(B)(N) The Market At Rest

The Market At Rest…Waiting…Watching…

Drama. Investment success that is based on the calculation of “risk-adjusted” returns and “volatility” is just a matter of chance, and those who have had it (“success”) are best-advised to fill their pockets and leave – which they do (The Street, June 12, 2014, Kass:Turn, Turn, Turn).

But not everybody can afford to leave because “cash” is not much of an investment to the pension plans and endowment funds that are counting on income against the day that their cash is gone; please see our Post “(P&I) The Pensionnaires” for more details on that necessity. And for today’s early-bird victim of chance and necessity (The Associated Press, June 16, 2014, Greenpeace says rogue employee lost $5.2 million on currency hedge gone wrong). Sounds clever? And they say he was an expert, too, but what did he know about “investing”?

We don’t know when the market will turn, either, or where it will turn to, and your guess is much better than ours, because we have don’t have any money riding on it. But it’s still a guess, and we never guess because there are only three words that move us – safety, liquidity, and hope – and those who are guessing, and riding on chance, have only the last (hope).

While the “market” has been at rest, the companies in it – who are working – have already paid about $300 billion in dividends to their shareholders, which is pretty generous and amounts to nearly 40% of their earnings, after tax, and all we have to do is buy and hold their stock, at the right time. For example, the Perpetual Bond™ is currently holding ninety-six of the one hundred companies in the S&P 100, and that number is up from ninety-three in January, and the portfolio is also up, +10%, so far this year, and we’re not worried about the rest of the year; please see Exhibit 1 below, and for more of the all-market details, please see our recent Post on “(P&I) Bubblemainia and The Working Poor“.

Exhibit 1: Buying & Holding the S&P 100 – Risk Price Chart – June 2014

(B)(N) S&P 100 Companies – Risk Price Chart – June 2014

The S&P 100 in just the (B)-companies – those that there are trading at or above the price of risk, and only then – gained $2.9 trillion in market value last year, for an aggregate gain of +45%, and they also paid $245 billion in dividends for an aggregate return of earnings of 39%.

We don’t know when the next stampede will begin, but we can wait and can afford the stop/loss, if so it is, and our estimate of the downside in the market during the next quarter is (-7%) due to the demonstrated price volatility and uncertainty.

Indeed, it’s possible that the “market” will blow-up, and it could happen at any time, but what does that have to do with the companies in it, who are still working, and not waiting, and not watching? That’s right. Nothing. Or, possibly, the “market” is just waiting to pay more for the stocks that we already have.

What now? June has almost come and gone!

Please click on the links (and again to make them larger if required) for the current details of “(B)(N) S&P 100 – Prices & Portfolio – June 2014” and “(B)(N) S&P 100 – Portfolio & Cash Flow Summary – June 2014“.

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 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*.