Sisyphus is not myth 2

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Page 1 of 4 February 2013 © Copyright StockTakers Limited, All Rights Reserved. Copying Prohibited.
The author does not provide investment advice. In order to use reproduce or convey the material herein,
in any way, written agreement must be obtained from the author or its agent Architypes Inc.
StockTakers Limited is an Alberta corporation providing information on “likeables” equities.
StockTakers Limited encourages your seeking tax law advisor for capital gains tax dispositions.
Man Bites Man! Sisyphus Is No Myth, #2?
The progressive increase in pension contributions has happened over decades and will continue
quietly increasing on our pay stubs, just as employers will complain of their increasing burden to
match half. The reality is now one of every 9.5 dollars we create through our employment is
consigned to pension fund coffers, a 7.9% increase in 2 years. Every dollar lost in ineffective market
myths requires we make another 9.5 more to replace it. Sisyphus, shoulder your rock.
That is the reality these untestable hypotheses are not something just esoteric. They resign us to
significant reworking in consequence of their damage to our assets entrusted to fund managers’
care, by law to ensure our pension funding. Portfolio Management Theory is not working it is myth.
We have been sending our newsletters to public pension fund
managers. Our lessons have not been accepted by them, at your loss,
literally. As their results reveal in the summary 13F reports filed with
the Securities and Exchange Commission (SEC) every quarter. Not
intending to pick but to illustrate, and, though doing overall better
than most, one national fund summary reads as a severe casualty list
of dollars lost instead of gained by the decisions made Second to
third Quarter. They did this by defying the reports we released. Lost
688.97 million, total gained 21.40, losses outnumbered 32 to 1 gains.
That fund held $5.2 billion in equities, meaning they lost heavily,
12.87% of the value held in equities. That was just on their decisions
made to hold through fourth quarter as markets suffered. The story
ending is our society having to “re-earn” $7.343 billion in 8 days to
replace that loss of fund assets, as 9.5% was our contribution from
each dollar we earned. Contributions have now increased to 10.25%.
Sispyhus is no myth, we live it every year. We keep-on having to roll that burden of losses from
conventional market myths and their methods. All society must pick-up their slack from those
losses. We must bend our knee as a society and push the rock, again and again. The financial
industry managers, and politicians at their prompting, just keep telling us to push harder, as they
The failure of pension fund investing on untestable myths, gospel and shibboleths tumbles our
social institution back down the hill. The raid on our wallets is persistent but not avoidable. The
well intentioned try hard to maintain and hopefully increase the pension fund value but sadly, do
not. Their untestable hypotheses do not a valid theory make. They are left with their faith in
conventions that amount to an arsenal of divining rods and martingales, or tumblers and dice.
Our Risk Price is tested and proven in logic and mathematics. Our Risk Price is a concise
statement of “what is” the relationship of the balance sheet to the stock price. The funds have not
been using our Risk Price. Their theory is not testable. They do not know where the equities they
buy in your name with your nest egg dollars actually stand in the markets. This is why their results
are just barely better than fair dice in fair times. Every dollar they distress requires we future
pensioners must work harder now to regain 10.53 dollars to replace that one dollar lost on their
myths of markets while the liability gap continues to enlarge due to flawed myths used.
Symbol $ Millions
Q2 Q4
G.TO -2.8037
SU.TO -7.1623
POT -1.7871
IVN -275.8501
CNQ -12.8267
GIB -3.8118
TLM -25.5068
NXY -11.3712
RIMM -255.5975
TRI -54.8768
ECA -21.4298
STB -1.8296
FCX -14.1209
-688.9743

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make the rock bigger due their failure. One in 20 funds is failing to meet their liabilities. In press
announcements they ebulliently extol their virtuous gains of 3 or 4% year over year. But they do
not relate that contributions required by law gained 1-2% of the portfolio value. Their management
of your assets has eroded value from inflation. The reality is that 1.1% is the 5 year average. That
1.1% is the same for the average of hedge funds in the past five years, according to HFRI.
One of the largest labour-oriented pension funds publicly claims to have had positive results for the
past eight years, while they also extol you will get an extra 30% of tax savings for contributions you
make. So, after you get the extra tax reduction what happens? It took
them three years to recover from their 2008-9 loss of 13.7%. How is that
positive? They are now ahead of their 2003 decline.
The reality is that for the past ten years these portfolio managers have
returned an average rate of 1.60% inclusive of member contribution
increases to assets under their management. In the past five years their
rate of return has been 1.03% inclusive of contribution increases.
Over the past 8 years as the base they prefer to talk from, the return has
been 2.87% exclusive of member contributions gain ((-) 1-2%), while the
TSX has gained at rate of 5.05% per annum. They have chronically
underperformed the market by more than half at best, near a third if
member contributions are accounted. So, in all cases exclusive of annual member contributions
gained these fund managers have successfully eroded the assets workers have entrusted to their care.
At least we can say capitalism is working fairly, even handedly. Whether you have a million or
more to invest with a hedge fund manager, or rely on labour-movement fund managers, you are
getting reasonably similar results from their portfolio management skills. Even the national pension
funds get corresponding results, poor, slowly eroding your wealth. Their theory is not working.
They are all using the same fundamental tools as they are officially certified, differing entirely on
arbitrary measures. Ethics is another factor as we keep hearing daily of the depths many have
resorted. The true exceptional performing fund managers such as Soros, Dalio and Robertson do
not use conventional portfolio management tools, relying on what most see as heuristics, good luck.
Economists trained just gape in awe of the results these have obtained. These towering examples
for long run success have not relied on the conventional methods analysts and their managers are
certified to use after extensive study. The claims made for conventional portfolio management are
large but do not bear out as we have seen through the past decade. Neither of the published
accounts of Dalio’s or Soros’ methods is considered as economics by main-stream economists.
Theirs are very detailed anecdotal corroborations, as Sam Clemens related, “History does not repeat
itself, but it sure rhymes.” Certainly their methods have been canonically more effective than those
of “economics” conventions, certifications and seminars.
Good luck should not to be dismissed as it is really all conventional portfolio theory has. As we
have shown, the market average for conventional portfolio management is just 1.1 to 1 identifying

