Skip to content

(B)(N) And Then He Moved The Market

July 2, 2014
Investors and their Banners Not Safe. Not Liquid. Hopeful? Or Doubtful?

Investors and their Banners Not Safe. Not Liquid. Hopeful? Or Doubtful?

Drama. The market went up today and everybody is surprised because there are far more nay-sayers and finger-pointers than there are cheerleaders (Bloomberg, July 1, 2014, U.S. Stocks Climb to Records, Bonds Slip on Factory Data).

But we don’t know what the market will do tomorrow, and in the midst of all the prognostication and finger-wagging and doubt, all that we can say is that the market did not decline today, and the reason is that there is more demand for these stocks, at these prices, than there is supply. Add a little new money with no place else to go, and it’s less likely that prices will go down.

Please, sir, I want some more - Charles Dickens 1838 Oliver Twist

Please, sir, I want some more – Charles Dickens 1838 Oliver Twist

Nevertheless, there are as many ideas on what to buy and sell, and when, as there are people doing it, no matter what school they’re in, and although it seems pointless (but not hopeless) to invest our money in the stock market in order to have a better chance of losing it, that’s still a rare thought, and we never hear the words safeliquid, and hopeful outside of these Posts.

And to see if we’re keeping up, and actually getting more today, and playing in the big-leagues for keeps, we took another random sample of fifty-two companies from “The Easy (EC) Theory of the S&P 500 NYSE” in which there are over 500 companies that have only three things in common; their market value is less than $100 billion, they pay dividends, and they have either a Company E (α=1) or Company C (α>1) modality.

With those criteria, the companies are all the same to us – we don’t know what they make or do – and although we might construct a portfolio that doesn’t keep up with the market, we can’t construct one that loses money, and even if we scramble them, they still come up eggs because the portfolio respects the “societal norms of risk aversion and bargaining practice” – it’s built-in to the modality and actioned by the price of risk – safe, liquid, and hopeful – those are the words that move us, and the only banner that we fly; please see Exhibit 1 below.

Exhibit 1: The (Small) Easy (EC) Theory of the S&P 500 NYSE – Fundamentals – July 2014

Summary The (Small) Easy (EC) Theory of the S&P 500 NYSE - Fundamentals - July 2014

Summary The (Small) Easy (EC) Theory of the S&P 500 NYSE – Fundamentals – July 2014

The (Small) Easy (EC) Theory of the S&P 500 NYSE - Risk Price Chart - July 2014

Figure 1.1: The (Small) Easy (EC) Theory of the S&P 500 NYSE – Risk Price Chart – July 2014

The (Small) Easy (EC) Theory of the S&P 500 NYSE - Fair Value Chart - July 2014

Figure 1.2: The (Small) Easy (EC) Theory of the S&P 500 NYSE – Fair Value Chart – July 2014

The portfolio on the left (Figure 1.1) looks to die for, but it’s just one of billions that we can pull out of our database of companies that all have the same criteria: the market cap is less than $100 billion (leaving room for growth), they pay dividends, and they have a Company E or C modality.

The portfolio is equal weighted by value in 2011, and buy and hold with no changes since then, but it was up +14% in 2012 and +33% in 2013, and a modest stop/loss policy, or sell if the price drops below some number, kept it’s value in cash or stocks, and kept most of its dividends because there were only six sell triggers (based on the price of risk) in 2012 and nine in 2013.

The Perpetual Bond™  (Figure 1.2) in the same companies returned +46% in 2012 and +42% last year, and is up another +14% so far this year; these companies also paid $25 billion in dividends to their shareholders last year for a return of earnings of 40% and a dividend yield of 2%; please see Exhibit 1 above and click on the links “The (Small) Easy (EC) Theory of the S&P 500 NYSE – FundamentalsPrices & PortfolioPortfolio & Cash Flow Summary” for further details.


What else can we do for you?

We also note that the (N)-company portfolio (Market Value (N) in Figure 1.2) is included in the buy and hold portfolio (Figure 1.1), but sold out of the Perpetual Bond™ as required by the stop/loss which is always between the price of risk and the stock price for the (B)-companies while they are (B)-companies; there is no effective stop/loss policy for the (N)-companies because they are trading below the price of risk which means that there is an excess of supply over demand at those prices and, therefore, that they are still “overvalued” even at those prices.

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.


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
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


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*.

No comments yet

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: