The document discusses and criticizes four common investment strategies - momentum investing, mean reversion, martingales, and value investing. It argues that none of these strategies provide a reliable basis for building long-term portfolio wealth as they make unrealistic assumptions about market behavior. While there may be short-term momentum or mean reversion effects, markets are complex systems influenced by unpredictable external events. The document then promotes an alternative investment approach of only investing in "likeable" stocks that have historically tended to gain in value around 67% of the time and avoiding attempts to time the market. It claims this approach has achieved a 29% average annual return.

1. “
Page 1 of 2 November 2011 © 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! Four Horses that are Mules and other dogs
biting their tales?
Four Horses of portfolio “apocollapse” are Momentum, Mean Reversion, Martingales, and
Model Value investment. Each is a Mantra in search of a feed-trough at our wallets of hard
earned retirement savings, enlightenment. These are the tools on which the financial industry
builds its products. It is their life’s work to sell them to us. The financial advisory are taught the
intricacies as if each of these dogmas actually worked. They are then tested on their reciting
these poetries not in Latin but in jargon to be certified and admitted to the “used equities” sales
fraternity. It is all they know. These mantras are each cloaked in epicyclical pattern mathematics,
but are each logically and unreasonably based in their poetry and not empirical reality.
Many have warned, the Momentum effect lasts maybe a month and then appears to reverse over
the longer term. Newton’s first law does not apply. The market is not mechanical. Exogenous
events intervening of the “who knew” variety are always handy apology given for us to swallow
with the bitter pills of our loses that are consequent, to their bloodletting and caustic poultices.
It is well recognized if the market does have a tendency to Mean Reversion, it is a phenomenon
that is slow and near imperceptible, over many years mostly decades. Our own past decade is just
an anomalous exogeny in the long term, “who knew?” The fact that today’s market is actually
10% higher than ten years ago is small consolation to those buying into it four years ago, and
now 15% lower in price index of even the most solid firms, some went to zero and got replaced.
The Martingale is at least close enough to reality, saying we have no means to know so it is at
least 50/50 probability that any price will go up or down. In gambling the system involves
doubling your bet after each loss. Many marketeers try it and have initial success. Sooner or later
they discover the disastrous string, the black swan of, “markets can be irrational longer than the
investor is solvent.” That empty pocket short halter on this horse can be disastrous. Who knew
the best result of 50/50 is in several lifetimes, because that is its premise, a dog chasing tales.
Price is the driver of the Model Value ratios used by the “value investor” strategy, P/B. The
problem remains that price has no mass, or direction. The book value is a proximation. Both
price and book values may quickly tend to zero without so much as a “Gesundheit.” The value
ratio of the hard working intelligent investor has a half-life potentially shorter than the heaviest
elements on the periodic table. These muleteers are on shifty ground ignoring the signals.
Ours is a wobbling string or wobbly orbit in a real multiverse of which it seems we can only see
as little as 5% at best. The physics of the Second Law of Thermodynamics can only give us a
cooling comfort. Markets are open systems, not closed ones so even that cannot pertain. Our very
existence is evidence of intellect and creation opposed to entropy and its levelling at work.
There may be some momentum effects, in the very short term from today to tomorrow, and a
weak mean reversion effect, in the long term. However, these are not constants on which to
successfully build portfolio wealth in our lifetime. Their portfolio aggregations are quantity over
quality with the result proving they are less than the whole. Product conquers promise.

2. “
Page 2 of 2 November 2011 © 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! Four Horses that are Mules and other dogs
biting their tales?
Prognolic.com tells us the average portfolio result is currently running at -4.51% with large
portfolios run by the big firms ranging down to -30 (and a few small outliers of two or three
equities ranging even positive 30%). In the last half one momentum portfolio whose performance
we monitor is down to -42.55% of its initial value. A Blue Chip fund we monitor is saved by its
inadvertent inclusion of some of our “likeables” turning-in 16.76% gain for them in the half.
The documented tendency of our “likeables” is holding, their tendency to gain 67% of the longer
term. Our N/B/W model of firms’ worth with the resulting “risk price” and N*/share ciphers are
fundamentally new and exciting way to study and engage investing in the equities market. Our
indications prove our hedging, putting the market, yielded a 313% profit against Goldman Sachs
call to buy the Big-Techs in July, as you all had a copy sent to you to consider. Selling-off the
waning to engage puts paid very well. Aggressive putting is not for everyone. It has its place.
None of the prevalent dogma about stock prices is relevant in deciding what to buy. Buy low and
sell high is the objective. When is it low on the way to high instead of tending closer to zero?
RIMM has been touted as a buying opportunity since April this year several times in some cases
by the usual suspects and yet is now two-thirds lower in price. Their Four Horses do not work!
Even pre-schoolers will say anything other than admit they do not know. The models of the Four
Horses are not even half-baked. Cross-wired Mulishness does not improve their dynamic.
The whole of this time prominent sellers of market gossip and gospel have reissued their call to
buy, as their Four Horses on the back-stretch told them. As Steve Jobs said, “If you keep saying
today is the last day, eventually you will be right.” What to buy has no guidance in hitching the
usual Four Horses cited above. Holding the winners and selling the losers surely does have to be
practiced, with the insights to firm worth the N/B/W model we have generated provides.
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
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
7 Balsam Avenue
Toronto, ON
M4E 3B3
351 Chemin Boulanger
Sutton, PQ
J0E 2K0
450 538-1270