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The S&P TSX “Hangdog” Market

August 10, 2013

Drama. Money continues to be on the run. After ten years of money making money on money, it has no place to go for safety and refuge (Reuters, August 7, 2013, Bank of England ties rates to jobs, markets unconvinced).

No Good, DOA & 0% unless it’s stolen, spent, or invested.

It’s money without borders and there is an estimated $800 trillion afloat in government bonds and collateralized and securitized debt (derivatives), or about ten times the global GDP, and forty times the cash in bank deposits and circulation, and twenty times the worth of the global equity markets.

Shilling Less One Pence

Shilling Less One Pence

That’s a lot of homelessness, and if our governments aren’t willing to pay for it (ibid, Reuters) – wisely, we think, because money making money on money debases the currency akin to “clipping” – neither should we, the taxpayers and “hewers of wood and drawers of water” (Joshua 9:23 and Cardus, Public Policy, November 29, 2012) who would be investors – we want our money to be safe – 100% capital safety (no clipping) – and to obtain a hopeful but not necessarily guaranteed rate of return above the rate of inflation, whatever its cause.

Our New Jackets
Bespoke On Wall Street

But there’s no safety in the herd as the market for money invested in money continues to deflate or blow hard from day-to-day (Reuters, August 7, 2013, TSX hits near four-week low on renewed Fed concerns and August 8, 2013, China data fuels biggest TSX jump in four weeks).

Moreover, the global market in commodities and industrial products and services is a demand-side market, and there are some who might be aggressively reactive to it (Reuters, August 7, 2013, Glencore, JPMorgan sued over warehouse aluminum prices) and others who will be proactive and take the long view (Reuters, August 7, 2013, BHP CEO says taking long view on potash).

We don’t know how the bond people are doing – probably not too well if they are still hoping for a few basis points from the government – and the hedge funds are being clipped as usual by being cleverly short on the long portfolio in the burgeoning U.S. markets and they too are longing for the “flight to safety”.

B

The Perpetual Bond (B)

But the Perpetual Bond™ (B) that we started in the S&P TSX in September last year has returned +27% since January (and +33% since September) and the leveraged portfolio on the same stocks (using only the margin account) has returned a staggering +75% since January and it is, of course, still fully invested with our usual price protection in force.

Please see Exhibit 1 and 2 below.

N

The Contra Portfolio (N)

Just as significantly, the Contra Portfolio (N), consisting of the more than one hundred and fifty stocks in the S&P TSX that we did not buy under The One Rule, has returned a tepid +1% and has varied, in aggregate, between ±1% for the entire year, and since September 2012, although there have been a few bright spots (about fifty with positive returns, such as Air Canada (+60%) and Bombardier Incorporated (+45%), among others) within the portfolio due to noise investing or transient circumstances.

Exhibit 1: S&P TSX Perpetual Bond™ (B) – Cash Flow ($000) – August 2013

S&P TSX Perpetual Bond - Cash Flow - August 2013

S&P TSX Perpetual Bond – Cash Flow – August 2013

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

Exhibit 2: S&P TSX Perpetual Bond™ (B) – Portfolio ($000) – August 2013

S&P TSX Perpetual Bond - Portfolio - August 2013

S&P TSX Perpetual Bond – Portfolio – August 2013

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

For more information on the chart elements, please see our previous reports, such as The Wall Street Put in April and March, or The Dow Transports & Utilities in June.

However, we can say that: The RiskWerk Company ran a portfolio of about eighty big-cap stocks in the S&P TSX that returned +75% in capital gains, plus dividends because nearly all of these companies pay them, in a hollow market that nobody else likes and which has returned +1% in the same period of less than eight months. Moreover, The RiskWerk Company keeps everything that it gets and knows exactly how to get it.

As an investment haven, the Canadian market is currently valued at about $1.5 trillion and is too small and an unlikely host for even a small fraction of $800 trillion that needs re-settlement, and the growth and demand possibilities of its 35 million people cannot be compared to those of China or India or Southeast Asia, Africa, or South America.

America Movil SAB

But we know how to take care of business at home and can still diversify into foreign markets that we know nothing about and that do not respect the “Risk/Reward”Equation either but will demonstrate the societal norms of risk aversion and bargaining practice – theirs – unavoidably (Reuters, August 8, 2013, Brazil’s Cosan cuts investments after surprise loss).

For more information on the Canadian market, please see our recent Posts such as Black Gold In The Canadian Oil Patch in April, or The All Canadian Four Play in October, 2012, and try the Search command for any term or company such as “gold” in Extraterrestrial Funds (ETFS) in March.

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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