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(P&I) Sanctification

March 7, 2014
An Investment Is Just And Only The Purchase Of Risk

An Investment Is Just And Only The Purchase Of Risk

Essay. Human beings have always tended to “sanctify” or “deify” what they don’t understand and can’t dismiss as bunk or of no effect and not to be feared. That is no less true now in the 21st century than it was in the 1st century and the millennia before that, with devastating effect time and time again and what we most feared comes to kill us by our own hands (Reuters, March 1, 2014, Buffett says more bad news on pension funds during next decade).

We can avoid that fate in our investments by dismissing most of what passes for “investment knowledge” as bunk. The issue of an investment is not how “good” it is or what it might do for us in the future, but how good are we and how good are we now?

An “investment” is just and only the “purchase of risk” and the risk is not that its value might fluctuate from time-to-time or even daily, but can we get our money back when we need it and a hopeful but not necessarily guaranteed return above the rate of inflation when that time comes.

Unless we are extremely bad planners and don’t know what to expect even tomorrow, then the policies of risk management by volatility management and diversification are of no effect and demonstrably, not even effective. They don’t work, in other words.

Efficient Frontier (B)(N) Boundary Open

Efficient Frontier (B)(N) Boundary Open

That is the basic thematic material of these Posts and it cannot be said that pension planners and their consultants have not had a fair chance to learn it.

For more information on “risk management” and additional references to the theory, 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 actionLa 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 AmericaBig OilShopping 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*.

2 Comments leave one →
  1. March 11, 2014 10:02 PM

    do you mind if I tweet this post?

    Like

    • March 12, 2014 12:19 AM

      Please do! It’s probably my best description of the human condition for which we could do better. Best regards, Ernst.

      Like

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