(B)(N) Buy Canadian! Please

What are you doing over there in Canada?

Drama. This is not a bad time to “Buy Canadian” with our US dollars and Euros or Yuan, and it’s never a bad time to be an investor if we can afford it and are allowed to export some of our foreign capital for investments in Canada or anywhere else because there is more money afloat in the World than investments that might give it value and an income.

The Canadian dollar is trading at a 20% discount to the US dollar – and could go still lower if the World shuns their exports – and the top Canadian companies certainly aim to please by returning about 58% of their earnings and a current dividend yield of 2.9% to the shareholders, and they might get a boost by rising consumer price inflation in Canada and lower prices for their export goods in many foreign markets although it must be said that everybody wants to sell abroad; please see below for the Export News.

Investing in the stock market is the easiest way to acquire an interest in foreign businesses and we’re willing to hold thirty-seven of the top sixty companies in Canada and that’s down from forty-six last year, but these companies gave us capital gains of +27% in 2013, +25% last year, and are up another +4% so far this year in the managed (B)-class portfolio which never loses money – it’s in our “jeans” and that’s the DNA of it just as some companies are (B)-class and others are not – we’re “stock pickers” and we like the tangibility of dividends and capital gains and liquidity when we need it and don’t like being whipsawed by the latest economic forecasts and short derivative traders who tally the future in basis points.

Earnings 50% off – In Stock – While They Last

Moreover, these companies currently retail for about $1.5 trillion and they produced $84 billion in earnings and losses of $10 billion for a net of $74 billion which is about twice the combined earnings of the Dow Transports and the Utilities for the same price ($1.2 trillion) after the discount which can be used in Canada to buy even more of these companies.

The S&P TSX 60

We divided the sixty companies of the S&P TSX 60, excluding only the combined Tim Hortons and Burger King which is now QSR Restaurant Brands International but still hasn’t published its balance sheet and is majority-owned by 3G Capital which knows how to butter its own bread, into the “We Have What It Takes” and the “Have Nots”.

The “Haves” are the banks, insurance companies, food chains and some retail, the railroads, some manufacturing, and a few resources companies; the “Have Nots” are almost all the other top resources firms and an engineering firm and a would-be airplane manufacturer that can’t quite get off the ground.

And there’s quite a difference between them which is not picked-up by the assorted index funds and ETFs which just divide the difference and call it a day; our prognosis might seem harsh but we’re talking about our money here and we believe in 100% capital safety and a hopeful return above the rate of inflation which is not too much to ask from our investments because a lottery ticket is far less dear but far too hopeful; please see Exhibit 1 below for a brief run-down and Exhibit 2 and 3 below for the whole story.

Exhibit 1: (B)(N) The S&P TSX 60 “Haves” and “Have Nots”

Figure 1.1: (B)(N) Buy Canadian – Risk Price Chart

Exhibit 2: (B)(N) The S&P TSX 60 “Haves”

Figure 2.1: (B)(N) Buy Canadian – Risk Price Chart – The Haves

Exhibit 3: (B)(N) The S&P TSX 60 “Have Nots”

Figure 3.1: (B)(N) Buy Canadian – Risk Price Chart – The Have Nots

The Export News – Buy Canadian! Please

The tables above, particularly Exhibit 1, show that it has been difficult to obtain a reliable investment return and income in the Canadian resources sector; we might think that the low demand for commodities is temporary but the evidence suggests that it is permanent and that the production and consumption patterns of World resources has changed because of the development of viable economies in parts of the World that had none fifty years ago, and not much as recently as twenty years ago.

Figure 4: What makes you so special?

In such a World, this World, it is the productivity of the people that will provide enduring prosperity and there are only fifteen countries with a population of between thirty million and fifty million which is similar to Canada’s at 34 million, and of these, Canada, Poland, Spain, and South Korea have surprisingly similar economies, but there are others such as Argentina, Iraq, and the Ukraine that might cause us to wonder what the differences are and how we might avoid those problems; please see Exhibit 4 on the right.

And the Canadian market isn’t big enough to take more than $1 trillion in new investment; for example, $1 trillion into the S&P TSX 60 would nearly double their price but not the earnings and the companies can only benefit if they are willing to sell new equity into that market – should they have a need for money, which is less than clear (The Guardian, January 27, 2015, Davos is starting to get it – inequality is the root cause of stagnation and Reuters, January 26, 2015, How Draghi got divided ECB to say ‘yes’ to money-printing).

For more information on The Barometer, foreign economies and trade, please see our Posts “(P&I) The World Trader’s Almanac” , “(P&I) The One World Food Bank” and “(P&I) La Francophonie & The Commonwealth“.

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 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*.