(B)(N) What’s A Girl To Do?

Born to do it!

Drama. According to Wall Street, she was “born to do it” so we thought that we should take a look at what she was “born to do” according to Wall Street and we ran a few of the World’s Favorite All American Mutual Funds and ETFs as a (B)-class portfolio .

The reason that works is “complicated” but it’s the same reason that we can ride our bicycle by just pushing-off (we have some money to invest), peddling (work and save some more), and looking straight ahead (don’t check the daily stock prices or we’ll lose our grip) and we can explain all of that in detail using the Theories of Conservation of Energy, Momentum and Gravity (sic) or, in our case, the Theory of the Firm.

And a mutual fund or ETF is just a “company” in the sense of the Theory of the Firm because it has you, the customer, and your money, which you gave to them to “manage”, and you are now both the customer and the “product” until you get it back (possibly).

The Toll Gate & Rent Collectors

Our relationship with mutual funds is a strange one in a business sense because the fund is “renting” our money (the property) and we’re paying them to do it (MERs and assorted “loads” or lock downs) but there are no guarantees at all (notwithstanding the insurance companies segregated funds) that we’ll get our property back even in the case of fraud, neglect, or recklessness.

On the positive side, we did what few customers do – we bought $5,000 of each of the six top-rated mutual funds (top-rated by funds under management, currently $1.3 trillion (AUM)) and the funds increased our money by +77% in five years since early 2012 (and we now have $54,747 and we can get it tomorrow if we want to) which is an average of 13.75% per year and sure beats our government bonds and GICS.

That result ought to be surprising because the fabled Berkshire Hathaway did about the same: +85% since early 2012 and an average of 15% per year in the same time frame and the investment methods (or sense and technology) are completely different to the point of antithesis and it’s important to know that there are as many reasons for a stock price as there are investors and how much money they have to spend on their idea (The Tao of Stock Prices).

Houston, We Have A Problem

But there is a problem – they (and neither has Berkshire Hathaway) haven’t made any money for us in the past twelve months; that is, they haven’t paid their rent (or ours), and we don’t know what they’re going to do in the next twelve months (only what they did in the last five years) and neither do they, other than what they’ve always done (it’s in the contract which they call a prospectus); please see Exhibit 1 below for the rough landing of your 401(k) plan (and click on it and again to make it larger as required).

Exhibit 1: Houston, We Have A Problem

For more examples of the (B)-class portfolio in difficult markets, please see our recent Posts on Green Energy and The Coal War.

And 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 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®™, The Medina Bond®™, The Barometer®™, the Free Market Yield®™ and Extreme Economics®™ 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*.