(B)(N) AC Air Canada & Friends

The Fundamentals

Drama. Canadians are paying the highest rates in the World for international air travel and the real-time estimate is about US$100 per 100 kilometers and so we’re paying about $500 per hour for a really unpleasant experience at 30,000 feet in a cold air-compressed cannister ploughing through the hopefully clear blue sky to our destination and even more hours at the airport (The Huffington Post, September 6, 2016, Canadian International Air Travel Is The World’s Most Expensive: Survey).

We could go to the US and get a much cheaper rate on long flights, about US$100 per hour and only US$18 per hundred kilometers. And maybe that’s the solution in Canada – we only do short-hops, under two hours, and longer flights, cross-country, only in 1st Class at popular prices and only when the flight is booked full enough to be “economic” and it’s not run to save somebody’s imaginary “schedule”, which is not the case now in any case despite their claims for convenient, on-time and glamorous “air travel”.

Vertical Seating

They are working on other solutions such as “vertical seating” and maybe walk-on and walk-off like on a subway train isn’t all that bad for most of us, but this current drama with air travel needs to end.

And we have cause to wonder why it hasn’t changed, and why it’s getting worse, and why Canadians are paying so much for it in more ways than one.

But we figured it out. Unlike the legend, if we don’t like the company, we buy its stock because the stock price is almost certain to be volatile, if not destined for bankruptcy, and the investors don’t know how to price it, and that’s exactly what happened here.

While the investors were checking in and out and looking at their flight schedule, we ran the (B)-class portfolio on the two major Canadian airlines, Air Canada and WestJet, and we took home +600% on our money, as good as cash and as safe as cash in the bank, out of their pockets and it’s good for +685% at the current market prices but we don’t count on those because we got +52% per year for five years on what is effectively our bank chequing account and always as good as cash.

And for all of that, we made only twelve decisions in five years and seven of them were buys and five of them were sells and these latter weren’t made by us, but by the market.

And our conclusion is that these airlines don’t exist for the benefit of passengers but that they exist for the benefit of the stock market and since they’re not going to fly us anywhere, anyway, that’s the only reason that they exist. Pity. Please see Exhibit 1 below for our flight plan (and click on it and again to make it larger as required).

Exhibit 1: (B)(N) Air Canada & Friends – Cash Flow Summary

For more examples of the (B)-class portfolio in difficult markets, please see our recent Posts on”The “W” Syndrome“, Steel,  Green Energy and The Coal War which is heating-up again now; and the Canadian Mines have also taken-off – please see our recent Post “(B)(N) Extreme Economics – The (New) Canadian Mines” for a heads-up on that.

And for more information and examples of the Free Market Yieldand 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*.