(B)(N) The Buzz Beat & NINJA Gold

Figure 1: NINJA Gold ETF

Drama. The rush to green (the buzz) has a lot in common with the rush to green energy and the money is moving fast from one investor to another – and to the lucky ones who are left standing – because these companies aren’t making any money and they take “NINJA” (no income, no job, no assets) to a whole new level – no income, no assets, no inventory, no plant (or plants), no net worth, no debt, no dividends and a colorful name such as CannLabs.com (now for sale).

And there’s no health warning on these stocks but they’re registered for sale on the stock markets in New York and Toronto and, in some cases, internationally in Britain, Germany, and Australia, with a current market value of about USD$115 billion which is up three-fold since 2012 as well as the number of companies in this market that we might buy and sell (and there’s even an ETF for the really dumbfounded who don’t know what to do with their money; please see Figure 1 above).

Nor are we just lucky because the (B)-Class Portfolio in this market is pulling down more than +70% per year no matter what they do next and we’re currently invested in ten companies that have some substance (total assets greater than $100 million or market value greater than $50 million) and represent most of the market ($115 billion) and fifteen companies that have no substance at all and have lost money every year and last year they lost ($322 million) but still have a current market value of $3.3 billion.

We’ll call the first group of companies “The NINJA Gold” (some substance) and the latter, “The NINJA Gold Dust” (no substance at all) but the shocking result is that the average returns are similar and it doesn’t matter very much whether we’re working only the long portfolio or the long and short portfolio because it’s the investors who make this market and it has next to nothing to do with the companies themselves as long as they have a good story.

Figure 2: ACB Aurora Cannabis Incorporated (B+)

As an example of how unfair this is, consider ACB Aurora Cannabis Incorporated which used to be a mining company but then started producing and selling dried medical cannabis for direct delivery and which was trading at $0.03 per share when we bought it using the usual Risk Price < Stop/Loss Price < Ambient Stock Price arbitrage in 2014 for the (B)-class portfolio and today we’re still holding it with a stop/loss price of $2.50 which we could raise to $2.60 if the market for it holds and we’re not stopped-out; please see Figure 2 on the right (and click on it and again to make it larger as required).

The NINJA Gold Dust

Canada (like Uruguay) expects to fully legalize cannabis products (which are basically a fruit) next year and sell it wherever for what they presume might eventually be a taxable revenue of about $20 billion a year plus a happier electorate and maybe a booming tourist business in Niagara Falls even as they’re butting-out our old-fashioned cigarettes and cigars and raising their prices.

And pot is also big in about twenty-eight states and the District of Columbia in the US in which it’s “legal” despite lingering Federal sanctions and a lot of enforcement problems with illegal grows (The Atlantic, March 31, 2017, Illegal Pot Farms Are Poisoning California’s Forests).

The market segments into bio-pharmas which are developing and selling products for medicinal uses and they could also either buy product from growers or buy the growers; growers who are operating farms or green houses; suppliers for grow fertilizer and other equipment; and recreational use growers and suppliers, usually with an e-product catalog and Internet presence.

Exhibit 1: NINJA Gold Dust – (B)-Class Portfolio – Cash Flow Summary

The NINJA Gold

Exhibit 2: NINJA Gold – (B)-Class Portfolio – 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, UFOs and the High Flying Techs, 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 as well as The Great Rotation & Twenty Hot Canadians 2017.

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*.