The case for the can opener edufeb12

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There is profound new theory of the firm supporting what we can do.

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The case for the can opener edufeb12

  1. 1. “ Page 1 of 8 March 2010 & February 2012 © 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. The Counter Culture: Case for a Can Opener We can all visualize that Norman Rockwell painting of a good ole North East Kingdom Vermont boy in the local hardware store. He came for advice and parts needed to fix his wagon, a wheel had come off. He expected good advice and tolerance for helping him with his problem. He did not know a cotter-pin and washer was what was needed. There are such places still, in fact, like in West Brome, where economist, DR. Verne Atrill, LSE, had his retreat and repose, there is still such a place in operation. The F. G. Edwards Hard Goods Store proudly since 1843 stands next to its home stead and the church on the corner. It is just the place where you can find a feeder tub and salt-licks for your live-stock or good reliable can opener, and good compass. They will give reliable advice on why and how to use whatever they sell, just step up to their counter and get a piece of real culture with that, Counter Culture. Then, there is an old-saw-horse of a poke at economists too that might involve a hardware store. A banker, stock broker and an economist are stranded on a desert island but they have a huge can of tuna. The economist confronted with this hungry dilemma says, “Let’s assume a can opener,” and proceeded with a theory (likely as not involving thermodynamics and closed systems). One might assume a rate of return and model the stock market’s volatility to obtain it, just as well. One might equally project your expectations of earnings and growth and use that to measure against a current market price. Assumptions are in the wheel-house of economics rear-view and forward looking prospects. It is like that good ole hound circling his bed, a habitual device. Then once upon another day among the roper’s gloves and salt licks at F, G, Edwards, a new customer came up to the counter, like as usual needing a bit of advice in order to make a prudent purchase of what he needed to solve his real problem. He was getting very hungry but he did have a can of tuna he had brought along for his lunch. Turns out, this new customer was an economist, just visiting on a holiday tour of the local ancient rolling mountains in the Sutton chain of the Appalachians running north out of Vermont. Just then Verne (Atrill) stepped up to the F. G. Edward’s store looking for a new axe handle for his splitter and some turpentine his wife needed to clean some of her paint brushes. The visiting economist recognized Dr. Atrill from all the to-do and stir over his calling Dome Petroleum insolvent. Dome was a darling of the Canadian equities industry 20% of the Canadian investor market had vested their wealth in Dome’s explorations for Beaufort Sea oil. Verne strongly believed in the Physiocrats focus on understanding business economy as base of the national situation. This differed in fundamental ways from Adam Smith’s followers who looked away from the markets up to management of the wealth of nations. Dr. Atrill differed from Keynes and Friedman also in many fundamental ways by preferring to view the business of firms as underlying the structure of all economies where answers need to be entreated from the
  2. 2. “ Page 2 of 8 March 2010 & February 2012 © 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. The Counter Culture: Case for a Can Opener behavioural science of people negotiating and collaborating in their trading business. Dr. Atrill was particularly unpopular with central bank economists “whose prime function has become the maintenance of inflation so that the governments they serve can meet their obligations.” Dr. Atrill’s work was difficult to grasp for so many as it was so different, not reduced to an absurdity for introductory explanation that tender minds might grasp. The limitations of his graphing for lesser skilled audience in mathematics did not help much to comprehend his conclusions. Deep inside there was the kernel truth that firms create the wealth of any economy, though the bedrock of all Macroeconomics, had been largely ignored by the Keynesian acolytes Verne’s mentor Lord Baron Lionel Robbins had struggled with in enthusiasm for Popper, Mises, and Hayek. We can always intuit that but have not understood such with any clarity, the firm. How does it work? It seems just as satisfying to our desire for simple order in a chaotic reality than understanding light as a particle-wave, stringing us out into strangeness. We live in a world where even light-speed may not be constant. Nothing is really as simple as that Norman Rockwell painting of classical physics, in Pythagoras’ peiron and apeiron, prochthon and antichthon for rigour without basis. As Ockham understood one needs to shave away assumptions that layer-over the matter, seeking elegant truth not just simplicity for its convenience alone. These graphs are certainly less settling. Gone is the comforting familiarity of simple downward sloping demand and upward supply curves intersecting at a price, so seeming neatly scientific. Balanced assurances found in simplicity for such a complex human activity is not Bacon’s test. Look to Pythagoras’ two millennium long confusion of reality vested in whole number ratio, a flat Earth, Counter-Earth, and Central Fire.
