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(B)(N) What’s A Girl To Do?

June 4, 2014
Not Safe, Not Liquid, Not Hopeful - in any weather. Could it be a "mutual fund"?

Not Safe, Not Liquid, Not Hopeful – in any weather. Could it be a “mutual fund”?

Drama. We have been regaled again by yet another investment professional with twenty-years of experience who still thinks that “mutual funds” are the way to go (U.S.News & World Report LP, May 30, 2014, How to build an all-weather mutual fund portfolio).

And we are offended because it is well-known that there are only three words that move us – safe, liquid, and hopeful – none of which they used and none of which are assured by any mutual fund – go ahead, let us ask for our money – and which are being saved from “extinction” only by their colourful brochures and “confidential” salespersons.

In contrast to rain (and “volatility” and the “Black Swan“), the Dow Transports need to go about their business regardless of the weather, rain or shine, and the delivery of higher stock prices is not really a part of their regular freight, but they did it anyway.

Maybe tomorrow will be a better day?

Maybe tomorrow will be a better day?

And, in general, we have found that we are much better-off  by just buying and holding the stocks of all of the companies in a major market, of which there are several, and we have found that, indeed, that is such a “stupid policy” that so defies the entire investment industry, that it’s bound to work for almost anyone – safe, liquid, and hopeful – those are the words that move us; please see Exhibit 1 below.

The “stupid policy” in which we just owned the stocks, equally weighted by value, of all twenty-one companies in the Dow Transports last year, returned +44% last year and has a current dividend yield of 1.4% even at these high prices; however, that policy is easily defeated by any mutual fund, even today, with more than fifty-years of industry experience behind it.

Or is it just fifty-years of one year’s experience, for which investors and savers “paid” a dividend in excess of $200 billion last year (U.S.News & World Report LP, May 15, 2014, Avoid supporting your fund manager’s lavish lifestyle)?

The Perpetual Bond™ is more “dynamic” and “under control” and “defensive”, responding more attentively to the “Prime Directive” – safe, liquid, and hopeful – and it returned +57% last year and currently holds nineteen of the twenty-one companies, and is up another +20% so far this year; there aren’t any mutual funds that did that last year, nor are there any (to speak of) that have ever done it, or are likely to know how to ever do it, regardless of the weather.

Please click on the links (and again to make them larger) for all the details “(B)(N) The Dow Transports – Prices & Portfolio – June 2014” and “(B)(N) The Dow Transports – Portfolio & Cash Flow Summary – June 2014“.

Exhibit 1: The Dow Transports – Fundamentals – June 2014

The Dow Transports - Fundamentals - June 2014

The Dow Transports – Fundamentals – June 2014

(B)(N) The Dow Transports - Risk Price Chart - June 2014

(B)(N) The Dow Transports – Risk Price Chart – June 2014

There are other distinctions, too, besides real all-weather service.

The industry is heavily leveraged with a current and long-term debt of $244 billion, which is more than twice their net worth of $103 billion; please see Exhibit 1 above and click on the chart (and again) to make it larger.

However, the return on the net worth was 28% last year, and the Coase Dividend is currently valued at $51 for $1 of the Coase Dividend, which is about twice the going rate in the Dow Industrials and the S&P 500 companies, and these companies, in aggregate, are “winding-up” with an expected future value of $353 billion (net worth, N*) if they just keep on doing what they’re doing, day-in and day-out, Monday through Friday, through all weathers.

For more applications of these concepts please see our Posts which rely on the Theory of the Firm developed by the author (Goetze 2006) which calibrates The Process to the units of the balance sheet and demonstrates the price of risk as the solution to a Nash Equilibrium between “risk-seeking” and “risk-averse” investors within the demonstrated societal norms of risk aversion and bargaining practice. And for more on The Process, please see our Posts The Food Chain and The Process End-Of-Process.

And for more information on real “risk management” and additional references to the theory and how to read the charts and tables, please see our Post, The RiskWerk Company Glossary; we’ve also profiled hundreds of companies in these Posts and the Search Box (upper right) might help you to find what you’re looking for.

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*.

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