The Wrong Tools Eventually Strip All Nuts

What began as a whinge in June (please see these Letters, What’s a girl to do? June 2012) has turned into a chorus in August. Trusted advisers and portfolio managers with decades of experience in the bond and equity markets are now saying that they really don’t know anything at all. For example, please see CNBC NETNET July 31, 2012, “Bill Gross Is Latest to Join Stocks Are Dead Club” or Jason Zweig of the Wall Street Journal August 2, 2012, “When Will Retail Investors Call It Quits?” for an interesting survey of the current crises of investment management angst.

We don’t usually comment on the latest “news” but, in this case, we have to make an exception. These advisers are suggesting that the only way out that they can think of for the multiple billions of investment dollars that they manage in our mutual funds, pension plans, insurance and endowment funds, is to enter the Promised Land, that is, the Land of Promises and the one that we have called the Bankster Land (please see these Letters, Numbers 20:12, August 12, 2012 and Banksters, The Economist, July 7, 2012) of fixed income investments with current yields below the rate of inflation whether corporate or sovereign.

At RiskWerk, of course, we have a different view that is correctly described as

“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads

and that is significantly different and, in fact, orthogonally different, from the promises of

The Risk/Reward Equation

Notwithstanding your good luck or happenstance,
– if you accept the “risk/reward equation” – no risk, no reward – you will lose your money;
– if “caveat emptor” is good enough for you, you will lose your money;
– if “past performance is no guarantee of future performance” is good enough for you, you will lose your money;
– if you like Jeremy Siegel’s book, “Stocks For The Long Run”, McGraw-Hill, NY, 1994, now in its fourth edition, you will lose your money;
– if you give it to your clients, you will lose their money.

What else can we say but that the wrong tools will eventually strip all nuts.

Disclaimer

Investing in the bond and stock markets has become a highly regulated and litigious industry but despite that, there remains only one effective rule and that is caveat emptor or “buyer beware”.

Nothing that we say should be construed by any person as advice or a recommendation to buy, sell, hold or avoid the common stock or bonds of any public company at any time for any purpose. That is the law and we fully support and respect that law and regulation in every jurisdiction without exception and without qualification to the best of our knowledge and ability.

We can only tell you what we do and why we do it or have done it and we know nothing at all about the future or the future of stock prices of any company nor why they are what they are, now.

The author retains all copyrights to his works in this blog and on this website. The Perpetual Bond®™ is a registered trademark and patented technology of The RiskWerk Company and RiskWerk Limited (“Company”) . The Canada Pension Bond®™ and The Medina Bond®™ are registered trademarks or trademarks of the Company as are the words and phrases “Alpha-smart”, “100% Capital Safety”, “100% Liquidity”,  ”price of risk”, “risk price”, and the symbols “(B)”, “(N)” and N*.