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Your retirement tea party

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The boomers have paid into social policy funds to pay for their parents’ retirements only to find those funds have not been used and made to work for them. They have become the victims of poor management policies of the industry who claim results they have never managed to obtain, ever.

You will never save your bacon that way. The financial industry managers ensure that they will take the hog home after you raised it.

“I’ve had nothing yet,” Alice replied in an offended tone: “so I ca’n’t take more.” “You mean you ca’n’t take less,” said the Hatter: “it’s very easy to take more than nothing.”

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Your retirement tea party

  1. 1. “Page 1 of 4 May 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.Alice, meet Dr. Dodgson! Your Retirement Tea Party.The biggest problem with savings is the rate of inflation eating your cash savings before you retireto sit-down and enjoy them. The reality of ‘financial products’ is they do not work to hold value foryou but erode value of savings entrusted even more than the erosion of inflation. The combined rateof inflation and fees they take but are unable to earn. The average fund fee of 2% plus MERs(Management Expense Ratios) of 2% charged on top of current inflation rate means they need toobtain 8.42% to maintain the value of your money entrusted them that you get a dollar back forevery dollar you have given them.No adequate results are the real issue. Johann Wolfgang von Goethe said, “There is nothing morefrightful than ignorance in action.” He had no knowledge of the modern financial industry. Theirsis willful ignorance. They skim whatever they can in fees and sales churn costs by poor quality useof what are known inadequate investment methods. These methods used by banks and insurerscreate mutual funds as financial products to exploit small investor savings for their taking fees.Hopefully, you did have the time to watch the recentPBS-Frontline showing of Rainmedia’s film TheRetirement Gamble. It was a nice start on these very realissues affecting us all. The morality mumbled byexecutives shown is truly reprehensible as that hasevolved to dominate the financial industry that drivesnearly a fifth of the entire economy; growing faster thanmining oil and gas sector; and, dominates politicallobbying. Opprobrium is relief but not an answer. For allthe high-faluting claims made by the industry in theirsales pitches they know the investment models they useare not getting required results to be relevant. Relevantresults would be obtaining a return higher than net of inflation which in our present 42 yearproductive adult lifetimes has averaged 4.42%, as documented by the Federal Reserve in this table.The film featured some pithy comments by Vanguard Funds founder, Jack Bogle, very acute butnot accurate, when he says of the industry, “You invest 100% of the money, take 100% of the riskWhat investors expect of bankers and financial industry investment products is a way to securesavings while growing their wealth. The circularity of ‘investment talk’ one gets from fundmanagers and advisors who have sold you their “goods” and taken your money to ‘safely invest’ islike what Alice gets at the Tea Party.“Take some more tea,” the March Hare said to Alice very earnestly.“I’ve had nothing yet,” Alice replied in an offended tone: “so I ca’n’t take more.”“You mean you ca’n’t take less,” said the Hatter: “it’s very easy to take more than nothing.”Pretty much that is the case. They have taken it all before you arrived. “Alice, meet Dr. ArtfulDodger.”
  2. 2. “Page 2 of 4 May 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.Alice, meet Dr. Dodgson! Your Retirement Tea Party.and get 30% of the profits” That leads to a misperception of the industry as Bogle should be sayingyour risk is of losing 98% and not getting 2% back. Fees plus inflation must be overcome. Theaverage fee of 2% plus MERs (Management Expense Ratios) of 2% charged on top of that 4.42%inflation rate means they need to obtain 8.42% to maintain the value of your money entrusted them.They must get 8.42% per year that you just get a dollar back for each dollar given them. Thatnegative -0.9158% over 42 years means there will be just 2.49 cents of every dollar, if they got0.00% return. Many have seen negative return performance from their mutual funds.You will never save your bacon that way. The industry managers ensure that they will take the hoghome after you raised it. “I’ve had nothing yet,” Alice replied in an offended tone: “so I ca’n’t takemore.” “You mean you ca’n’t take less,” said the Hatter: “it’s very easy to take more than nothing.”ETF’s as financial products do not yield 30% either. Many will misread Jack Bogle’s comment andshift their wealth to index funds but that is hardly effective. The often cited Vanguard VTI hasaveraged 4.25% over their 12 years ahead of the DJI 2.91% in those 12 years. More relevant is VTIfirst 3 year decline of -23.69% from inception 2000-03 (while DJI -24.86%) and then 2 year rise toget back to even followed by 70.64% overall rise to 2007 but that was just 3.84% return over 7years leading into the sharp 2 year decline -40.3% in 2007-09 providing a negative -2.76% return at9 years. Quantitative Easing has saved the rate of return for Vanguard, as others, since federal debtinduced ‘money’ has flowed into the markets’ rise in value instead of creating economic demand,so markets have sharply recovered while GDP and employment have risen subtly.Index funds are not effective either, but just practical IF they can match the market. When they dothey just see-saw with it and over the past two decades they have barely justified their taking even1% fee. Over the past two decades inflation has been relentlessly eroding wealth while fees formanagers without effective methods have stripped fortuitous gains they have not had a clue forobtaining. Index funds are no less or more so competent, just a little less expensive for passivemanagement flotsam with the markets rise and fall. That is fortuity claimed as expertise. Noweveryone is wondering where the next bottom is, and when, they will need some income whetherthere will be savings.The basic reality is that inflation is always eroding the value of idle money. The average inflationfor the last century was 3.23% but in the 42 years current since the 1970’s has run at 4.42%. That ismost relevant to recovering our wealth from disastrous financial industry returns as the boomersretire the old adage remains, “You have to make your own bacon.”The boomers have paid into social policy funds to pay for their parents’ retirements only to findthose funds have not been used and made to work for them. They have become the victims of poormanagement policies of the industry who claim results they have never managed to obtain, ever.Legally they should have known better and acted differently, but that court battle is more than wecan afford or attorneys general will pursue. The industry defence will be they acted according to thestandards required, those of the self-regulating industry they require of themselves. You will haveto prove differently and confront the morass of conflicting ‘experts’ testimony well paid.
