What’s A Girl To Do?

Drama. The Street has valiantly offered us lots of good investment advice that is based on decades of market history, their own experience and the experience of other great investors (The Street, October 25, 2013, Cramer: You’re Investing, Not Running the Company and November 5, 2013, Kass: Emotion Begets More Volatility and November 6, 2013, Blankenhorn: SAC Capital is finally busted).

We Are Armed To The Teeth But Where Is The Enemy?
Courtesy: The Walt Disney Company

But now that we are armed to the teeth, what weapon shall we use? And where is the enemy?

In our view, many successful investors will use whatever weapon they feel comfortable with – what they believe should work – because it’s their money (their own or fiduciary), after all, and that usually means that they will choose a weapon that they think is at least as “smart” (prescient), or smarter than the next guy’s, or at least some of the guys in the market because they think that they are in competition for the other guy’s money.

They want to be there first, and early, so that what they bought at a “low price” can only be purchased for a “higher price” later, and we think that’s a fair description of “value investors”, “active managers” and many hedge funds that work macro-economics or specialized “tools” such as micro-arbitrage. And it also describes speculators.

Trench Warfare
It Didn’t Work Then Either

Another class of investors – a large class because it includes most pension funds and mutual funds and it’s not their money but ours – has dug trenches and entrenched themselves (and their jobs) with dependence on the variance and co-variance (volatility) of stock prices or earnings returns and partitioned the market into “systematic risk” which they think that they can’t control (such as wars, depressions, and so forth) and “unsystematic risk” or “diversifiable risk” which they think they can.

Oddly enough, the first method makes enemies of our friends – those who might want to buy our stock later and still have money – and the second makes enemies of the markets and of economics, generally, both of which we hope to profit from.

The Value of $1 Since 1776
The Enemy

But none of these, neither friend nor foe nor markets, is the enemy. The enemy is that if we invest our money, we might lose it to the “smarter, faster or more empowered guys” and if we don’t invest our money, then we will surely lose it to inflation.

Moreover, we can show that none of the above methods actually works and defeats the enemy on a portfolio basis, that is, we want our money to be safe – 100% capital safety – and to obtain a hopeful but not necessarily guaranteed return above the rate of inflation.

And we’ve shown that we don’t have to dig trenches in order to “make money” in the stock market. When last we looked, companies do that for us.

What’s Working In America – October 2013

For more information and additional references, please see our recent Post, The RiskWerk Company Glossary.

And for more on what risk averse investing has done for us this year, please see our recent Posts on The S&P TSX “Hangdog” Market or The Wall Street Put or specialty markets such as The Dow Transports & Utilities or (B)(N) The Woods Are Burning, or for the real class action, La Dolce Vita – Let’s Do Prada! and It’s For You, Dear on the smartphone business.

And for more stocks at high prices, The World’s Most Talked About Stocks or Earnings Don’t Matter – NASDAQ 100.

And for more on what’s Working in America, Big Oil, Shopping in America or Banking in America, to name just a few.

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*.