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The S&P TSX “Hangdog” Market

May 3, 2013

Drama. The S&P TSX appears to be confused. The market as a whole is down minus (-1%) to the end of April, which is an improvement over minus (-4%) less than a month ago, in contrast to the US markets which are up in the double digits; for example, the Dow is up (+13%) since December and the market of thirty companies is worth nearly three times as much as the entire Canadian market ($4.4 trillion versus $1.6 trillion); and the S&P 500 is up (+10%) and worth nearly eight times as much ($12 trillion versus $1.6 trillion), which is almost $2 trillion that has gone from low to high.

But, there’s a “Hangdog Aspect” to the Canadian market; that everything is up for sale at low prices getting lower – better to cash in now, they say, a bird in hand is better than two in the bush or under some rocks, so to speak – and invest our money where it can do some good – in the U.S. and China, which are buying up our resources and companies, and moving in their own.

There are lots of examples in these Posts that support that view; it  isn’t intentional – far from it – but the evidence of a faded and jaded market that trades for the sake of trading, and lacks purpose, is hard to escape. For example, the oil & gas industry is pulling in its horns and conserving its resources for future generations, we suppose; we could talk about RIM Research in Motion, but it’s better not to; and the same could be said for the Keystone XL pipeline; the “Ring of Fire” in Northern Ontario is but a glimmer in the swamp; uranium is selling for $50 a pound but a lot of it is foreign-owned anyway; there’s some interest in potash (by a hedge fund) but none in gold, silver, or copper, but the Americans like our railroads; and the iconic Canadian retail stores such as Loblaws, Canadian Tire, and The Bay, are trembling before the Target Corporation, as Wal-Mart before them; and there’s a fly in our coffee affecting Tim Hortons. Please use the Search box on our Post to locate companies by name, or part of it, and concepts such as oil, gas, gold, wood, retail, pharma, and so forth.

Despite all of that, there are over eighty companies in the S&P TSX with a total current market capitalization of over $800 billion, that are not just flotsam and jetsam on the tides of volatility and financial opportunism, and more are emerging as new balance sheets keep coming in for the rest of the year.

The Perpetual Bond™ in the S&P TSX has returned +13% since December, and just buying up a piece of all the companies with no management at all has returned +10% plus dividends, a more leisurely enterprise that would favour the $600 billion or so that is locked up in the Canadian Pension plans led by the patient money of the Canada Pension Plan Investment Board (CPPIB), the Ontario Teachers’ Pension Plan, the Caisse de dépôt et placement du Québec, the Alberta Investment Management Corp (AIMCo), the British Columbia Investment Management Corp, the Ontario Municipal Employees Retirement System, and the Public Sector Pension Investment Board, when governance and leadership of the Canadian capital markets becomes less of an issue for them, and investment success – we want to keep our money and obtain a hopeful return above the rate of inflation – becomes an even greater one under the precepts of “pay for performance”, only (please see our recent Post, (B)(N) ABX Barrick Gold Corporation, April 2013).

Exhibit 1: The Perpetual Bond™ S&P/TSX Companies – Cash Flow Summary – April 2013

S&P TSX Composite Companies - Cash Flow - April 2013

S&P TSX Composite Companies – Cash Flow – April 2013

The Perpetual Bond™ is a managed portfolio and we only buy and hold the stock if the stock price appears to be above the price of risk and for no other reason.

(Please Click on the Chart to make it larger if required.)

Please see our recent Post, Bystanders & Collateral Damage, April 2013, for more information on the price of risk, and for a recent summary of what we’re buying and holding now in all the capital markets, please see the summaries in The Wall Street Put, April 2013, which complement this one.

Exhibit 2: The Perpetual Bond™ S&P/TSX Companies – Portfolio Summary – April 2013

S&P TSX Composite Companies - Portfolio - April 2013

S&P TSX Composite Companies – Portfolio – April 2013

(Please Click on the Chart to make it larger, and again, if required.)

Postscript

We are The RiskWerk Company and care not a jot for mutual funds, hedge funds, “alternative investments”, the “risk/reward equation” and every other unprovable artifact of investment lore. We have just one product

The Perpetual Bond™
“Alpha-smart with 100% Capital Safety and 100% Liquidity”
Guaranteed
With No Fees and No Loads on Capital

For more information on RiskWerk, please follow the Tags or Categories attached to this Letter or simply enter Search for additional references to any term that we have used. Related data may be obtained from us for free in a machine readable format by request to RiskWerk@gmail.com.

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*.

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