  3. 3. “ Page 3 of 8 March 2010 & February 2012 © 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. The Counter Culture: Case for a Can Opener To anticipate eating tuna from any can the economist knows has been manufactured, like as one is in his hand, so, he can tell you so, but he cannot tell when it will be eaten, or how it will be opened when the need is there. So much for the science of allocating scarce resources to alternative competing demands1 , as it offers little to quantify the nature of demand whether by needs or wants, or distribution, or timing. Those generally are remote or as they are fond of saying exogenous factors to their models. Good luck is what we must trust under that prevailing capability, so back to tossing coins in the fountain. Martingales are such fickle curiosity, Mr (Nell Trend’s) grandfather! A martingale is all conventional economics has, good luck with that! Many have, and lost, on forward looking projections, and then filled the fine print with exculpations about forward looking projections, forecasts at your risk to proceed anyway, like assuming a normal rate of return from stock markets that you hope you can obtain by adjusting for the market volatility. Assumptions are telling in Value Investing where one makes a case the equity is just undervalued over historic levels, buy it low and hold on, then you may just possibly watch as it descends to zero. In both methods one relies on past repeating itself and holding to the validity of its average result. There is more in being a good shepherd tending these goats than in their assumptions and underlying theory, provided you have a basis, a control metric, like Risk Price, as we have developed from Dr. Atrill’s supposition, and proven its validity in context. Trading is about the present, its needs and opportunities. Finding someone to transact with and negotiate to mutual satisfaction and agreement. That is the business of firms, dealing with the here and now. The rest is rationalized projections, which if we know history drove Pythagoras raving to his death in the bean patch. His tidy rationality was a screen over the anathemic reality of a world dominated by irrational numbers whose untidy ratios are foundation of what we can actually see. Those sorts of rationalizations gave us a flat world full of untested assumptions out of touch with the real world that was called science for two millennia of suppressions, another half-millenium of shaving them away since Francis Bacon said, “ let reality speak for itself.” But, there is another assumption, in that can of tuna! How did it get here, from Cannery Row. What makes that economic good? There, we find economists have spent little effort in discerning the behaviour in society of the firm and its process that sustains us and our society’s existence. How odd that is. It exists but we do not know quite how it got there, like a pistol in a Louise Penny mystery novel, huh? Supply and demand, it looked so neat and we assume it is finite and really solid representation. “I feign no hypothesis,” said Newton, following Bacon. 1 That is from the famous statement of Lord Baron Lionel Robbins who raised the London School of Economics to its present stature during his leadership before and after the WWII. Ronald Coase, Verne Atrill and George Soros all passed under his mentorship. Robbins had given safe haven to von Mises and von Hayek prior to the war and favoured the insights of Frank H. Knight. Knight had been schooled by Herbert Davenport had founded stature in the Chicago School and had studied there under Torsten Veblen. Robbins firmly believed in behaviour as prime-active in economics and not statistics as came to dominate Keynesians and Freshies alike.
