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(B)(N) Dream Canada – Bombardier & Air Canada

September 28, 2017
Avro Arrow

Figure 1: Avro Arrow 1959 Only Mach 2 at 50,000 Feet

Drama. Canada has been trying to develop an aerospace industry for decades and apart from WestJet and Porter Airlines (which is privately owned), the magnates in Ottawa have only delivered the Avro Arrow fiasco of the 50’s somehow related to defense, and the lavishly financed Bombardier C-Series that’s already obsolete and has yet to fly anywhere, and Air Canada (right) when we might have just done the business as customers with money to spend and exports to offset them in a much larger industry in the US, Britain, France, Russia, China, Israel, and Brazil, any of whom would like to sell us the aircraft of our dreams at low and negotiable prices and we could use the money that we saved to get low and negotiable fares to anywhere.

And the customer is always right (Bloomberg, September 27, 2017, Bombardier Tumbles on New Blow to $6 Billion Bet-the-Company Jet) and always gets what they want eventually, but the government doesn’t get that and the industry and its shareholders, many of whom are in the US, have dutifully preyed on that romantic national and nationalized flight of fancy which now jeopardizes the fortunes of about 90,000 employees who have come to rely on those companies for their jobs and pensions.

And, so, in our view, Air Canada and Bombardier are “investments” only in the deep pockets of the government and the taxpayers as needed.

For example, Air Canada has never paid a dividend and can’t control its earnings despite steady revenues and it’s also slated to be a customer for up to 75 of said Bombardier C-Series aircraft (costing USD$6.3 billion which is more than 5× its net worth and half its total assets) which have never been flown in commercial traffic, and the management of Bombardier is totally opaque to anything but new owners and has paid “dividends” of $300 million against losses of ($11 billion) in the last three years; please see Exhibit 1 below (and click on it and again to make it larger as required).

Exhibit 1 Dream Canada - (B)-Class Portfolio

Exhibit 1: Dream Canada – Bombardier & Air Canada – Fundamentals

But the stock market is transparent and always an investment for us in troubled times and by betting on them (the shareholders) and how they choose to spend their money on “Dream Canada” in the stock market, we’re flying high at +1400% on our money in the risk market and an average of 60% a year for five years in the risk-free (B)-Class Portfolio for these two companies (please see below) and, after all, we’re Canadians too in pursuit of the “Dream Canada” but, alas, not a seat on Air Canada.

Dream Canada – Bombardier & Air Canada

Exhibit 2 Dream Canada - (B)-Class Portfolio - Cash Flow Summary

Exhibit 2: Dream Canada – (B)-Class Portfolio – Cash Flow Summary

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®™, 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*.

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