MMM update

I don't mean to pick on 3M.  They pay a small dividend and their cash to debt is $2.81:$6.58 (billions) which is really not bad.  Long time readers know why I think cash to debt is important but for new people:

• Debt is how good businesses that have been around for a long time either get bought under hostile circumstances or go BK.  At most times, as long as they can make the monthly payment, people think debt can drive growth because for a while and for those who are in and out before the crash it actually does drive growth.  But few are clever enough to set their entire business up to expand and contract in order to take advantage of the credit cycle and so in most case the best bet is not to get into unnecessary debt.  Too much debt at the wrong time becomes an existential threat to otherwise good businesses. 
• During credit deflation, which is what we now face on a global scale, cash is revalued.  Cash becomes king.  Everyone needs cash in order to cover what are effectively margin calls.  I'm not just talking about the stock market folks, it's ALL one market.  For example, those who used debt to build more manufacturing capacity find that customers dry up but that the facility costs and debt service remain even if you fire all of the employees.  Having to sell assets in order to not default on your loans for these facilities is effectively a margin call.  You never get a good price for assets in a forced sale.
• When cash is king, leveraged gamblers find the need to sell their assets at any price (as just mentioned).  That means that those who have been saving their current earnings instead of borrowing from the future get to snack up on all sorts of real, necessary, productive assets at fire sale prices that are always far below the cost of building the asset from scratch.  Not 10% below.  More like 50-90% below based on the rapidity of the crash.  The faster the crash occurs, the larger the number of assets on the market at the same time and thus, due to a big increase in supply vs dwindling demand, the prices have to tank before you get any bites.  During the Great Depression high end luxury homes were liquidated at 10 cents on the dollar.  Those with cash end up with all the wealth when the credit crash finally ends and the deflationary depression with it.

I am posting 3M charts for several reasons.  As always it is good wave counting practice for myself but it is also done as a service to people who know that fluffy social media stocks are shit but that real producers like 3M are golden "kant lose" investments.  Folks, when the credit Ponzi peaks, it's all one market.  During the last credit collapse, the federal reserve had to loan money directly to the likes of Harley Davidson for goodness sake! 

A rising tide floats all boats but ebb tide leaves many of them on the hard.  Take it from a long time powerboat captain: if the tide goes down far enough, the entire weight of the boat sits on the props and shafts.  At that point all it takes are a few good waves coming through (i.e. Greenspan's "turbulence") to hole the boat.  Once that happens, she doesn't rise with the next incoming tide and you need SCUBA gear to salvage the little of value that is left

In any case, I think 3m peaked today in just the way that I modeled it would happen yesterday.  Leftmost below is yesterday's model.  Middle is today's actual.  Right is just the peak of C and then wave 1 down and then 2 back up.  Note the following:

• 5th wave throw over which broke out, peaked, and then rapidly came back down into the channel.
• From the right hand picture note that black 1 could not break it down but after heading back up into wave 2, a running start into wave 3 easily busted through in the 3rd of 3.  The back up for a quick back test into 4 before another perfect EW wave down into 5 to form 1.  Then a move back to the level of the prior 4th for wave 2.
• Is it just me or does this seem like the shares had to scramble a bit in order to get ready for a start of day sell off the very day following the return from 4th of July holiday break?  If this model is correct, and the ability to predict daily movements with any accuracy at all suggests that it is not far off, wave 3 down begins right after the break for 3M.  If 3M begins to go down this is like the "backbone class" shares (3M and others like it) of the market breaking loose.  This is not Twitter or some other "never should have been a company in the first place" useless social media stock.  This is 3M.  This is why I am covering 3M.