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gainers. That is a very small differential “free-board” keeping your boat afloat. That 10% potential
success rate is quickly overwhelmed by market declines or volatility which is what so many have
targeted for blame in their results. Risk is not volatility. It is risk, as “there is risk in what you do
not or cannot know." Thomas Tooke, 1844, asserted.
Their funds theory is not gaining value, not working. It will take years to overcome impact of that
failure on top of many such since 2002, as endowment and pensions liability gaps opened and have
not diminished. Conventional portfolio theory is based on projecting what will be, divining what
the future will be, by projecting expectations of earnings, or discounting some expectations of
future cash flow. Both are problematic schemes of projection that rely on legally disclaiming the
consequences while hoping for the better outcome, which bless their “foresight.” Convention
requires such extrapolations of what will be, and, a large helping of your hoping for the best.
StockTakers Risk Price on the other hand is appreciated as a statement of “what is” that can be
routinely found in the balance sheet and its relationship to what is the stock price. Our correlations
have shown that relationship to be that when the stock price of an equity is already above our Risk
Price determination the markets will tend to increase the stock price two of three times. Market
behaviour correlates consistently. The correlation of market Stock Price behaviour to our Risk
Price shows this very likeable tendency, rewarding portfolios partitioned on our Risk Price basis
with average of 26.53% IRR per year on the DJI over 12 years, through recessions and recoveries.
Our Newbies issued 31Dec2012
are close, 103.61% after six
weeks, to TSX full portfolio of 86
stocks Q4-2012 for 43.07%IRR.
Our Newbies issued 31Dec2012
are close, 104.10% after six
weeks, to NYSE portfolio of 210
stocks Q4-2012 for 22.36%IRR.
That is very consistent result from knowing the “what is” of our Risk Price. That result of knowing
the “what is” of an equity in our Risk Price should not be so readily ignored or dismissed as fund
manager have seemingly been prepared to do. They have done so by risk management and portfolio
stress models they use. We show these do not work and must be deconstructed, as well as, the
efficacy of the pricing and discounting value models that took them there. Lessons should be
learned, as they intend true social good were it not for losing your pension assets.
Your ‘blameless’ fund managers by following the standards of conventional methods as in the
above cases make our point decidedly. By knowing our Risk Price and holding only stocks whose
stock price is greater, yields powerful and consistent results. The mid-section of 2011 was difficult
for many. Using only our information such as we released to those fund managers and de-
constructing that fund portfolio of according purchases and pitch-outs of equities the result is
profound in 33 weeks, obtaining 29.75% IRR instead of 19.66% loss, of your assets in their care.

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So, these ‘blameless’ fund managers lost 688 million on that 3.5 billion portion, a 19.66% loss of
your assets, as they passively managed held in equities contrary to our Risk Price information and
methods. They acted to protect their 7-figure job descriptions written to execute conventional
portfolio methods from untestable theories. Those assets redirected into the "what is" relationship
of our Risk Price “likeables” obtained gain of 650 million, 18.58% added to portfolio assets in
those 33 weeks, obtaining 29.75% IRR. To be fair we sent them what not to hold, then, applied
those assets uniformly over our “likeables” portfolio. Add that back to the rest of the equitites
portfolio not suspect to our remedy there would be little impact in raising the rate of return.
The bigger issue is that they have put a high proportion of your pension assets into low-yield bonds
consequent to their "risk-fright" or "flight" from markets “volatility.” As much as they talk about
"risk management" in their public pronouncements that becomes a negative portfolio growth model
as inflation has exceeded most rates of bonds they have committed for years. The return earned
mostly covers their management costs. They are just snapping their bubble-gum with less than 4%
of their assets in the markets of their supposed expertise in conventional methods.
The Grail portfolio and the Goats are not myth, but very real, as we have proven. By holding Goat
equities with a stock price less than our Risk Price be anxious in declining markets as those will
only tend to gain less than one to one. The Goats are slightly better behaved than one to one in
more favourable market swings. That relationship is corollary. The Goat portfolio behaviour ill
compares to our proven Grail portfolio of just “likeables” that arises in any and all markets.
It has taken an extensive amount of hypothesis-test-analysis-synthesis to displace the diving rod or
nose of a dog for finding water to drink. It can be readily seen most economics relies on myths and
suppositions more than “let reality speak for itself.” There is no real testable basis in what has
passed as expertise instead of faith. The rash of insider trading indictments for “expert networks”
indicates where ethics has been turned in these circumstances, from senate to exchange seat.
Our reasons for having any equity in our portfolios are clear, concise and consistent. The equities
we hold are “likeables” tending to gain 67% of the time. We do not make stock prices but can
reasonably respond to stock market price tendencies, by our knowing the price of risk, the
downside, and buying and holding accordingly. That is new fundamentals from theory we have put
into policy obtaining 26.53% IRR average. Know What You Have. Have What You Know.
Our view is risk averse. Of course, we require a fee for doing that. Mail us for our help.
Ernst and Hans Goetze,
Architypes Inc and StockTakers Limited
Head Office
76 Midridge Close SE
Calgary, AB
T2X 1G1
72 Cornwall Street
Toronto, ON
M5A 4K5
351 Chemin Boulanger
Sutton, PQ
J0E 2K0
450 538-1270

Sisyphus is not myth 2

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