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(P&I) Extreme Economics – The Hitchhiker’s Guide To Fine Cars

September 10, 2015
Enzo, Wash Me!

Enzo, Wash Me!

Drama. Can we make money by driving a fine car? No but can we make money by investing in the World Autos? Maybe but we need to be careful in what we drive and when  – in the (B)-class or think about walking – and they’re trading today at junkyard prices.

But the World still turns on two axles and four wheels and there’s a change afoot and we might not recognize this industry in twenty years (Reuters, September 7, 2015, Fiat Chrysler CEO says pursuing merger with GM a ‘high priority’ and Oil prices fall on global oil glut fears, weaker U.S. jobs data) and we need to be thinking about a World in which the cars drive themselves and also park themselves … for refueling … at home … while we work … at a job that doesn’t exist yet … and pick us up later.

That’s a scary scenario because it’s unfamiliar but the problem for investors is still the same as it’s always been – how do we obtain an income from money – and our answer has been to look to the entire World for it and not just in our neighborhood because there are 7 billion people on the planet who have that problem and it’s only in their enterprise that there is a solution (notwithstanding other “popular” and well-worn solutions such as war, conquest, famine, and slavery of one type or another).

World Autos only has about a dozen companies in it and they’re all based in the US, Europe, and Japan, and the US is the smallest of these three markets based on both the total assets ($2.1 trillion) and the market value ($700 billion) which is quite a change from 1950.

Moreover, the entire industry is capitalized at less than half of World Oil ($4.4 trillion) and half of World Telecoms & Telekoms ($4.2 trillion) and it has only 1/6th of their combined market values which might be compared to the rent that we need to pay for World Enterprise despite millions of employees and hundreds of millions of customers who are typically also spending 1/6th of their incomes to buy and hold one or more of these cars; please see Exhibit 1 below for more information (and click on it and again to make it larger as required).

But with a little bit of investment management, we can buy not only the cars but the companies that make them and we can do it with other people’s money that they don’t have anymore and maybe they’re having to walk again to the Portfolio Management School (PMS) in their neighborhood; please see Exhibit 2 below for The Hitchhiker’s Guide to the Price of Risk and it’s not first time that we told them about that.

Exhibit 1: (B)(N) World Autos & Fine Cars

Figure 1.1: (B)(N) World Autos & Fine Cars

Figure 1.1: (B)(N) World Autos & Fine Cars

Exhibit 2: (B)(N) The Hitchhiker’s Guide to Fine Cars & the Price of Risk

Figure 2.1: (B)(N) The Hitchhiker's Guide to Fine Cars

Figure 2.1: (B)(N) The Hitchhiker’s Guide to Fine Cars

For more information and examples of the Free Market Yield and the terms that we have used above, please see our Posts “(P&I) The Dismal Equation (Ecclesiastes 9:1)” and “(B)(N) S&P 100 Volatility Risk and The Full Moon” and “(B)(N) NASDAQ 100 Volatility and The Stone Bunnies“ and for an introduction to The Barometer “(B)(N) What’s A Girl To Do” or “(P&I) The Swiss Franc Debacle“.

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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