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(B)(N) The Stock Market Is Always Cheap

October 10, 2014
Growling Bear

The NASDAQ is not the NASCAR

Drama. Investors are having a busy weekend and they’re worried about Monday, October 13, 2014. Will it be another day of infamy, the like of which we haven’t seen in five years? Five years to get ready for it, and only 48 hours to wait for it, and it might be gone in 60 minutes (Business Insider, October 10, 2014, STOCKS CRUSHED, DOW FALLS 335: Here’s What You Need To Know).

We’re not going to be popular for our view, but they ought to know that investing is not the Olympics, and that the NASDAQ is not the NASCAR (two of the letters are different, but please check out the links if still apprehensive).

Figure 1: The Bull Chase and The Bear Embrace

Figure 1: The Bull Chase and The Bear Embrace

But we’ve been waiting and ready for this day every day since 2009, and it shows in the chart on the left as the number of “deemed” investment grade (B)-class companies has risen, and risen, and risen, and … (wait for it) is now falling – but how far will it fall, if at all?

And that’s what really worries them – it might not fall far enough, fast enough, and their cash positions (net of the margin accounts) are just “money” but the price of stocks and income is still rising (possibly), and where is the “recession” when we need it?

Figure 2: S&P 500 What are they buying?

Figure 2: S&P 500 What are they buying?

Despite the Dow up +50% and the S&P 500 up +50%, and so forth, the companies that they’re buying and selling have hardly changed at all – please see Figure 2 on the right – and they’re not going to change this weekend, or the next, or the next two years, no matter how many fans, or not, they have on Wall Street.

The companies are growing at 3% rates, but the investors are “growing” at 15% rates, and don’t want to miss anything, we guess.

Figure 2: The God Stock Does Not Reward Risk

The God Stock Does Not Reward Risk and Investing Is Not A Trial

And most of them won’t miss anything, but their money; please see our Post on “(P&I) The God Stock (Econo-speak)” for the reason why.

And for more information and background, please see some of our recent Posts such as “(B)(N) NYSE Pulp Fiction” or “(B)(N) BlackRock’s Broken Bond Market” and we like the income stocks in “(B)(N) More Money, Please (REITS)” for all seasons.

And for more information on the “Five Equations of State”, and an introduction to the terms that we have used here, please see our Post “(B)(N) Through the Looking-Glass“, and for the really hard rocks, the Theory of the Firm which is based on The Process.

And for more information on real “risk management” in modern times and additional references to the theory and how to read the charts and tables, please see our Post, The RiskWerk Company Glossary and “(P&I) Dividend Risk and Dividend Yield“, and our recent Posts “(P&I) The Profit Box” and “(P&I) The Process – In The Beginning“; and 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, such as “(B)(N) TLM Talisman Energy Incorporated” or “(B)(N) ATHN AthenaHealth Incorporated” or “(B)(N) PETM PetSmart Incorporated“, to name just a few.

And 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 on what risk averse investing has done for us this year, please see our recent Posts on “(P&I) The Easy (EC) Theory of the Capital Markets” or “(B)(N) The Easy (EC) Theory of the S&P 500“, and the past, 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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