  4. 4. “ Page 4 of 8 March 2010 & February 2012 © 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. The Counter Culture: Case for a Can Opener So, we at StockTakers as practitioners of our Counter-Culture believe it is better to make fewer assumptions. We have looked very closely where very few in the last century have bothered to look. What sustains the economic behaviour of the firm? How does the firm behave to remain in business, supported by its adherents, those of its trading connections; the partners, employees and shareholders who like it, and like what it is doing, so are willing to participate in creating and participating in its process. It has been these questions that have informed our Counter- Culture and "theory of the firm" built on legacy of Dr. Atrill’s musings on foundational insights. Like the good guys at, F. G. Edwards Hard Goods Store, if they did not have a complete answer they would point in a likely direction nominated by consideration for the problem at hand, or, from a thoughtful career dealing with real problems. That is what we have allied from Verne Atrill, mostly direction, going deep in analysing fundamentals of ongoing business process seen in its debt structure ratio (DSR) of its ledgers to the balance sheet. We want to know the real business processes so we can discern and know the Risk Price position of the real firm in the hip- hop of raving markets pricing. “If there be a procthon then be antichthon in ratio, Pythagoras?” So, welcome to our Counter-Culture, giving you some counsel to your questions as to what you need and why it is needed, for you to make an informed purchase instead of an "educated guess" as is the ancient apology for economics heuristic. We have been busy, and even have out back the entirely new Perpetual Bond2 ready to get going, just in case you are interested. Oh, and here is just the thing you do need, right now, a can opener. This is an especially fine side-cutting model you won't err and cut yourself with. It is the only kind we like to sell because it is safe to have with children in your household, or out in the barn mixing formula for feeding those bleating hungry kids whose she-goat mother has fallen ill. We will sell you that old finger slasher top-ripper bayonet style, if you insist. We do not sell insurance against such ancient foolishness, though some will, just try and collect from them when you slash-off your finger tip. The work and discoveries accounted in, The Modal Geometry of Firms and Balance Sheet Worth of the Trading Connections, brings these emotions and expectations into account as GW* numeraire through the insights of transactions made between the trading connections. By tracing these whiffs and whims left in balance sheet worth of its trading connections support the firm process, creating credit and debit floats builds capital that develops and trades as virtual money in these relations. In fact these relations in capital formation are what makes hard currency, money, literally what money is. Addressing the expectations of the market is the objective that economics has had, long before the swell over Keynes notions washed over. Seventy years that tide has run. Its flotsam lies dry on the beach on which we are stranded by irrelevant assumptions with not a can opener on the sand among them, though many cans of tuna lay about. Objective Economics as a science in economics can be seen and found again as terra firma and promontories on that shifting sand. Lionel Robbins had pulled these threads together in the discourse he fostered at the London School of Economics. He stood against the tide of 2 “O'Canada! May we have 3% plus inflation? Please.”; J. Flaherty, Rt. Hon. and others, 06 April 2010.
  5. 5. “ Page 5 of 8 March 2010 & February 2012 © 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. The Counter Culture: Case for a Can Opener Cambridge and Keynesians for a long time though acknowledging some of their insights. Robbins brought together in the discourse with his faculty and students the critical thinking of Davenport, Veblen and Knight and allied it with that of the Continentals, Ludwig von Mises, and Friedrich Hayek, for whom he helped provide safe-harbour as Europe unravelled once again. In Modal Geometry "theory of the firm" we make only two assumptions, clearly as follows: 1. there is a balance sheet of the firm (that the rule of law governs its information is possibly weak assumption but at an accuracy to at least the modest degree accountants are prepared to be responsible for), and, 2. the firm will vigorously negotiate, “what it owns” (in order to stay in business “what is owed to it” with “what it owes” and vice versa, to make the best of what it has, that is in its trading connections). The Modal Geometry theory of the firm has unfolded more by rigourous observation in the real world, aided with logic, epistemology, and some powerful mathematics, than by just emotional assumptions with little or weak science. The economists’ experimental vessel is society. Economics is politics, and its results can never be repeated or verified convincingly, can they! At least they never can or will after the election. Even banking regulation actually gets re-jigged by lobbyist politics and oxymorons more than economic wisdoms, we can see as Atrill asserted. Our theory of the firm is directly tied to fundamentals of ledgered business processes that even the, Barrow-Boy of London or Bangkok; or, CEO's and bankers of Fleet, Bay, Century or Wall Streets can recognize as truths they encounter in their everyday management of their turf. Certainly, what we can all agree on, at whatever level we engage business in economic society, must be relevant, regardless of policy preferences. From such realism we have provable results. We account for underlying fundamentals of our theory of the firm in rigorous logic terms, no string theory or big-bang debates are necessary templates in our shop, at our “Counter-Culture”. You can rely on your own recognition of what we are talking about, because it is all based in the real world of businesses negotiating their process by their enterprise. Even though there is some very high-powered mathematics and logic engaged in inspiring our results - you will recognize our view of the terrain of firms' behaviours as familiar to your own household and business. In our “Counter-Culture” we have normative theory of the firm and numerate results we get from that theory, operating in our models. Our models rely only on publicly available balance sheet data as inputs, and the operations arising from our theory of the firm to process that data and provide an effective numeraire of the firms worth, N*. No market gossip, no "educated guessing" enter into our theory of the firm and determination of its worth. There is provable quality in our view of equities. There is nothing arbitrary about our determination. There is not any grinning confusion of "goodwill" as declared by a Cheshire Cat, pinning his tale on your donkey.
