TROUBLED TIMES? ASSESSING FINANCIAL AND STABILITY RISK IN THE STOCK HOLDINGS
FUNDAMENTAL RISK ANALYSIS OF PORTFOLIO One of the reasons I am comfortable holding such a large percentage of my wealth in risk assets is that those companies are conservatively financed, and the underlying businesses are sound and will not fail if there is a large external shock. Here I look at the businesses, not the expected share price reactions, which could, and probably will, be significantly disassociated from the underlying business, at least for a while, if stress and uncertainty hit the market. With the bond market again under some weakness, with yields rising and areas of uncertainty in geopolitics and high worldwide debt levels, financial stability is worth another look. The first part of the analysis examines the traditional measures of debt. Of course, these measures of risk analysis are closely tied to the inherent volatility and riskiness of the underlying businesses. That is, what are appropriate debt levels for some businesses are not appropriate for other...