that gives us the opportunity to buy 6-10% dips in great companies that are already trading at highly discounted prices.

Remember that you most important task is to filter out the noise and focus on fundamentals, don’t get caught up in the market game!

Despite the fact that OIL is sharply down and that both financials and housing are recovering, this does not mean that it’s time to jump back in. We feel that this is a bear rally and that investors should be careful… don’t be fooled by a 15% jump… a 30% drop could be around the corner. There are still too many unresolved issues with Freddie and Fanny and until we have concrete news from Washington, there is still sharp downside potential.

No doubt that this rally will probably go on into next week but again, we feel investors should not rush to get back in. As usual, study companies you are interested in and decide at what price you would be comfortable opening or adding to a position. It is extremely important to remain focused on this initial analysis and not to get carried away by what Mr. Market does.

Some readers have written to us asking if they should take out the limit orders and just buy now before things move too high… but this is not how we like to invest. Forget about the crowd, stick with your play. As Emerson said “The great man is he who in the midst of the crowds keeps with perfect sweetness the independence of solitude.”

From the Coeur website:

Coeur d’Alene Mines Corporation is one of the world’s leading silver companies and also a significant gold producer. Coeur, which has no silver or gold production hedged, is presently constructing two of the world’s largest silver mines – San Bartolomé in Bolivia and Palmarejo in Mexico; operates two underground mines in southern Chile and Argentina and one surface mine in Nevada; and owns non-operating interests in two low-cost mines in Australia. The Company also owns a major gold project in Alaska and conducts exploration activities in Argentina, Bolivia, Chile, Mexico and Tanzania. Coeur currently expects to produce approximately 16 million ounces of silver in 2008, representing nearly a 40% increase over 2007 silver production levels.”

As already discussed, in previous post on CDE, this company gives investors a change to participate in the inevitable increase of silver prices due to the fact that the world has nearly run out of silver and it is also interesting as a hedge against the economic downturn and current market conditions.

Despite recent turmoil and general speculation about the quality of the management team, is the sell-off justified?

The above chart clearly shows that whilst Silver tracking ETFs have remained relatively stable after the march sell-off and have been slowly recovering, CDE is continuing to dive…

We somehow feel that this situation will not last and that we will see a reversal. Stay tuned for more.

Please read our disclaimer.

We have used ETFs for this graph- please click on the graph to enlarge:

- PowerShares DB Commodity Idx Trking Fund (DBC)

- iPath S&P GSCI Crude Oil Tot Ret Idx ETN (OIL)

- Vanguard Total Stock Market ETF (VTI)

- Vanguard Total Bond Market ETF (BND)

- Vanguard Small Cap Value ETF (VBR)

- Vanguard REIT Index ETF (VNQ)

Naturally, the question is how long will this last? Sooner or later things will have to turn around and it is precisely in these times that we have to take a long-term view. To confirm this, most of the top ranking value oriented money managers are claiming that it has been years since they have seen these many opportunities in the market place. Having said this, it also means that there is risk so make sure you stay away for things you can’t understand and focus on solid businesses which will come back once the economy turns around.

If you want to have an idea of what the top value guys are buying, have a look at GuruFocus, it’s a great place to get investing ideas: link.

Please read our disclaimer.