  6. 6. “ Page 6 of 8 March 2010 & February 2012 © 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. The Counter Culture: Case for a Can Opener At StockTakers, we have test-modelled our resulting numeraire for individual firms in the stock market for the past ten years. Following our recommendations of firms worth, with only the two mild assumptions we list above, we obtain a 29% growth annual performance in portfolio selected and managed based on our near zero beta policy, as we have followed. In our Zero to Hero portfolio, we stopped trading late in 2008 as all our indicators told us prices were falling below our "price of likeability," became risk ridden, and for no other reason. This result we call the 29% IRR, The-Better-Than-Money Zero-Risk, Zero-Beta portfolio. We have out-called the stock market behaviour championed by analysts, and even Warren Buffet, by a huge differential. Without accessing our N* numeraire Buffet lost $2.5 bn in two months on a play to expand his holdings in a stock he already had held for years. “He liked it.” There was bravado, but Buffet's diligence team did not see that one coming, though he knew the company well, sitting on its board. The Analysts, they returned 5% over that decade, before their fees. Whose lunch are they eating, still yours? Our numeraire driven information is fundamental difference maker needed to go forward. It is based on our new theory of the firm that is profoundly apt and is fundamental, provable science found in firms' behaviour. Ours is the “new fundamentals” information that can quickly reclaim the losses endowments and pension funds have received from the "educated guesswork" of well-intended analysts on whom they have had to rely for direction. We are selling the solution to these investor problems of Modern Portfolio Theory, CAPM and Black-Scholes risk models for which, we, StockTakers, provably, • can show Financial Engines among all others have invalid advice to give as it based on a merely partially reasonable CAPM modelling • show Microeconomics as we have known it has been fundamentally flawed by its latent beliefs, unfounded in empirical market of business behaviour • show the assumptions on which Microeconomists have propounded are baskets that will not hold water let alone the nest-eggs of savers • can show we do provide Zero Beta opinion of the value of firms that are functioning in a free-market economy ruled by laws • have shown such in our market tracking test models going back 10 years (yielding 29% ROI results year after year) • have market models that do work • have shown ours is not just theory but empirically based method we have confirmed (and despite more than 2 years, no one can refute) • have new basis for very accurately and reliably evaluating the worth of firms and securities trading in free markets • have fundamental new tools for business accounting and financial analysis that can be tested • have demonstrated the natural inflation rate of free-market driven economies where subject to rule of law • provide science to understanding market behaviour on which the investor must tailor his own wisdom in his active participation expectations and needs
  7. 7. “ Page 7 of 8 March 2010 & February 2012 © 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. The Counter Culture: Case for a Can Opener We prefer to be trading in stocks where, We Know What We Have, and, We Have What We Know. You need that confidence too, trading from accountable knowledge rather than from market gossip! Our numeraires determining worth of firms in our Risk Price metric have given us very profound results that are very likeable, indeed. Keynes too suffered many losses in the market and is reported to have wished he had been able to have drunk more champagne. But, we can talk about that another day. So, enjoy your can-opener! March 20, 2010 The case for “The Counter Culture” seems to be an ever growing one, and very timely. We have an opportunity to “break the mould” and to do it with the support of both economists and actuaries who will recognize what we're talking about because we can not only recognize the problem, and are recognizing the problem, but we can also provide a “testable/refutable” solution (which we have tested and which has failed to be refuted (sic) for good reasons) which will go a long way to putting pension fund management and the productive use of pension funds, back on top, so to speak. This case is especially cogent in the context of recent remarks of former Bank of Canada Governor David Dodge “Canadians need to save more, maybe 20% of their gross income” in the absence of safe and reliable investments (see “But when will that be?”, “But it doesn't work, Dr. Jekyll” and “Too big to fail” or “The Path to Bankers' Hegemony”). 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 price movements, by our knowing the price of risk, the downside, and buying and holding accordingly. That is theory we have put into policy obtaining 29% IRR average. Know What You Have. Have What You Know 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 7 Balsam Avenue Toronto, ON M4E 3B3 351 Chemin Boulanger Sutton, PQ J0E 2K0 450 538-1270
  8. 8. “ Page 8 of 8 March 2010 & February 2012 © 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. The Counter Culture: Case for a Can Opener

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