  3. 3. “Page 3 of 4 May 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.Alice, meet Dr. Dodgson! Your Retirement Tea Party.The economy rises with innovation and productivity creating social demands more than populationgrowth. Investing in corporations is the most likely way of overcoming inflation and zero-sumconsequences of population growth hungry mouths pushing demand raising prices. Inflation ismostly a consequence of government debt financing unwarranted corporate entitlements.Businesses with worthy ideas need to obtain debt financing often on a massive scale as arose withindustrialization and the Napoleonic Wars. That is why the modern ‘public liability’ corporateentity was finally legalized of necessity notwithstanding the morality of agency problems arisingfor the management class that had so deeply concerned Adam Smith. Their risk is transferred to thesociety at large of ‘unsecured creditors’ when they fail after taking fees salaries and bonuses.That management costs outstrip shareholders and the public interest is still current, even with socialfund managers criticising the managers of the firms they allocated social fund investments.http://riskwerk.com/2013/05/05/pension-envy/ But they really are just chickadees chirping at each other for mostsocial funds’ costs for management exceed the rate of inflation and often near double.That is on the massive funds we are lawfully compelled to allocate to their use, every year bycontributions deducted from our pay stubs, and supposed serving our interest in our pensionfunding. Over 10% of our earnings are so allocated each year and simply added to their claims ofobtaining returns. They have not ever achieved that critical 4.42% average inflation after their feesover the last 45 years such funds were enacted by government.Some of these so-called self-anointed social funds claim as much as 9% in management costs.Social endowment funds also generously self-award management costs and fees in excess of themutual average fund. Getting positive results in excess of 8.42% is the average that the industryneeds to provide to justify the average fees and still return a dollar for dollar at the end of 20 to 45years. Pension funds report that rate (whenever they do), only by including all new contributions asgrowth they have obtained. That is hollow illusion.Imagine that some of the supplementary federally regulated (and further tax supplemented) pensionprogrammes being pitched today eat over 9% in management fees each year plus 4.42%+ asinflation eats even more external to their management. Canadian Registered Education SavingsPlans receive a 20% top-up from the government that just pays for bank management fees yieldinga 0.89% growth over 17 years - bankers raiding the kids piggy-bank is government policy.The Yale investment board (a model many social service endowments use) endorses fund mangerstake near 6% in costs and salaries even in bad times, and even congratulates them.Yale posted a return of 4.7 percent on its investments during the latest fiscal year,...“Thanks to the outstandingwork of the Investments Office, ..."The reality is that management costs were an unsustainable 970 million on a 18.53 billion fund,5.2%, in 2010. They acquired illiquidity in fine sounding "Alternative Investments" with a highercost to run and with the very risk of illiquidity if they do not succeed as they expected. This past
  4. 4. “Page 4 of 4 May 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.Alice, meet Dr. Dodgson! Your Retirement Tea Party.year in 2012 the endowment value fell "modestly" as self-reported from $19.4 "dropped by $100million due to spending distributions" -0.52% loss as markets rose gently, 3.75% in that fiscal year,underperforming the previous 3 year 52.5% brisk market rise, just halfway recovering 08/09 losses,remaining 18.6% below as discounted by inflation. Outstanding work, or nice if you can get it?Yale’s endowment performance, which leaves it at $19.3 billion as of June 30, is significantly weaker than the21.9 percent return it posted in fiscal year 2011 but exceeds the returns registered at two other Ivy Leagueschools so far this year. While the University of Pennsylvania posted earnings of 1.6 percent last week,Harvard University announced yesterday that its investments had experienced a 0.05 percent loss during fiscalyear 2012.The investment models and methods of the industry do not work to obtain the minimum 8.42%return required. Many of the board members sitting at endowments invented the investmentmethods used that even for themselves proved failure in practice. Savings and minor gains are takenin fees claimed by the financial advisors who make these products and sell them to the public ofearnest small investors. You provide the ‘unsecured’ working capital to failed investment models.We call the firms we select by our methods "likeables" because investors have a decided tendencyto like them. In the past quarter without an attempt to reinvest for greater gains these"likeables" only portfolios we identify (as we partition from markets by our Risk Price analysis)gained 10.56% for 210 NYSE firms partitioned, and 7.72% on the 89 TSX firms partitioned fromlast quarter 2012 balance sheets. Those were used to select the Tax Charity portfolios on thearbitrary filter of the lowest cost suiting the tax limit.These results are routine. In 2009 to 2011 our partition of the DOWs earned 16% per annum asindustry portfolio managers lost 25 to 40% of their client capital. From 2000 through 2012 theaverage 26.53% obtained on the DOWs partitioned by our theory and methods, logically correctand mathematically proven, as the markets have scientifically proven consequences.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 tendencies, by our knowingthe price of risk, the downside, and buying and holding accordingly. That is new fundamentals fromour new theory of the firm. Know What You Have. Have What You KnowOur 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 LimitedHead Office76 Midridge Close SECalgary, ABT2X 1G172 Cornwall StreetToronto, ONM5A 4K5351 Chemin BoulangerSutton, PQJ0E 2K0450 538-1270

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